BMI View: We expect Indonesia's economy to pick up momentum over the course of 2015, following a disappointing performance in the first months of 2015. In Q115, real GDP growth came in below-consensus at 4.7% year-on-year (y-o-y), on the back of high borrowing costs and a challenging export outlook. Therefore, we have revised down our real GDP growth forecast to 5.3% versus 5.5% previously. We expect growth to accelerate over the coming quarters, driven by additional interest rate cuts, a more streamlined investment process and a pick-up in the pace of infrastructure investment. With food , drink and retail sector investments likely to be more forthcoming in the coming years, dynamism in consumer-facing sectors will remain buo yant and support demand growth. Indonesia remains one of the most exciting emerging market prospects, in our view.
Headline Industry Data
Food consumption (local currency) forecast growth in 2015 = +9.4%; compound annual growth rate (CAGR) forecast 2014 to 2019= +9.8%.
Alcoholic drinks value sales growth (local currency) in 2015 = +10.7%; CAGR forecast 2014 to 2019 = +10.9%.
Soft drinks value sales growth (local currency) in 2015 = +11.4%; CAGR forecast 2014 to 2019= +11.6%.
Mass grocery retail value sales growth in 2015 = +14.0%; CAGR forecast 2014 to 2019 = +13.6%.
Key Industry Trends
Poultry Is Next Step For Cargill In Indonesia : In April 2015, US-based agricultural company Cargill was looking to enter the Indonesian poultry sector as it continues investing in mills to support its rising palm oil business in the country. The move is part of its plan to pump USD1bn into various sectors in Indonesia in the coming three to four years. The company, which is 'in active discussions' with various firms to enter the poultry sector, plans to construct a new unit and enter partnerships, according to Alan Willits, Cargill's chairman for Asia-Pacific. 'We'll most likely partner with someone that is an integrated poultry producer and we'll do the value-added piece, the same thing we do in Thailand and China,' Willits said, reports Nasdaq.
Minister Says No Prospect Of Full Alcohol Ban : In April 2015, the Indonesian government said that it was opposed to a complete ban on alcohol in the country, despite fears that Islamic parties could force through legislation. The Wall Street Journal reported that a bill that would criminalise alcohol, backed by Islamic parties, will not pass through the parliament to become law. Co-ordination minister for economic affairs, Sofyan Djalil, said: 'If we want to attract tourists to Indonesia, the availability of alcoholic beverages is a must.' Recently, the ban on sales of most types of alcohol from small convenience shops was introduced by the majority Muslim country.
Matahari Expansion Plan for 2015 : At the end of 2014, Matahari Putra Prima, the operator of Hypermart stores, announced that it plans to open 20 new stores and refit 10 existing stores in 2015. The retailer is to invest IDR882bn in expanding and improving its network in 2015, with the new stores mainly planned for cities in the east of the country. Hypermart has recently launched its first hypermarket under what it calls its G7 concept, displaying a new colour scheme and improved product display systems to better engage shoppers. All of the new stores will display the new format. Matahari Putra Prima also plans to open up to eight additional stores for its grocery banner Foodmart, as well as launch an upmarket banner that will be called Foodmart Primo.
Key Risks to Outlook
Our current GDP forecasts assume that growth will pick up in the second half of the year, as infrastructure developments break ground. Delays or lower-than-expected investment would postpone the pick-up momentum