World Bank cuts Indonesia’s 2015 growth projection to 5.2%

indonesia currency

The World Bank on Monday cut its projection for Indonesia’s economic growth in 2015 to 5.2% from 5.6% due to the weak outlook for fixed investment and trade as well as a slowing pace of loan expansion. 

The lender also revised its forecast for growth in gross domestic product (GDP) this year to 5.1% from the 5.2% projection it made in July.

Indonesia’s GDP expanded 5.01% in the third quarter on yearly basis, the slowest pace since 2009, as the pace of investment and net exports slowed.

“Any significant rebound of growth will require a strong rebound in investment and we’re not seeing an indication of that in Indonesia,” Ndiame Diop, the bank’s lead economist for Indonesia, told a conference in Jakarta on Monday.
Diop said weak imports of capital goods and slower loan growth indicated weak growth for 2015.

Imports of capital goods in January-October contracted more than 7% from a year earlier to $24.8 billion.

Indonesia’s central bank expects 2014 loan growth of 11-12%, which would be the slowest since 2010 and roughly half of last year’s pace of 21.4%.

President Joko Widodo’s decision to raise subsidised gasoline and diesel prices in mid-November is expected to have a limited short-term effect on GDP, but higher infrastructure and social spending from the budget savings might offset the impact on growth, Diop said.

The World Bank pencilled in Indonesia’s GDP to grow 5.6% in 2016.

Widodo has pledged to accelerate growth in Southeast Asia’s largest economy to 7% on average during his five-year term.

Finance Minister Bambang Brodjonegoro has estimated economic growth next year at 5.8%.

(Reuters)

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