Indonesian Bussiness Today

Some economists projected that Indonesian economy remained sluggish in 2014. However, economic growth is expected to recover in the fourth quarter of 2014. 

During the past year, Indonesia challenged by the impact of the reduction of monetary stimulus program (tapering) by the Central Bank of America (U.S.), The Federal Reserve. That prompted foreign funds out of emerging markets. Indonesia was classified into one of tapering due to the fragile economy.

“We see little hope for change is imminent” said Daniel Martin, an economist at Capital Economics, told CNBC on Tuesday (05/06/2014).

He added that the tight monetary policy with lower commodity demand make Indonesian economic growth reached 6% harder. Bank Indonesia (BI) has raised benchmark interest rates five times since mid-2013. This is because the rupiah weakened about 26% against the U.S. dollar in 2013.

But Barclays economist Wai Ho Leong Senior said that Indonesian economic growth rate tends to be temporary. Leong added that the ban on exports of mineral ores held in January designed to increase profits from the mineral sector had little impact on Indonesia's growth.

“Monetary tightening certainly contributed weakness, but I am not sure if the ban on the export of minerals is a key driver of growth” said Leong. Central Statistics Agency (BPS) said the economy grew 5.2% in the first quarter of 2014. Realization that economic growth below analyst expectations around 5.6%. Economic growth was the slowest since the third quarter of 2009.

According to Martin, the investment will remain weak in 2014. Thing follows the high interest rate. In addition, the reduced expectations for political reform following the poor performance of Joko Widodo in parliamentary elections also adds sentiment down. Minister of Finance, Chatib Basri said the economy slowed in the first quarter of 2014 is only temporary.

“If you recap in January and February, Indonesia experienced the worst flooding. Which is why we have export and import of infected not because people did not order but because of road traffic and disrupted transport” said Chatib. Meanwhile, Leong estimates, Indonesian economic growth reached 5.3% in 2014. Indonesian economic growth will be below 5% in the second and third quarter of 2014.

Indonesian consumer spending is expected to give a positive sentiment for economic growth in Indonesia. ”Inflation rates have to increase the purchasing power of consumers”, said Martin.

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