The economic outlook for Indonesia this year has been revised downward by Business Monitor International, an independent provider of industry and economic data, following a reduction of fuel subsidies in the Southeast Asian country.
BMI has lowered its GDP growth forecast for Indonesia for 2013 as a whole to 5.8 percent, down from the 6.1 percent made during its third quarterly freight industry report.
In its “Indonesia Freight Transport Report Q4 2013,” the company said the government raised the prices of subsidized premium petrol and diesel by 44.4 percent and 22.2 percent, respectively.
This has led to an inflation spike in July and a tightening of monetary policy by Bank Indonesia that raised the benchmark interest rate in June and July.
“BMI’s view is that both moves are a necessary and healthy response to some of the imbalances in the Indonesian economy,” a written statement said.
But these measures have led to a cooling of consumer demand and a reduction in economic growth.
“Signs of a slowdown were already making themselves felt, with GDP growth in the second quarter of 2013 decelerating to 5.8 percent year-on-year, down from 6 percent year-on-year in the first quarter of the year,” BMI said.
Still, given the underlying resilience of the Indonesian economy, “we expect this to be only a transitory ‘dip,’ with GDP recovering again to 6 percent in 2014 and 6.5 percent in 2015,” it added.
Over the next five years, annual GDP growth is predicted to average 6.2 percent, confirming the country’s status as one of the top performers in Asia, BMI continued.
“The growth outlook for Indonesia’s freight sector is encouraging, particularly because there are signs that one of its key problems, an infrastructure investment deficit, is beginning to be tackled. Capacity problems remain an issue, but new investment projects in ports, airports, road, and rail are being launched.”
Airfreight volumes are forecast to expand by 7.5 percent in 2013, with average annual growth of 7.4 percent during the forecast period to 2017.
Rail freight volumes are estimated to rise by 10.2 percent in 2013, with average growth of 8.3 percent during the forecast period.
Total tonnage growth forecast for 2013 for Indonesia’s leading port Tanjung Priok is 6 percent to 53.09 million tonnes, with average growth of 5.5 percent expected over the forecast period to 2017.
The Port of Palembang has a total tonnage growth forecast of 5.9 percent to 12.4 million tonnes, with average growth of 4.3 percent over the forecast period.
Indonesian foreign trade is expected to grow by 3.9 percent in 2013, down from 4.3 percent in 2012.