Investment led recovery
Indonesia real GDP grew 5.2% yoy in 4Q17, slightly above consensus expectation of 5.1%. Investment continue to lead the economy recovery, with machinery investments grew by 22% yoy. This brings FY2017 real GDP reach 5.1%, strongest growth since 2013. We reiterate our view that gradual economy recovery should continue this year within our forecast of 5.2-5.3% in FY2018.
What will be the growth drivers in 2018?
- Improvement in consumption, due to 1) no administered prices hike (at least for now), 2) stable inflation/Rupiah, 3) domestic events (Pilkada and Asian Games).
- Solid investment activities. As we mentioned previously, construction activities continue to be strong with good infrastructure projects in the pipeline.
- Export growth from both price and volume, thanks to synchronized global growth. Indonesia’s export growth was one of the strongest in the region back in 2017, which may translate to capital expenditure (capex) and job creation/consumption.
- Risks: rising crude energy prices & inflation, strong USD, rising interest rate, political noises.