Lewes, DE -- (ReleaseWire) -- 07/16/2014 -- We have reduced our GDP growth forecast for Indonesia this year, cutting it back to 5.1%, down from the 5.4% we were predicting in our previous quarterly shipping report. The main reason is growing political risk ahead of the presidential elections due in July, coupled with increased economic nationalism from the outgoing government. Taken together these things are persuading investors to wait things out. Economic growth in the first quarter has already slowed to 5.1% year-on-year (y-o-y). The ban on mineral ore exports (introduced to try and force mining companies to do more refining and processing within Indonesia) has had a negative effect, particularly as it has coincided with slowing Chinese demand for Indonesian coal. Other measures (such as new restrictions on foreign participation in the oil and gas sector) have also concerned investors.
We expect slowing investment to be the main drag on growth this year. On the plus side, however we believe that presidential front runner Joko Widodo (Jokowi), the former mayor of Jakarta, who is the favourite to win the contest, is reform minded and is prepared to strike an astute balance between the needs of foreign investors and domestic political constituencies. Although his detailed policies have yet to be spelled out, we think he could boost the infrastructure, mining, and oil and gas sectors, although admittedly he may face an uphill task in coalescing political support for his plans, given the expected fragmentary nature of the new parliament.
Spanning over 112 pages, “Indonesia Shipping Report Q3 2014” report covering the Industry Forecast, Market Overview, Company Profile and Economic Analysis.
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