"2011 is a year full of crisis, such as the European financial crisis and the "Arab Springs" in the Middle East, but Indonesia's economy managed to grow very well. However, Indonesia must remain cautious for the start of 2012," said Director of Standard Chartered Bank in Indonesia, Tom Aaker.
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| Economic Growth |
Indonesia's 2012 economic growth rate is estimated to 5.8 percent due to the impact of declining foreign direct investment (FDI) and the withdrawal of foreign currency funds that dominate the banking funds, and reduced exports.
"If the Euro deteriorate, the price of debt securities issued by troubled-European-countries such as Greece, Ireland, Portugal and Spain will continue to weaken, eventually European banks have also been affected as there are fallacious securities valued at 300 billion euros," said Standard Chartered Bank economist, Fauzi Ichsan.
This makes the European banking devastated and could not inject fresh capital to maintain the Capital Adequacy Ratio (CAR) in Europe, meaning would withdraw funds Asian banks.
"Foreign exchange is withdrawn from Asian banks would cause banking has foreign exchange shortages to finance capital expenditure. The limited purchase of capital will cause the private investment slows down," said Fauzi.
With these calculations, Standard Chartered Bank estimates that the investment growth is likely to decrease to 8.2 percent from 10.3 percent in 2011. But domestic consumption growth is expected to remain 4.7 percent in 2012.
While the inflation is likely to reach 5 percent in the late 2012 as a result of increased electricity tariffs and fuel prices as well as the rising in rice prices post-flood in Thailand.
According to Standard Chartered Bank, the 0.1 percent budget surplus in gross domestic product (GDP) in 2011 would make the government reject the rise in fuel prices. Despite that the subsidies for the fuel would need 17.5 percent in 2012 state budget. The trick is to increase the tax of the commodity sector such as palm oil and coal.
Indonesia banks interest rate is expected to fall to 5.75 percent in the first quarter of 2012. Bank Indonesia also would reduce the Indonesian banks "net interest margin" into 5.5 to 6 percent, thereby reducing the 2012 bank credit growth up to 20 percent.
The budget deficit would gradually increase from 0.6 percent of the value of GDP in 2010 (from the government target of 2.1 percent) to 1 percent in 2011 (from the government target of 2.1 per cent) to 1.3 percent in 2012 (from target 1.5 percent).
Source: Analisa
