HSBC: Indonesia's Economy Stays Healthy Supported By Strong Domestic Consumption

Illustration. (Photo: Doc. Antara)

JAKARTA - Chief Investment Officer for Southeast Asia and India at HSBC Global Private Banking and Wealth, James Cheo, said the Indonesian economy remains healthy supported by strong domestic consumption. "The Indonesian economy remains healthy thanks to support from a strong level of consumption," James said at the HSBC Global Private Banking Investment Outlook press conference for the third quarter of 2024 in Jakarta, quoted from Antara, Tuesday, June 4. He said data on Indonesia's first quarter of 2024 gross domestic product showed growth was at the level of 5.1 percent on an annual basis. This figure was achieved thanks to domestic consumption, although investment and exports weakened slightly. The service sector is a bright spot supported by tourism. Entering the second semester of 2024, James said economic growth would be supported by strong credit growth with the influence of foreign investment and infrastructure spending.

He estimates that the Indonesian economy could grow 5.2 percent in 2024, higher than 5 percent in 2023. On the other hand, Bank Indonesia (BI) surprised many by raising the BI-Rate benchmark interest rate in April to 6.25 percent to overcome the weakening of the rupiah and inflation which has increased slightly. According to him, now there is also uncertainty about the direction of interest rates. Therefore, his party postponed the cut in the first interest rate for BI-Rate to the fourth quarter of 2024. "We postponed the cut in Indonesia's first interest rate to the fourth quarter of 2024," he said. BI seems to remain cautious in cutting flowers, and chose to wait for steps from the central bank of the United States (US) or the Fed. He estimates that the cut in US interest rates will occur in September 2024.

"For Indonesia, market performance will still be volatile in the coming months. Therefore, we are in a neutral position to the Indonesian stock market," said James. Previously, BI Governor Perry Warjiyo said the Indonesian economy remained resilient in the period of high global uncertainty. This is reflected in the economic growth in the first quarter of 2024, recorded 5.11 percent year on year (yoy), an increase compared to the growth in the previous quarter of 5.04 percent (yoy). ). "This development is supported by domestic demand," Perry said at a press conference on the results of the May 2024 BI Board of Governors Meeting in Jakarta, Wednesday (22/5).

The domestic demand is in the form of improving private consumption and the government, driven by the positive impact of the 2024 General Election and national holidays related to National Religious Holidays.

He also said investment grew well, mainly supported by building investments as infrastructure development continued. Bank Indonesia predicts Indonesia's economic growth in 2024 to be in the range of 4.7-5.5 percent.