- Three aspects will be of interest in 2024
- - upcoming change in political leadership,
- - expanding footprint in the value-added commodity sectors, and
- - a gradual exit from the tight policy conditions.
- USD/IDR is seen keeping to a stable 14500-16000 range in 2024
Please download the PDF to read the detailed report.
ECONOMICS (Radhika Rao)
Indonesia’s growth was amongst the highest in the G20 countries in 1H2023, backed by capital spending, consumption, and tailwinds from structural changes in the export dynamics i.e., a rising proportion of downstream commodity output. Inflation returned to the target band in second half of the year, with higher food addressed via a mix of supply-side steps and cost of living support. The authorities have also shed the pandemic excesses, tapping strong revenues to narrow the fiscal deficit to below the -3.0% threshold, tightened policy rates to ensure price and FX stability, cessation of outright bond purchases and raised subsidised fuel prices in 4Q22 in response to fiscal pressure from elevated oil prices.
Three aspects will be of interest in 2024 – (i) an upcoming change of political leadership, (ii) expanding footprint in the value-added commodity sectors, and (iii) a gradual exit from the tight policy conditions. These will occur against the background of a fading tailwind from higher commodity prices, moderation in China as well as global growth and the need to maintain post-election economic momentum.
A change of political leadership
Indonesia is gearing up to hold its presidential elections in February 2024, after a decade under President Jokowi’s presidency. While the elections are in focus, encouragingly the political environment is a lot less volatile and more stable, compared to the 90s.
Expand footprint in the commodity value-add sectors.
Indonesia’s efforts to revitalise the manufacturing sector has found success in the metals sector, for instance the significant nickel deposits has attracted ecosystem players to build smelters as well as electric vehicle battery producers, concurrent to the authorities’ push to expand the domestic EV market and strengthen the infrastructure backbone.
Exit from tight monetary conditions
The central bank adopted a multi-pronged approach in 2023 to contain inflation, improve foreign currency liquidity (through capital management measures) and ensure financial market stability. Domestic liquidity remained ample, with only a modest passthrough of the higher BI rates onto the bank lending rates. Of late, liquidity has started to moderate as signaled by the softening credit growth and deceleration in the third-party fund growth. There is a growing debate on the timing of a start to the BI’s rate cutting cycle. We are in the camp expecting a calibrated exit plan, exhibiting a lower urgency to lower rates, to preserve financial stability.
CURRENCY (Philip Wee)
IDR Outlook – A stable 2024 outlook
In 2024, we anticipate USD/IDR to remain within the 14500 to 16000 range established in mid-2022. This expectation is in line with Bank Indonesia's projection of an average rate of 15510 for USD/IDR in 2024.
In the next few sections, we discuss the 2024 growth, inflation, macro stability markers and currency. Please download the PDF for details.
To read the full report, click here to Download the PDF.
Topic
Explore more
E & S FocusThe information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong SAR
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.