MACROECONOMIC ANALYSIS SERIES: Indonesia Economic Outlook 2019

Current account deficit and political climate will be two of the key themes that will affect Indonesia’s economy in 2019. Relatively weak export performance due to overreliance on raw materials export, particularly on crude palm oil, and higher imports due to infrastructure drives have driven Indonesia to run trade deficit again in Q2 and Q3 2018, and we do not see room for trade position to improve significantly in 2019. The downside risk to Indonesia’s trade performance will also be considerable as full-scale trade war threatens to reduce GDP growth in China and United States, which directly accounts for 24.2% of Indonesia’s export value in 2017.  These trade risks, along with rising interest rate and drop in FDI to Indonesia, will put pressure additional on export and Rupiah exchange rate in the medium term

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