Moody’s Investors Service forecasts that Indonesian GDP growth will dip just below 5% in 2019-2020, due to a likely moderation in government spending and a slower pace of infrastructure development. This forecasting GDP growth rate is still stronger than the median average for Baa2-rated sovereigns.
“We expect growth will likely moderate slightly in 2019 and 2020, to 4.9% and 4.8% respectively. A weaker pace of infrastructure development coupled with slower trade flows led by global factors, will also weigh on headline growth,” said Moody’s.
While private sector, Moody’s noted, consumption should remain stable due to increased social spending and handouts, government spending could slow post presidential elections in April 2019.
Based on Moody’s analyze that real GDP has been growing at a strong and stable pace, averaging in excess of 5.0% year-on-year (y-o-y) over the past five years.
In 2008-2017 periods, annual growth averaged 5.6% y-o-y, making Indonesia among the fastest growing, and also most stable, Baa-rated countries. Through 2018, real GDP growth expanded 5.2% y-o-y, compared with 5.1% in 2017.
The growth was driven by strong domestic demand, including consumption primarily from the household and government sectors; as well as fixed capital formation.