New Market Research Report: Indonesia Commercial Banking Report Q3 2010

Fast Market Research recommends "Indonesia Commercial Banking Report Q3 2010" from Business Monitor International, now available
 
July 20, 2010 - PRLog -- We remain bullish on Indonesia's growth prospects over the coming year, projecting real GDP growth to reach 5.2% in 2010, before accelerating to 5.5% in 2011.     However, we note that the political situation has worsened following the implication of Vice-Preside nt Boediono and Finance Minister Sri Mulyani Indrawati in the Bank Century bailout scandal.     Recent economic data released across the globe has been generally encouraging and many countries in Asia maintained the V-shaped rebound through Q409 as external demand remain robust. As such, our global growth forecast now stands at 3.0% for 2010, representing a decent recovery for the global economy from an estimated -1.8% outturn in 2009. Notably, we expect emerging Asia to outperform the other regions, projecting real GDP growth to reach 7.2% in 2010, compared to just 1.8% for the developed states. Although trade-dependent economies are likely to benefit inordinately from resurgent external demand, the sustainability of the recovery be yond the next two quarters is still in question. As such, while export-driven economies are likely to show a larger jump in real GDP growth with respect to 2009, domestic demand-driven economies such as India and Indonesia have a more stable platform for Indonesia's real GDP growth came in at a robust 5.4% y-o-y in Q409, taking full -year 2009 GDP growth to 4.5% (slightly above our forecast of 4.3%).     We remain bullish over Indonesia's growth prospects over the coming year, projecting real GDP growth to reach 5.2% in 2010, before accelerating to 5.5% in 2011. Underpinning this sanguine outlook is our expectations that the country's large domestic economy will continue to perform well. Indeed, Indonesia - with less dependence on exports - is also relatively insulated against a slowdown in the US (from 2.8% in 2010 to 1.8% in 2011) or China (from 9.0% in 2010 to 7.7% in 2011), which we expect to happen in late H210. High Private Consumption Growth Maintained Private consumption growth held at 4.0% y-o-y in Q409, contributing the lion's share of 2.4 percentage points (pp) to headline growth. Going forward, we expect a robust figure from this component of GDP, forecasting private consumption growth to reach 5.5% in 2010. We see two key reasons supporting our view.     Firstly, we believe that the BI will keep the benchmark rate relatively low for the next two years (envisioning only a 125bps rate hike by end-2011), supporting more uptake of household debt. Secondly, the projected increase in investment in the coming quarters should provide a boost to real wages, thereby bolstering private consumption. More signs have also been appearing in recent months that support our upbeat view. Indeed, Indonesia's unemployment rate (released bi-annually) actually fell from 8.14% in March 2009 to 7.87% in August 2009, despite the downturn.     We expect the unemployment rate to further decline to 7.6% by end-10,consumer confidence is still holding up well, judging from the robust car sales registered towards the end of 2009, and we expect this to continue over the medium term. Investment Picking Up Gross fixed capital formation (GFCF) growth accelerated for a second consecutive quarter, rising by 4.2% y-o-y in Q409, contributing 1.0pp to headline growth. Although the figure is still far below the average 10.1% growth (a figure skewed to the upside given the global boom of the time period) seen in 2007-2008, the trend has been encouraging and we currently project GFCF growth to reach 5.0% in 2010. Given the strong performance of the economy, businesses are likely to increase investment in the coming quarters. Indeed, in the latest Business Survey conducted by Bank Indonesia (Q309), there was increased optimism regarding the business situation. Moreover capacity utilization is already at 74.20% in Q409, close pre-crisis levels, indicating that businesses will have to invest to cope with increasing demand. Business lending will also be facilitated by our expectation that Bank Indonesia will keep the BI rate low and embark on more efforts to encourage further lending by commercial banks External Sector Holding Up In a further sign that global trade flows are normalising, export and import growth (refering to both goods and services) finally turned positive on a y-o-y basis after three consecutive quarters in negative territory, with export recovery vastly outpacing import growth. However, we believe that this trend is poised for a reversal given our outlook that Indonesia's domestic demand will fuel stronger import growth. Moreover, with the Asean-China Free Trade Agreement (FTA) in effect since the beginning of this year, there is a likelihood that import of chinese goods may surge. That said, we acknowlege that Indonesian exports will also benefit from the FTA and it is premature to assess the net impact on Indonesia's trade balance until further data is available. Currently, we expect export growth to reach 8.5% and import growth to reach 9.9% in 2010.     Optimism Tempered By Clouding Of Political Situation Despite our bullishness on the Indonesian economy, we note that the domestic political situation has become decidedly cloudier. While we had been opt imistic following the strong mandate garnered by President Susilo Bambang Yudhoyono during the presidential elections in 2009, the scandal involving the bailout of Bank Century poses a serious overhang. In the worst case scenario, Vice-President Boediono and Finance Minister Sri Mulyani Indrawati (both of whom are crucial towards further economic reforms) would stand to lose their positions.

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.
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