Indonesia: IMF pencils medium-term growth at 5.6%

• The Indonesian economy has continued to perform well. Real GDP growth accelerated slightly to 5.1% in 3Q17 from 5% in 2016 and 1H17, led by robust exports and fixed investment.
• The output gap is estimated at –0.5% of GDP. Inflation fell to 3.3% in Nov 17, at the lower half of the official target band (4±1%), due to the slightly negative output gap and stable food prices, which more than offset the increase in electricity prices earlier in 2017 due to improved targeting of subsidies.
• Core inflation has remained stable at around 3%. The current account deficit declined to 1.5% of GDP in 1Q17-3Q17 due to higher exports. However, credit growth remains slow reflecting both weak demand and banks’ tight lending standards.
• The economic outlook is positive. Real GDP growth is projected at 5.1% in 2017, rising gradually to 5.6% over the medium term, led by robust domestic demand. Inflation is projected to remain around 3.5%, within the official target range, due to stable food and administered prices, and well anchored inflation expectations.
• The current account deficit is expected to remain contained at near 2% of GDP due to firm commodity prices and robust exports. Risks to the outlook remain tilted to the downside, including spikes in global financial volatility, uncertainty around U.S. economic policies, lower growth in China, and geopolitical tensions.
• Global growth and commodity prices could surprise on the upside. Domestic risks include tax revenue shortfalls and larger fiscal financing needs due to higher interest rates.

External Link : http://www.imf.org/en/News/Articles/2018/02/06/pr1836-imf-executive-board-concludes-2017-article-iv-consultation-with-indonesia