Indonesia is yet another emerging market to have exploded out of the gates of the last recession. Over the last year, Indonesia’s exchange traded fund (ETF) is up 45%. As with any developing market, there’s risk, but Indonesia is laying out the canvas for a bright future.
Indonesia is blessed with a few characteristics that position it for a bright economic future.
- Indonesia’s population is young and growing.
- Jakarta, the nation’s capital, is expected to be the largest city in the world within two decades, reports Berni Moestafa of BusinessWeek.
- Domestic consumption makes up two-thirds of the economy. That has helped shelter Indonesia from the last recession that rocked the more developed and/or export-dependent nations.
- Low inflation has allowed the central bank to keep rates at a record low of 6.5%. Inflation averaged 3.8% in the first five months of this year. [China ETFs, Rising Wages and the Trade Deficit.]
As a result, the IMF has forecast that Indonesia will grow 6% this year, up from 4.5% last year. Trade Minister Mari Pangestu believes the country can grow exports at 7% to 8.5%, reports Jason Folkmanis of BusinessWeek.
European demand remains a concern, but so far, the fallout in Europe has not seemed to affect Indonesia’s exports too much. Exports grew 19.6% in the first quarter compared to last year.
According to Gita Wirjawan, chairman of the Investment Coordinating Board of Indonesia, 6% to 7% growth is “pretty much in the pocket.” [Why Indonesia Is On Fire.]
For more stories on Indonesia, visit our Indonesia category.
- Market Vectors Indonesia Index ETF (NYSEArca: IDX)
Sumin Kim contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.