Indonesia is yet another emerging market to have exploded out of the gates of the last recession. Over the last year, Indonesia’s 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.
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.”
- Market Vectors Indonesia Index ETF (NYSEARCA:IDX)
Sumin Kim contributed to this article.