Economic Crisis? Indonesia Doesn’t Think So


Indonesia remains confident that it has taken the necessary steps to ride out a protracted global financial crisis and avoid the worst of the damage.
Questions of just how prepared we are have taken on new urgency with analysts and observers predicting that the global economic crisis will spread from Europe and the United States in 2012, bringing down countries in its path.
“The government has, in the past two months, prepared itself to face a possible worsening of the global crisis and its impact on Indonesia,” Finance Minister Agus Martowardojo said over the weekend.
The country, he said, had learned its lessons from mistakes made during the global depression of 2008 and 2009.
“In many respects, our experience in facing the 2008/2009 financial crisis is still relevant to what we have to deal with today,” he said.
He added that the government had built predictions of future financial turmoil into the 2012 budget, giving special attention to the price of oil.
“In general, the 2012 state budget is good, having been prepared since last May,” the minister said. “We have taken into account forecast developments in the September to October period, namely a possible worsening in the European crisis.”
He said there were articles included in the budget as “anticipatory steps,” meaning that in the event of a worsening of the financial crisis and a negative effect on the economic health of Indonesia, the budget could be revised.
But confidence in the domestic economy, he added, remains extraordinarily strong.
Stock market analyst Pardomuan Sihombing said he believed the economy was well placed to withstand a global meltdown.
“Although the Indonesian financial market, such as the stock market, has felt the negative impact of the European and US financial crises, many countries in the world have felt it even worse,” he said.
He added that he was confident domestic growth would not be markedly disrupted next year.
Indonesia’s “macroeconomic fundamentals” and the likelihood that “emerging markets” will be relatively shielded from the fallout, he said, should see foreign capital seeking refuge in Asia.
“Foreign players still see that the investment market in Indonesia will continue to grow. There was capital outflow in August, but in September they came back with a volume reaching $1.6 billion,” Pardomuan said.
While Indonesia has yet to reach “investment grade” status, foreign funds have continued to flow in, which is a sign, he suggested, that the country will soon obtain the coveted rating.
“There is still foreign ownership in Indonesia because foreign investors are convinced that Indonesia will grow and provide high yields,” Pardomuan said.
The analyst also said that the Vista countries (Vietnam, Indonesia, South Africa, Turkey and Argentina) would continue to see economic growth.
“Previously, the world’s economic pillars were China and India. But now this has begun to shift,” he said. “China and India are now experiencing slower economic growth, while the countries in the Vista group are continuing to grow rapidly. Indonesia can realistically look at economic growth of 6.5 percent, which would be one of the best growth rates in the world.”
Abidin, from securities company Millenium Danatama Sekuritas, says he thinks 6.5 percent is a realistic target, and one that would “serve as positive sentiment for local capital market players.”
He added that domestic stock market investors had become increasingly mature in dealing with economic crises. “The 2008 crisis served as a valuable lesson for domestic investors in facing a global crisis,” he said.
Source: Jakarta Globe - Antara, December 4, 2011