• Indonesia’s economic fundamentals are not as weak as they seem
• We still project the BI rate at 8.00% by end-2014, but adjust the timing of the next rate hikes to Q2 and Q3
• A further rally in IDR bonds will be tactical and limited; we maintai...
• Our Indonesian clients are slightly more optimistic this year on business prospects
• Our survey results suggest that sustaining revenue growth remains the key challenge
• Indonesian clients are bearish on their local currency vs. USD in 2014,...
• We expect Indonesia’s economic fundamentals to improve in 2014
• We lower our end-2014 BI rate forecast to 8.00% from 8.25%
• Trade balance is set to improve, driven more by import slowdown than by exports recovery
Parliament passed a non-expansionary budget for 2014, with a deficit target of 1.7% of nominal GDP
• We maintain our forecast of a deficit of 1.5% of nominal GDP
• Net supply target is IDR 205tn, or 12% lower than in 2013; stay Overweight duration...
• BI to focus more on stability, less on growth, even in election year 2014
• BI is likely to continue to tighten monetary policy, despite slowing inflation
• We estimate the new optimum real GDP growth rate at 5.5-6.0% in 2013 and 2014...
• Although Indonesia’s economic fundamentals are still strong, its external exposures are rising
• Balance-of-payments deterioration needs to be addressed with structural rather than ad-hoc measures
• External debt has risen in recent years, but ...
• Indonesia’s economic fundamentals are deteriorating; the market perceives that country risk is rising
• We revise our BoP, GDP growth and government budget deficit forecasts
• We expect the IDR and IDR bonds to weaken further on inflation risks...
We believe BI Governor-Appointee Martowardojo is more likely to hike rates
• We project inflation to reach 5.5% y/y by end-2013, still within BI’s target range for this year
• We expect the current account to remain in deficit in 2013...
We believe that the government is unlikely to hike subsidised fuel prices in 2013
• We now expect BI to raise the FASBI rate, instead of the BI rate, by 50bps in H2-2013
• Stay Underweight FX and Neutral duration on IDR bonds; shift 5Y and 20Y hol...
• Sentiment in Malaysia is more bullish for 2013 vs. 2012; optimism has declined in Indonesia
• Domestic and regional issues are back in focus, especially wage costs and political uncertainty
• Clients are more optimistic on the THB in 2013 than i...
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This report provides an economic outlook for more than 60 economies worldwide and investment implications for commodities, credit, equities, FX and interest rates markets in 2014. We expect a better 2014, with world economic growth picking up and inflation staying benign. Global growth should increase to 3.5% in 2014 from 2.7% in 2013, helped by improvements in economic activity in the US and Europe. A pick-up in growth in the West is good news for the rest of the world, and we expect emerging economies’ growth to outpace G7 growth by almost 4 percentage points.
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