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Allow Us to Repeat Our Four Mantras on Indonesia
lGiven continued strong client interest, here by way of review are our "four mantras" on Indonesia:
1. Indonesia is not an export tiger and is not gaining global market share. Global trade and import demand have been strong, and this "rising tide" has lifted all boats - but this has nothing to do with Indonesia per se, and the country is not gaining market share.
2. Demand is sluggish at home. Underlying growth has been weaker than the official GDP growth rate for most of the past decade, and that is still the case today. Our proxy activity index is currently running just below 3% y/y, i.e., no recession but no excitement either.
3. The country has no balance sheet problems. The good news is that Indonesia has relatively clean balance sheets at the macro level, with low public debt levels, no external deficits and well-behaved domestic leverage indicators.
4. And there's room to ease policy. Which in turn means that the country has room to ease policy at home. Inflation is running near record-low levels, real interest rates are near record highs, and BI has barely begun an easing cycle. With the rupiah likely to be more stable in coming quarters, we do see further room for policy stimulus ahead.
Allow Us to Repeat Our Four Mantras on Indonesia (PDF)
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