Experts say Indonesia may take advantage from Trump's effect

Having low dependency on foreign trade and strong macro-economic condition, Indonesia's economy may have a better position in responding to protectionist measures expected to be applied by U.S. President-elect Donald Trump.

Indonesia's exports contributes only less than 30 percent to the gross domestic product, while consumption has more than 60 percent contribution as the country is home to a population of over 250 million with emerging middle class and growing wealth.

Under such condition, the Southeast Asia's largest economy offers a better investment playground, amid negligence of global fund's managers on shares, bonds and currencies of nations whose economy is highly generated by exports, particularly, to the United States.

"We suggest paying attention on countries whose economies generated by domestic market, such as Indonesia and India, with subdued debt level," Frederic Neumann, managing director and Co-Head of Asian Economics Research at HSBC bank, said as quoted by CNBC.

Indonesia's economy is projected to expand steadily last year and this year at moderate level amid contraction in some other economies.

"There are positive triggerers from banking credits and strong domestic consumption," Neumann said.

The Indonesian central bank estimates loan growth to accelerate at a faster pace this year of over 10 percent from predicted 8 percent last year, Erwin Rijanto, deputy governor of the bank has said.

Strong macro-economic condition, relatively stable political atmosphere, ongoing reforms to improve investment climate and prediction of relatively stable rupiah against U.S. dollars, would favorably factor to the inflows of foreign funds into Indonesia.

Rising global prices of commodities, the major exported products from Indonesia, and high bond's yield offered by the government and corporate, would also help Indonesia to counter the impact of the prospect of U.S. Federal Reserve's rate-hike plan this year.

Last year, rupiah gained 2.3 percent against the U.S. dollar as the Indonesia's central bank successfully guarded its volatility following Trump's victory on the U.S. presidential polls.

The lender's foreign exchange reserve has risen 18 billion U.S. dollars to 111 billion U.S. dollars since three years ago, according to the central bank data.

Indonesia is the world's biggest exporter of crude palm oil, thermal coal, and the world's third biggest exporter of rubber and cocoa, as well as home to the world's second-biggest copper mine.

With the prospect of further rising global oil prices after OPEC made new commitment to slash oil output, commodities prices will usually follow the hike.

Increasing revenues from exports of commodities have contributed to decline on the Indonesia's current account deficit gap, and repatriation assets from overseas has also narrow the country's development budget deficit last year.

The latest U.S. Federal Open Market Meeting Committee has seen uncertainty in the future and may put an option of changing monetary policy following the investors' reaction on the victory of Trump. The U.S. Federal Reserve has previously anticipated three rate hikes in 2017.

Relatively subdued inflation target this year of 3 to 5 percent may lead the Indonesian central bank resuming easing policy. Last year, inflation accelerated 3.03 percent.

source: Xinhua