Indonesia: Another downward revision – ANZ

Economists at ANZ Bank expect more weakness to emerge in Q2 in line with the various COVID-19 related social distancing protocols that were implemented in Indonesia. USD/IDR trades at 14,905.

Key quotes

“Following the weak first quarter GDP growth as well as prospects for an even weaker Q2, we are revising our 2020 growth forecast to 1.6%. We see a revival to 4.5% in 2021.”

“Inflation will remain well within Bank Indonesia’s (BI) target of 2-4% this year and next. This will provide ample room to the central bank to deploy various tools of accommodation, including unconventional ones.”

“Stepped up spending on healthcare, social protection, tax incentives to businesses and an economic recovery program will result in the budget deficit shooting up to 5.1% of GDP in 2020.”