Indonesia Q3 GDP growth pegged at 6% YoY

Private consumption growth has been the underlying support to the economy.

OCBC Treasury Research noted:

Despite investment growth likely to lose some steam ahead, we maintain our GDP growth forecast for Indonesia at 6.2% yoy and 6.5% for 2012 and 2013 respectively, given that domestic demand is likely to sustain its decent momentum in the medium-term (also bolstered by the multiplier effect from this year’s robust investment growth).

We forecast Q3 GDP growth to come in at 6.0% yoy this week. We still see excess capacity in the domestic economy and note that private consumption growth has been the underlying support to the Indonesian economy in recent years.

The risk to our forecast lies in further (or sustained) weakening tone in the Rupiah and possibly revision to domestic (subsidized) fuel price, which would have a marked impact on the domestic purchasing power.

Meanwhile, we continue to expect BI standing pat on their policy rate this week, as the central bank is likely to err on the side of caution going into 2013, with signs that underlying inflationary pressures are beginning to creep higher.

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