Good News From Indonesia

Goldman Sach, world’s most respected investment banking group, once predicted that in 2010, Indonesia’s GDP (purchasing power parity) would reach $800 billion. Guess what? Indonesia’s GDP (purchase power parity) in 2007 already reached $ 948 billion.

Morgan Stanley, another world’s top investment bank predicted that Indonesia’s economy would top $ 1.5 trillion, and GNFI has a strong confidence that this is another under-prediction. Using 7-8% growth, $1.8 trillion is not really difficult to achieve.

That’s more than enough for Indonesia to be in an elite ring called BRIIC (Brazil, Russia, India, Indonesia, and China). Analyst used to say that Mexico will join that club, but eventually, Indonesia is more eligible, in term of steady pace of economic growth and political stability.

What Indonesia needs to do now is :

• keep up this pace
• promote more
• inject more funding for infrastructure
• increase the export
• attract more visitors
• produce more Made-in-Indonesia products, and sell overseas.

Yes, you got it. BRING MORE MONEY IN!

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Indonesia’s economic growth may accelerate to 7 percent from 2011, providing a case for its inclusion in the so-called BRIC economies along with Brazil, Russia, India and China, Morgan Stanley said.

A win for President Susilo Bambang Yudhoyono in the July 8 elections as projected by polls may help attract investors. Political stability and buoyant domestic demand will help boost expansion in the $983 billion economy (PPP), Morgan Stanley said in a report dated June 12 which compares Indonesia with India.

Southeast Asia’s largest economy may grow 60 percent in the next five years to $1.57 trillion due to a stable administration, lower capital costs and a government plan to spend as much as $34 billion to build roads, ports and power plants by 2017, Morgan Stanley said. Inclusion in the BRIC nations may increase Indonesia’s standing among developing countries as they seek more influence over global financial policies.

Strong growth, strong confidence
“What this means for the investor community is that they need to need to look at this asset class more seriously,” Chetan Ahya, a Singapore-based economist at Morgan Stanley, said in an interview today. Political stability, improved government finances and “a natural advantage from demography and commodity resources are likely to unleash Indonesia’s growth potential.”

Indonesia may expand as much as 4 percent this year, making it the fastest-growing major economy in Southeast Asia, according to the International Monetary Fund. Morgan Stanley expects 3.7 percent growth this year. (GNFI says 5%)

Leaders of the BRICs nations may use their first summit on June 16 to press the case that their 15 percent share of the world economy and 42 percent of global currency reserves should give them more influence over policies.

Developing countries say their votes in the IMF, founded at the end of World War II to promote global trade, don’t reflect the shift in economic power. Brazil, the world’s 10th-largest economy, has 1.38 percent of the IMF board’s votes, less than the 2.09 percent for Belgium, an economy one-third the size.

The BRICs may overtake the combined $30.2 trillion gross domestic product of the Group of Seven nations by 2027, said Jim O’Neill, the London-based Goldman Sachs Group Inc. chief economist who coined the term for the four countries in a 2001 report. That is a decade sooner than he had forecast.

By Arijit Ghosh-Bloomberg
and GNFI

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