Demand for everything from cement to instant noodles has continued to drive robust economic growth in Indonesia, defying the global uncertainty and domestic concern about resurgent economic nationalism and a widening trade deficit.
Gross domestic product expanded 6.1 per cent in the fourth quarter of last year, compared with a year earlier. GDP grew 6.2 per cent last year, slightly below 2011’s 6.5 per cent, as the slowdown in China hit demand for Indonesian commodities such as coal and palm oil.
While many other emerging markets in Asia are reliant on exports, more than 60 per cent of Indonesia’s GDP is generated by domestic consumption, shielding it from the vicissitudes of the global economy.
“We are not worried about a slowdown,” said Anton Sitorus, the head of research at the Jakarta office of Jones Lang LaSalle, a real estate agency, which has seen firm demand across the retail, office and housing markets. “The consumer is still strong and the economy is still growing, so businesses have a positive outlook.”
Indonesia’s GDP has grown by an average of 5.7 per cent a year over the past decade, underlining the potential of southeast Asia’s biggest economy.
The country attracted record levels of new foreign investment last year as companies from L’Oréal, the French cosmetics group, to Toyota, the Japanese carmaker, increased their production capacity to meet surging demand from the rapidly expanding middle class.
Domestic investment has also reached record levels as the family-owned conglomerates – such as Sinar Mas and Bakrie Group – that dominate Indonesia’s economy have built shopping malls, housing estates and hospitals.
Some economists have warned that falling incomes from their cash-generating commodity businesses could limit the ability of these conglomerates to invest in the consumer market.
But one senior banker in Jakarta played down the concern. “There’s been some slowdown in the natural resources sector,” he said. “The smaller players are finding it a bit tough but the big groups still have cash.”