QNB Forecasts Continued Strong Economic Performance In Indonesia

(MENAFN- The Peninsula) QNA

Doha: Qatar National bank (QNB) predicts a positive economic outlook for Indonesia, driven by a pro-business government focused on continuity, favorable demographics, a strong fiscal framework, and a solid pipeline of infrastructure and capital investment projects.

In the report, QNB outlined three key factors behind this optimism, despite headwinds such as rising US protectionism and fluctuating commodity prices.

The first is Indonesia's demographics, which act as a long-term driver of growth.

The population continues to grow rapidly, and this demographic momentum is expected to fuel economic expansion for decades to come.

The report notes that with Indonesia's relatively young population, the number of working-age individuals is projected to grow faster than the number of dependents, creating a demographic dividend.

This occurs when the proportion of the working-age population (15 to 64 years) surpasses that of non-working-age groups.

Indonesia began experiencing this demographic dividend in 2013, and it is expected to continue driving positive economic momentum until the early 2040s.

According to the report, this demographic dividend could boost Indonesia's real GDP growth by at least 1 percent annually over the next two decades.

During this period, Indonesia could add over 100 million people to its consumer base an increase surpassed only by China and India.

The second factor is Indonesia's consistent fiscal framework, which continues to provide economic stability.

Since 1967, Indonesia maintained a fiscal rule capping the budget deficit at 3 percent of GDP and, since 2004, public debt at 60 percent of GDP.

In recent decades, the deficit has only exceeded this cap through a presidential decree during the COVID-19 pandemic in 2020 and 2021, after which it swiftly returned below the limit.

The report highlighted that public debt has recently stabilized at around 40 percent of GDP, which is lower than in many other Southeast Asian economies.

With real GDP growth projected at 5 percent and the government sticking to a 3 percent deficit cap, public debt is expected to remain stable or even decrease.

This fiscal discipline helps Indonesia maintain strong investment-grade credit ratings from all major agencies, along with relatively narrow sovereign bond spreads.

The report also noted widespread expectations that the new government will maintain fiscal discipline, helping keep borrowing costs low and investor confidence high.

This fiscal prudence enables continued infrastructure investment at reasonable costs for both the public and private sectors, boosting investment and growth.

The third factor highlighted is Indonesia's large-scale infrastructure and capital expenditure projects, which are expected to drive investment recovery.

The country has prioritized infrastructure projects valued in hundreds of billions of US dollars, including major developments in transportation (roads, bridges, railways, airports, and ports), logistics, mining, and essential facilities for new factories.

According to the report, a major driver of increased infrastructure spending is the plan to relocate Indonesia's capital from Jakarta to Borneo Island.

Following the footsteps of countries like Malaysia and Myanmar, this move aims to ease Jakarta's severe overcrowding and support efforts to unify the archipelago.

The project is estimated to cost around USD 33 billion and is expected to play a significant role in boosting economic growth through robust infrastructure investment.

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