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Domestic Demand Growth Robust, BI On Hold


Bank Indonesia announces its monetary policy decision later today and is widely expected to leave rates unchanged at 6.0% and is not yet likely to move to an easing bias as growth remains robust, inflation is at the mid-point of the band and the IDR is still at weak levels (see MNI BI Preview). BI expects growth this year to be between 4.7% and 5.5% supported by domestic demand. Leading indicators from the start of 2024 support this view.

  • Q4 domestic demand growth rose to 6.1% y/y from 4.8%, the highest in five years, supported by strong consumption and investment, which has been boosted by infrastructure projects, and there was also a pickup in government expenditure. President-elect Prabowo has said he will continue the economic policies of the outgoing President Jokowi.
  • January consumer confidence rose 1% to its highest level since August and is in line with consumption growth continuing in the 4.5-5% range it been in since the end of 2022.
  • The S&P Global manufacturing PMI rose 0.7pp to 52.9 in January, well above the aggregate ASEAN PMI of 50.3. The outlook is also positive with new orders growth picking up including slight growth in new export orders. Business confidence also stayed positive with businesses hoping sales would rise as the economy improved, but sentiment is below the series average.
Indonesia consumer confidence vs consumption y/y%

Source: MNI - Market News/Refinitiv

ASEANS&P Global manufacturing PMIs

Source: MNI - Market News/Bloomberg

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