Strong Growth

3 12 2007

Indonesia 3Q GDP Growth

In September 2007, the dRi Coincident Economic Index (CEI), which tracks the current state of the economy, fell to 105.1 (down by 1.0% month-on-month) from 106.2 in August 2007. This is the first time the CEI has fallen in seven months. As such, it is too early to conclude that the uptrend in the CEI has been broken. Indeed, the fall in the CEI is only temporary we believe, and the CEI is likely to rebound in the coming months.

The latest data shows that the Indonesian economy grew by 6.5% year-on-year (YoY) in Q3 2007, slightly up from the 6.3% YoY growth pace in Q2 2007. As such, the Indonesian economy is picking up its growth pace.

The dRi Leading Economic Index (LEI) that moves ahead of the Coincident Index (around 6 to 12 months) rose to 110.7 in September from 110.3 in August 2007 (up by 0.4% m-o-m). The LEI had increased from March 2007 till July 2007, but declined in August 2007. The rebound in the LEI in September suggests that the economic recovery is likely to be sustainable and that the economy is likely to continue to pick up its growth pace in the near term.

Improving purchasing power, combined with relatively low interest rates, have spurred domestic demand. Investment activities have also increased significantly. As a result, the engine of economic growth is more balanced than before, thus meaning that the current economic expansion is more sustainable than before.

Against this backdrop, we reiterate our forecast that the Indonesian economy will grow by 6.23% in 2007. The expansion is expected to continue in 2008, in which year the economy is expected to grow by 6.33%. Indonesia Early Economic Indicators November 2007