Indonesia Shipping Report Q2 2015
Indonesian Economy Set To Accelerate in 2015
We are expecting activity at Indonesia's main ports to be positive and broadly comparable to last year, with growth of cargo handled ranging roughly between 3% and 8%. Of particular interest to the bulk shipping sector is the fate of the government's existing ban on the export of unprocessed mineral ores. The Constitutional Court upheld the ban in December, but there have been some signs that the authorities might relax the measure as part of a wider deal with mining companies. Such a move would boost shipping demand significantly. Over the medium- to long-term, we continue to believe that the key to sustainable growth in shipping is investment in port infrastructure, including road and rail links in the hinterland areas.
We are encouraged to see continuing evidence of progress on this front.
BMI is maintaining its forecast for the Indonesian economy to pick up a little speed this year, with GDP growth rising to 5.5% after an estimated 5.1% expansion in 2014. The main drivers for this will be improving terms of trade and fiscal efficiency. Bank Indonesia's tighter monetary policy, commenced in June 2013 as petrol price subsidies were reduced, is still a factor and has taken some steam out of the country's investment boom. However, with its finances improved by the cut in subsidies and the effects of lower international oil prices, the government has 2015 budget savings of around USD18.2bn to play with, and we expect around two thirds of those to be invested in infrastructure development projects, with part of the remaining one third being redistributed as subsidies to low-income households: both things with be growth-positive. One cause for caution, however, is that we have yet to see the new government tackling structural economic reforms, particularly in the important mining sector, where the environment remains unattractive to international companies and investors.
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