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View all search resultsIndonesia will not approach 8% GDP growth anytime soon, Fitch forecasts
A Fitch statement released on Wednesday forecast Indonesia's GDP growth would likely hover around 4.9 percent in 2027 and 2028, nowhere near the President’s ambitious 8 percent target despite an upward revision from an initial projection of 4.7 percent.
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Two women in masks stroll down a sidewalk along Jl. Sudirman in Central Jakarta on April 16, 2020. (Antara/Akbar Nugroho Gumay)
F
itch Ratings projects that Indonesia’s gross domestic product growth will get nowhere near President Prabowo Subianto’s 8 percent target during his term and may instead trend downward in the coming years.
In a statement on Wednesday, the sovereign credit rating agency’s economics director Alex Muscatelli and sovereign ratings director George Xu wrote that the country’s GDP growth in 2027 and 2028 would likely hover near 4.9 percent, around two-thirds of the President’s ambitious goal.
“Our baseline implies that it will be challenging for the government to meet its target while maintaining macroeconomic and financial stability, absent further significant reforms and high-quality job creation,” Muscatelli and Xu wrote.
The latest forecast was an upward revision of the agency’s initial projection of 4.7 percent, which reflected “a modest impact on total factor productivity and capital deepening from structural reforms on Indonesia’s potential GDP”, the economists said.
Indonesia secured unexpectedly high growth of 5.45 percent in the first half of this year, but Fitch forecast that full-year growth would touch only 5.2 percent due to fading fiscal support following front-loaded spending in the first six months, on top of diminishing net exports.
Muscatelli and Xu noted that the rupiah and the country’s foreign exchange reserves had experienced intensified pressures this year on concerns over policy credibility, fiscal discipline and capital market governance.
They acknowledged that the “rapid policy response” from authorities to buttress the currency and the swift appointment of a new central bank governor had “eased the pressure”, and that the 2027 budget pointed to policy continuity alongside reduced risk of higher state spending.
