Indonesia\u00e2€™s missing motorcycles point to a deepening demand hole in
\nSoutheast Asia\u00e2€™s biggest economy. What\u00e2€™s more worrying for investors is
\nthat President Joko Widodo has so far done little to fill it.<\/p>\n
Motorbike sales \u00e2€“ an important indicator of Indonesia\u00e2€™s economic health
\n\u00e2€“ fell a staggering 36.5 percent from a year earlier in May. Demand for
\nthe two-wheelers, a popular mode of travel in the archipelago with
\npatchy public transport and still-limited car ownership, has now slumped
\nin eight of the past 12 months. The decline is intertwined with
\nvanishing gains from trade. Prices of coal, palm oil and other
\ncommodities Indonesia that sells in world markets are falling much
\nfaster than those of the manufactured goods it imports.<\/p>\n
Even more disconcerting is Widodo\u00e2€™s failure to offset the shortfall.
\nEarly in his tenure the new president scrapped wasteful fuel subsidies
\nthat cost the government $20 billion last year, raising expectations of
\na meaningful increase in public investment. Upgrading roads, ports and
\npublic transport would boost the economy\u00e2€™s potential while also putting
\nmore money in people\u00e2€™s pockets. But fiscal spending so far in 2015 has
\nbeen only about 30 percent of the full-year target, according to DBS Bank.<\/p>\n
The economy needs stimulus. The International Monetary Fund expects GDP
\ngrowth, which sunk to a five-year low of 5 percent in 2014, to slow
\nfurther to 4.7 percent this year. Monetary easing isn\u00e2€™t much of an
\noption. The central bank has reduced interest rates just once this year.
\nLowering rates further could extend the 7 percent slide in the
\nIndonesian rupiah against the U.S. dollar this year, potentially
\nspurring inflation by raising prices of imported goods.<\/p>\n
Foreign investment is already stagnant because of waning demand from
\nChina for commodities and a slower-than-expected pickup in
\ninfrastructure investment. International capital has also been spooked
\nby Indonesia\u00e2€™s increasingly virulent economic nationalism, which led to
\nthe disbanding of the oil and gas regulator in 2012 and a ban on private
\nparticipation in the water industry earlier this year.<\/p>\n
Pending a revival in private investment, government spending will have
\nto fill the hole in Indonesian output. It\u00e2€™s the only way for Widodo to
\nget those missing motorcycles back onto the roads.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/missing-motorbikes-point-to-indonesian-demand-hole",
"image": "june_19_indonesia_motorcycle.jpg"
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}