An uncertain future

© The Economist Intelligence Unit, 2016 The Economist Intelligence Unit AN UNCERTAIN FUTURE Hopes for Indonesia's economic development have been dented by a slowdown in consumer spending and rupiah weakness, which has raised input costs for manufacturers. ONESI Nikkei Indonesia PMI, 2013-2015 That shrinking feeling Indonesia's manufacturing sector has steadily contracted in 2015. The next few years for industrial Indonesia may be characterised by falling output. 52.7 JUNE & JULY 2013 2015 A reading below 50 signifies contraction 2014 48.5 AUGUST 46.4 MARCH Indonesia's foreign investment outlook More concerns, less investment? In 2014, the government increased the number of sectors closed and/or limited to foreign investment, even as it actively courted investment abroad. Security concerns in Indonesia may deter the timing of investment or perhaps even reduce the likelihood of some projects beginning. 12 14 22 9 Sectors Sectors Sectors Sectors Sectors expressly opened open for foreign investment, with more open to confirmed closed to foreign investment, to foreign investment, but previously open or unregulated restrictions higher foreign and previously on foreign but previously unregulated investment closed investment FDI targeting Indonesia's secondary sector Lower gear Foreign investment in Indonesia's secondary sector has cooled since 2013. 2015* US$bn 21% 48% 12 US$bn 3 US$bn 2010 41% 2011 13 US$bn 2012 2014 35% US$bn 2013 46% FDI (US$bn) 16 Share of total FDI (%) 55% US$bn * Data for 2015 is from January-September 881.1 2020 After a lull, passenger vehicle registrations are expected to rev higher 776.5 2019 The need for wheels 681.1 A rebound in consumer spending will likely spur production growth over the longer term. 2018 593.6 2017 517.4 2012 517.4 2013 508.5 2014 529.4 2016 501.7 494.7 2011 Forecast 2016 - 2020 2015 424.4 2010 Consumer spending (US$bn) 330.6 2009 359 541 601 781 880 880 737 810 875 926 978 1049 Passenger car registrations (units 1,000s) Sources: BKPM, Herbert Smith Freehills, The Investment Coordinating Board of Indonesia, Markit, The Economist Intelligence Unit forecasts. Sponsored by Shell