Indonesia to release business confidence metric for Q1

Indonesia will today release its Business Tendency Index (BTI) for Q1, a measure reflecting business confidence among leaders in major economic sectors.

A BTI value greater than 100 indicates an improving outlook for business. While Indonesia’s BTI has been positive recently, only dropping below 100 twice since 2009, its value is forecast to drop to 98 for Q1 from 106 last quarter, reflecting an expectation of reduced demand and interruptions in supply for businesses in the short term.

Q1 saw Indonesia’s weakest economic growth in nearly two decades, as domestic consumer spending and regional trade have slowed significantly. Indonesian exports fell 7% year-on-year in April, and retail sales are projected to have declined by over 10%.

However, there is room for optimism as the global economy seeks to begin reopening in Q3. Exports, which make up around a fifth of Indonesia’s GDP, should rise fairly quickly due to China’s swift recovery. In addition, the weaker Indonesian rupiah will likely spark higher demand for cheaper Indonesian goods in China and Japan.

Stimulating domestic demand may prove to be more difficult, as Indonesia’s economy is not expected to fully reopen until August. Regardless, employment and incomes may not return to pre-crisis levels in the short run, even with additional government stimulus packages. Do not expect Indonesia’s BTI—or the economy in general—to return to normal for at least a year.

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