Indonesia’s economic growth may accelerate to 7 percent from 2011, providing a case for its inclusion in the so-called BRIC economies along with Brazil, Russia, India and China (BRIC), Morgan Stanley said.
A win for Indonesian President Susilo Bambang Yudhoyono in the July 8 elections as projected by polls may help attract investors. Political stability and buoyant domestic demand will help boost expansion in the US$433 billion economy, Morgan Stanley said in a report dated last Friday which compares Indonesia with India.
Southeast Asia’s largest economy may grow 60 percent in the next five years to US$800 billion due to a stable administration, lower capital costs and a plan to spend as much as US$34 billion to build roads, ports and power plants by 2017, Morgan Stanley said.
Inclusion in the BRIC nations may increase Indonesia’s standing among developing countries as they seek more influence over global financial policies.
“What this means for the investor community is that they need to need to look at this asset class more seriously,” Chetan Ahya, a Singapore-based economist at Morgan Stanley, said in an interview yesterday.
Political stability, improved government finances and “a natural advantage from demography and commodity resources are likely to unleash Indonesia’s growth potential,” Ahya said.
Indonesia may expand as much as 4 percent this year, making it the fastest-growing major economy in Southeast Asia, the IMF has said. Morgan Stanley expects 3.7 percent growth this year.
Yudhoyono may win an overall majority in next month’s election, polls show. His Democrat party won more than 25 percent of seats in parliamentary elections this year, becoming the only party to be able to nominate a presidential candidate without seeking outside support.
This year’s parliamentary election results “suggest continued stability in this democratic political framework and is a critical factor in unleashing Indonesia’s growth potential,” Ahya said. “Coincidently, the India story has also recently been given a ‘fillip’ from the strong political mandate of the Congress-led coalition in the 2009 general elections.”
The Congress party of Indian Prime Minister Manmohan Singh’s won the most seats in parliament since 1991 in last month’s polls.
Leaders of the BRICs nations may use their first summit today to press the case that their 15 percent share of the world economy and 42 percent of global currency reserves should give them more influence over policies.
Developing countries say their votes in the IMF don’t reflect the shift in economic power.
Brazil, the world’s 10th-largest economy, has 1.38 percent of the IMF board’s votes, less than Belgium’s 2.09 percent, an economy one-third the size.
The BRICs may overtake the combined US$30.2 trillion GDP of the G7 nations by 2027, said Jim O’Neill, the London-based Goldman Sachs Group Inc chief economist who coined the term in a 2001 report. That is a decade sooner than he had forecast.
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