Southeast Asia is shaping up in terms of economic growth. For example, countries like the Philippines and Vietnam are emerging to be good business destinations.

Indonesia is joining in and is expected to see its economy hold up well in the face of the COVID-19 pandemic. In fact, the country is forecast to see GDP growth of 4.5% in 2022, according to the International Monetary Fund (IMF).

This is despite the fact that Indonesia was one of the countries hardest hit by the pandemic, with over 1.6 million confirmed cases and more than 42,000 deaths as of April 2021.

The Jakarta Composite Index

Despite a few setbacks in 2022, Indonesia’s Jakarta Composite index ended the year with the strongest performance of any major Asia-Pacific market. Since the year began, the index has been up 6.51%.

Comparatively, this year’s declines in the Hang Seng index in Hong Kong, the Kospi in South Korea, and the Taiex in Taiwan have all exceeded 25%. Mainland China’s Shanghai Composite and Shenzhen Component have also taken a beating, falling by roughly 17% and 27%, respectively.

Better performing indices were Thailand’s SET index, India’s Nifty 50, and Japan’s Nikkei 225, all of which had losses in the single digits. The second-best performer in the area was Singapore’s Straits Times index, which dropped just 0.53%.

What is Indonesia’s advantage?

The Jakarta Composite index had significant declines in May and July before making up ground. It has held a position over the 7,000-point threshold since early August.

Maynard Arif, head of Indonesia equities at DBS Group Research, claims that increased foreign equity investment has pushed the index higher and that stronger commodity prices are helping Indonesia to become a leading commodity exporter.

Although wealthy economies have already seen this boost, the economic recovery there has been on the upswing since COVID limits were loosened, he noted.

Maynard wrote in an email to CNBC, “2022 profits growth on [the] Indonesia market remain healthy, even after a large comeback in 2021 from a low base.”

Although Indonesia confronts challenges due to U.S. interest rate increases, he continued, DBS is nevertheless positive about the country. Government bond sales have decreased this year as a result of the Federal Reserve and a strong dollar.

Given Indonesia’s vision and growth, he noted, “the value may appear pricey [compared to] other nations, but it may be justified.” However, according to Manishi Raychaudhuri, director of Asia-Pacific stock research at BNP Paribas, declining commodity prices are a source of worry for Indonesia.

In a report dated September 28, he stated, “Given the decrease in energy prices, we suggest prudence and a nimble-footed approach to the energy industry in particular, and to Indonesia in general.”

According to Raychaudhuri, Singapore and India, Indonesia, and Malaysia are “pockets of safety,” and Singapore has a “big presence” of businesses that profit from growing rates, such as banks.

Tourist influxes are assisting the economy and market since it reopened, according to Suresh Tantia, a senior financial analyst at Credit Suisse.

Conclusion

Indonesia’s strong economic performance is due to a number of factors, including its large population, which provides a large domestic market, and its location, which makes it a key gateway to Southeast Asia.

Indonesia is also benefitting from high global commodity prices, as it is a major producer of palm oil, coal, and other natural resources.

Looking ahead, the Indonesian government is aiming to boost infrastructure spending and attract more foreign investment in order to sustain economic growth.

With its strong economic prospects, Indonesia is well-positioned to weather the COVID-19 pandemic and emerge as a leading economy in Southeast Asia.

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