Country Report Indonesia February 2011

Economic performance: Strong consumer demand supports manufacturing

Strong demand from Indonesia's growing number of middle-class consumers has been a driving force behind economic growth in recent years, aided by low interest rates and a strengthening of the rupiah. This strong domestic demand, which remained resilient even at the height of the 2008-09 global financial crisis, helped to ensure that Indonesia was one of only a few major economies that avoided recession during that period. These middle-class consumers are now helping to spur a renaissance in the country's manufacturing industries. Production at large and medium-sized factories in Indonesia rose by 4.4% in 2010, according to BPS, with firms catering to the demands of middle-class consumers driving this strong growth.

Sales of cars and motorcycles have been especially strong. Car sales in 2010 rose by 57% to 764,710 units, up from 486,061 units in 2009, according to the Indonesian Association of Automotive Industries (Gaikindo), boosted by the rising spending power of Indonesia's consumers and low interest rates. Motorcycle sales rose by 26% to 7.4m units in 2010, according to the Indonesian Motorcycle Industry Association (AISI). Producers of consumer goods are also expanding rapidly. An Anglo-Dutch consumer products firm, Unilever, recently announced plans to invest up to US$400m in Indonesia by 2013, and a Swiss company, Nestlé, is spending US$200m to boost its presence in the local market.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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