My negative outlook on Indonesia's economy reflects the ongoing deficit in merchandise trade balance, which will keep on during 2018-2022. The negative trend of trade balance will be formed by higher commodity prices, as well as Indonesia's strong demand for imported capital goods. The main Indonesia's exports will continue to be natural resources, which will be under pressure due to widening of tariffs on goods imported to the US and possibility of slowdown in China's economic growth. As a result, the trade surplus will not be enough to cover the solid deficit on the primary income account, which I expect to widen to 2022. This also reflects repatriation of funds by foreign firms, as well as an increase in borrowing costs related to Indonesia's large external bond debt, due to higher US interest rates.
I expect further growth of Indonesia's economy, which will be accompanied by real GDP growth of 5.1% per year in 2018-2022. Growth in private consumption will remain strong and especially will be supported by election-related spending in 2019, as populist government measures for supporting household consumption. According to my forecast, the government's efforts to increase the inflow of private investments (domestic and foreign) in infrastructure and manufacturing will ensure capital raising in the mid-term. As a result, gross fixed investment will increase by 5.6% on average in 2018-2022.