New Construction research report from Timetric is now available from Fast Market Research

Boston, MA -- (SBWire) -- 07/13/2013 --Indonesia's construction industry has performed well during the review period, driven by strong economic activity and high levels of investment. Fixed investment has soared over the past decade, with its share of total GDP rising from 19.5% in 2003 to a high of 33.2% in 2012. The construction industry has been a clear beneficiary of this investment, and has grown by 7.4% on an annual average basis, in real terms, over the past 10 years, well above the GDP growth rate of 5.9%. It maintained this rate of growth in 2012, expanding by 7.5%. In line with this trend, the construction sector's share of total GDP increased from 6.2% in 2003 to 10.4% in 2012. Despite some challenges, the outlook for construction is favorable, supported by urbanization, rising incomes and government efforts to improve the infrastructure base as a part of its ambitious multiyear Master Plan for the Acceleration and Expansion of Indonesia's Economic Development (MP3EI).

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Key Highlights

- Indonesia's medium-term economic prospects are positive and investor confidence is building. With continued strong domestic demand growth offsetting weaknesses on the external side, real GDP growth is forecast to be in the range of 6-6.5% a year in the next two years. The forecast expansion in Indonesia's middle class, rising urbanization and labor force participation underpin the projection of real GDP growth of 6-7% a year between 2015 and 2017.
- The government has succeeded in maintaining a deficit consistently below 3% of GDP over the past 10 years. It has also managed to reduce its debt burden from a peak of 77% of GDP in 2001 to just 24% in 2012. It is partly due to improvements in the government's fiscal health that international credit ratings agencies have upgraded Indonesia's sovereign credit ratings, with Fitch and Moody's returning investment-grade status to Indonesia.
- Indonesia has attracted massive foreign direct investment during the review period, with the total rising to US$24.6 billion in 2012. However, the share attracted by the construction sector has fallen, from a high of US$618.4 million in 2010 to just US$240 million in 2012. Although FDI in the construction industry has been disappointing, domestic companies ramped up investment spending in 2012.
- A new bill on land procurement was passed in December 2011. Under this law, the government is obliged to provide land and can purchase property at market value, reducing the potential for speculators to buy and sell property at exorbitant rates and cause delays in projects. This law is expected to accelerate infrastructure projects over the forecast period.

Companies Mentioned in this Report: PT PLN (Persero), PT Wijaya Karya (Persero) Tbk, PT Bakrie & Brothers Tbk, PT Waskita Karya, PT Adhi Karya (Persero) Tbk

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