[SINGAPORE] Indonesia's consumer confidence faced an "extreme deterioration" in the first half, falling the most in Asia as the outlook for the economy and stock market worsen, according to a MasterCard Inc. survey.
The 25.8-point slide from the second half last year to 64.3 on the MasterCard index was the steepest among 17 markets in the region, the credit card company said. Three other Southeast Asian nations - Thailand, Myanmar and Malaysia - are also among the top five decliners, according to the survey that also tracks employment, income and quality of life.
While expectations were perhaps unrealistically high, Indonesians and foreign investors have been disappointed with the slow pace of change following President Joko Widodo's election victory last year. Weak government spending has contributed to an economic slowdown, as a stifling bureaucracy and conflicting regulations remain impediments to doing business.
There was "a significant halo effect" with the elections, Matthew Driver, who heads global products and solutions in Asia Pacific at MasterCard, said in an interview on Tuesday. "But all of the commentary has shown a little bit of a frustration with trying to make that administration work."
The survey showed consumer confidence for Indonesia fell to the weakest in three years, undermining moves to increase domestic spending in a country with Asia's fastest inflation rate.
Southeast Asia's largest economy is growing at its slowest pace in more than five years amid a commodities slump, China's slowdown and uneven recoveries in the US and Europe. Much needed government infrastructure spending to offset external influence is still trickling in slowly as Mr Joko, also known as Jokowi, works to cut through the bureaucracy and acquire land for projects.
"We are in a cyclical downturn," Mr Joko said in a speech in Singapore on Tuesday. "It is true we still have a lot of work to do in Indonesia," he said, adding that the country needs to be business-friendly by simplifying permits and cutting bureaucracy and corruption.
Reduced imports by China also left the commodity exporter searching for alternative markets as supplies expanded following an investment boom from 2008 through 2011.
"Export recovery has been elusive," said Chua Hak Bin, an economist at Bank of America Merrill Lynch in Singapore. "China has become a lot more important than 15 to 20 years ago."
The MasterCard report showed the outlook for Indonesia remains in the "optimistic" range compared with other Asian markets even as the outlook deteriorated. It's just "significantly less optimistic" than it was last year, Mr Driver said.
Consumer spending, which accounts for more than half of the economy, remains moderate. The country's motorbike sales posted a 22 per cent month-on-month gain in June ahead of the Eid al-Fitr holiday, after falling to the lowest in almost three years.
Consumption has been gradually increasing as a component of Indonesia's gross domestic product, said Gundy Cahyadi, an economist from DBS Group Holdings Ltd. "This means that they're shouldering more of the burden to lift growth in Indonesia." The survey also showed the outlook for the Indonesian stock market plunged to the lowest since the 2008-2009 global financial crisis.
Indonesia's benchmark Jakarta Composite Index slumped 9.8 per cent this year, the biggest decline in Asia, while the rupiah lost 8 per cent, the region's worst-performing currency after the Malaysian ringgit.
Mr Chua expects the rupiah and the ringgit to continue to "remain vulnerable" as prospects of US interest-rate increases draw near.