If economist Nouriel Roubini was a betting man, he’d be cashing out of China and doubling down on Indonesia.
On his first trip to south-east Asia’s largest economy, Roubini argued the case for countries with growth models like Indonesia, where nearly two-thirds of GDP is domestic consumption, rather than China, at roughly one third and, as he has previously warned, “could be headed toward a hard landing.”
Indonesia has low inflation, low debt (at about 26 per cent of GDP), young demographics and accelerating growth. China he said, is slowing and has a debt-to-GDP ratio of closer to 80 per cent (though China’s official figure is just 18 per cent).
“Some countries in the region are better positioned for long-term, even growth – countries like Indonesia or India, with 50 – 60 per cent of GDP coming from domestic consumption,” he said.
Indonesia learned a hard lesson during the 1997-1998 financial crisis, when GDP shrank 13 per cent in a year, capital flooded out and the rupiah collapsed. Now, along with most of its south-east Asian neighbours, it has built up “massive reserves” and is in healthy shape.
On the other hand, ”China needs to move away from the growth model and find balanced growth of the other emerging markets, like Indonesia, India and Brazil,” he said.
“It is the time of rising power of the emerging markets and emerging Asia is the fastest growing region in the world. Indonesia is a country that can be very important in the global economy. By the end of the decade it will be the 10th largest economy and by 2030, it could be the 6th.”
So you see, Dr Doom isn’t gloomy about everything.