Indonesia is the place to invest, says Nouriel Roubini, an economics professor famous for predicting the housing market collapse and subsequent economic meltdown.
Indonesia has a high rate of domestic consumption, low debt, and young demographics, Roubini told the Financial Times.
Domestic consumption accounts for over half its GDP. Its debt is about 26 percent of GDP, and it has a large population of young people that can help invigorate economic growth.
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In the financial crisis of 1997-1998, its GDP plummeted to 13 percent in a year, capital fled the country, and the rupiah collapsed. But Indonesia learned a lesson and accumulated enormous reserves.
Indonesia will be the 10th largest economy by the end of the decade and may be the sixth largest by 2030, predicts Roubini, co-founder and chairman of Roubini Global Economics LLC.
(Getty Images photo)
"It is the time of rising power of the emerging markets and emerging Asia is the fastest growing region in the world," he told the Financial Times. "Indonesia is a country that can be very important in the global economy."
He also favors other emerging markets with low inflation, low debt, and favorable demographics such as India and Brazil.
However, he has predicted that China might be headed to a hard landing. Its growth is slowing, and domestic consumption accounts for a third of domestic consumption. Although it claims its debt-to-GDP ratio is 18 percent, Roubini says it is closer to 80 percent.
"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.
Many Japanese retail investors seem to agree with Roubini's assessment. According to The Economic Times, they moved about $478 million into Indonesian mutual funds in the past year.
In response, asset management firms are creating mutual funds focusing on Indonesia, as well as other Southeast Asian countries.
"Japanese investors are keen to hold Indonesian funds due to the country's bright economic prospects, backed by strong domestic-led demand," Namie Katayama, product marketing manager at PCA Asset Management, told The Economic Times.
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