Indonesia’s construction industry achieved lower-than-expected growth rates in the first quarter of 2011, prompting us to downwardly revise our full-year real growth forecasts for the sector to 6.3% in 2011 (previously 7.4%). We believe that this weaker growth is due to the rising cost of inputs and the fact there has been no resolution with regard to problems with regulatory issues in the construction sector. While the rate of inflation is likely to ease in the second half of this year, regulatory issues are unlikely to be resolved quickly, and this could have ramifications for the growth potential in the construction sector over the long term. Nevertheless, construction activity, driven by investment into transport and energy infrastructure, as well as industrial construction related to the country's growing mining sector, is expected to be relatively robust between 2012 and 2015, averaging 7.3% per annum.
Indonesia Infrastructure Report Q4 2011, © Business Monitor International Ltd.