Indonesia 2012 growth to plateau at 6%

The 16-year record will not be repeated.

In a relase, Moody's said that Indonesia reported real GDP growth of 6.5% in 2011, the strongest since 1996. Moody's expects full-year growth to moderate slightly to 6.0% in 2012, as robust domestic demand relative to net exports will likely result in a mild deterioration in Indonesia's external payments position and depreciation of the rupiah.

Here's more from Moody's:

Indonesia's moderate to high economic strength is supported by its very large scale and favorable long-term growth prospects, although GDP per capita is relatively low compared with its rating peers. It also reflects the country's diverse economic base, ample natural resources, as well as rising savings and investment.

Inflationary pressures should remain manageable, given the delay in the planned hikes for administered prices of fuel and electricity. Conversely, the failure to enact subsidy reforms poses a risk to fiscal and trade balances.

In addition, although the improvement in the external payments position has paused, the stock of foreign exchange reserves, along with the government's bond stabilization framework and existing contingent lines of financing, provides a formidable buffer against external pressures.

Indonesia's susceptibility to event risks is moderate, given the stability of the banking system and the presence of financial buffers that can offset near-term risks. Still, political risks remain a medium-term concern, as the policy outlook is clouded by political posturing ahead of the general elections in 2014. The government recently announced several regulations, many of which appear to be protectionist.