Indonesia's economic prosperity dips, but agencies remain optimistic for 2020

Indonesia, which is the world's fourth most populous nation and 10th largest economy in terms of purchasing power parity, seems to have hit a stumbling block. The World Bank has forecast a Gross Domestic Product (GDP) growth of 4.9% for Indonesia next year, according to a September report seen by Bloomberg. If realised, the growth would be the slowest pace since 2015 and below the government’s expectation of 5.3%.

In June, The World Bank also released a quarterly report, which showed growth slowing in the first quarter of 2019 at 5.1%, compared to 5.2% in the previous quarter’s results and its forecast. Businesses, which have been used to Indonesia's stability, may now see things shaking up in the country, with its newly re-elected president and decision to change its capital. In a conversation with Marketing Interactive, M&C Saatchi founder and president director Anish Daryani, the slowdown in GDP growth is all but a "minor blip" in relative to the broader economic landscape.

With China industrial growth hitting a 17-year old low on the back of ensuing trade wars with the US, he said Indonesia's dip in GDP in contrast, shows strong resilience against financial headwinds. He said:

When China catches a cold, the rest of Asia sneezes. That’s what we’re facing right now.

“Businesses ought to take this as a positive sign, and continue believing in Indonesia’s growth prospects. With Indonesian government bonds performing well and Indonesia’s inflation remaining low, the fundamentals continue to be strong," added Daryani.

According to him, the agency has not seen any major cut in budgets in client spend, and does not expect any in the near future. As private consumption is the largest contributor to Indonesia’s GDP and it continues to grow, Daryani said his outlook for 2020 remains positive. "With President Jokowi Widodo’s re-election, his commitment towards infrastructure development remains undeterred. Hence, I don’t see any signs of slowdown in the Indonesian economy," he explained.

Moving forward, the agency plans to invest in resources and build capacity to meet its clients’ business objectives. While China and the US continue to throw punches at each other, Daryani said the local government and private sector can similarly find ways to turn the situation to their advantage and uncover opportunities.

Moreover, the numbers for the early part of the year may not be an accurate judge of the rest of 2019 or the near future. Omnicom Media Group Indonesia, for instance, has seen a "definite spike" in business climate for the second half of the year. CEO Rajat Basra explained that the overall market in 2018 and first half of 2019 had been cautious when it comes to investment, but that sentiment changed right after the political elections, marking the end of the wait-and-watch phase.

"The market has seen higher foreign direct investments and conspicuous consumption, including the impact we have seen on sales of consumer goods, consumer durables and e-commerce. The business momentum has been positive, at least for our business here in Indonesia," he added.

Ensuring a wise spending mode

Facing the uncertainties ahead, Basra said the Group is sticking by its "client-first, data-led and people-powered’ business approach. Through that, it has helped its clients focus on evidence-based, outcome-driven investments, and build synergies across their businesses over the past few years. He said:

Agencies with a service design that focuses on a part of the business funnel, such as awareness or conversion, will be exposed to volatility.

On the other hand, companies such as Omnicom Media Group Indonesia are evidence-based, providing solutions that are agnostic in nature and aligned to the needs of consumer situations.

Meanwhile, FAB Group's managing director Lia Sunarjo foresees client going into "wise spending mode". While she does not think there will be a decrease in spend, she said that clients may refocus their ad dollars on activities that has "direct impact to sales and strong engagement" to stretch the marketing budget and make it work harder for them. She added:

I think since the engine or driver of economy will be consumption and investment, we will also witness new dynamics in the market that can be capitalised by agencies and consultants.

To maintain business agility, Sunarjo said agencies have to keep reinventing themselves to be constantly relevant to their clients and the dynamics of the market. This includes seizing business opportunities "beyond the usual cake", and investing in unique talent and training to increase quality of services and deliverables. "We need to be more sensitive at identifying unseen opportunities that might not be available in the market, but is a much needed solution for clients, or even proactively create the opportunities," she explained.

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