Indonesian economy becomes a 'standout' among emerging markets

Indonesian economy becomes a 'standout' among emerging markets.

As China's slowing growth spills over into other developing economies in the region, Indonesia is gravitating above the turmoil. Earlier this year, the International Monetary Fund's mission chief for Indonesia gave the government credit for its economic competence, and expects its economy to grow by 5 percent this year.

Analysts say Indonesia's success is all the more impressive as major economies around the world continue to hew to loose monetary policies — which haven't gotten them much bang for their buck — and developing economies struggle.

"Against this backdrop it is hard to find structural and sustainable growth stories," Smriti Shekhar, portfolio manager with NN Investment Partners' equity markets group told CNBC in a recent interview.

Indonesia's vast population exhibits favorable demographics such as high life expectancy and fertility rates. Investors also like growth prospects, fiscal discipline and relatively low inflation of around 3-5 percent, making the country what Shekhar calls a "standout as an attractive market."

Indonesia's reform credentials have also stood out in 2016 with a new government, improved economic fundamentals, tax reform and the appointment of a credible new finance minister who was a former IMF official.

Foreign investors have lapped up Indonesian bonds at a very high rate — at least 40 percent, according to recent data — underscoring how the country's relative attractiveness, but stoking concerns with the country's officials. In a research note to clients this week, Bank of America-Merrill Lynch recommended maintaining exposure to long-dated Indonesian debt, based on "a supportive stance from global central banks" boosting the attractiveness of emerging government bonds.