Indonesian consumers spending big on smartphones

Indonesian consumers spending big on smartphones
A customer holds a smartphone inside a Samsung showroom in Jakarta

Indonesian consumers are forecast to spend more on new smartphones and Internet access this year after increases in disposable income; however, they remain cautious about spending on big-ticket items, suggests a survey by multinational financial services holding company Credit Suisse.

Fifty-five per cent of Indonesian respondents intend to upgrade their current phones to smartphones within the next 12 months, higher than 54 per cent in Mexico, 46 per cent in India and 31 per cent in Russia, according to the survey.

"Smartphones, Internet access and property will top Indonesian consumers' wish list this year, particularly those of middle income consumers," said Ella Nusantoro, the director of PT Credit Suisse Securities Indonesia's equity research.

With gross domestic product (GDP) per capita hitting over US$3,000 (S$4000), Indonesian consumers will channel their discretionary income into lifestyle items, such as smartphones, according to Ella.

The rise in spending on smartphones or the Internet has been a trend over the past three years, offering huge potential for e-commerce businesses.

Forty per cent of Indonesia's roughly 250 million people owned a smartphone last year, compared with only 10 per cent in 2010.

Internet penetration rose to 38 per cent from 14 per cent during the four-year period, according to the survey.

Indonesians spent 16 per cent more on smartphones last year, 10 per cent more on Internet access and 9 per cent more on property, the highest spending growth rates compared with spending on other items.

Indonesia's consumer spending trend is similar to other countries surveyed by Credit Suisse, which shows high spending growth for smartphones, Internet access and cars.

The survey, however, has shown that Indonesian consumers remain more cautious in spending their money on expensive items compared with their emerging market peers.

Jahanzeb Naseer, Credit Suisse Indonesia's head of research, said demand for property in the country would be driven by economic growth and special mortgage loans offered by banks.

"[The] more important thing is that the [interest rate hike] cycle is done; earlier, the interest rate was continually going up, now [it is] going down," he said.

The central bank decided on Feb. 17 to lower its benchmark rate by 25 basis points to 7.5 per cent. The Bank Indonesia (BI) rate is used as a benchmark for various credit interest rates, including mortgages and automotive loans.

Naseer said a lower BI rate would boost the country's domestic consumption, resulting in higher economic growth.

Indonesia's economic growth, which at 5 per cent last year reached its lowest level in five years, is expected to accelerate to 6 per cent in the fourth quarter this year, according to Naseer.

The survey was carried out in September last year by interviewing 15,835 respondents across nine emerging economies - India, Brazil, Indonesia, Saudi Arabia, China, Turkey, Mexico, Russia and South Africa, with 1,531 respondents from Indonesia.

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