Despite global petroleum prices expected to remain low in the foreseeable future, Bank Indonesia Governor Agus Martowadojo said prices of several commodities have in fact increased in the past couple of months. For example, the crude palm oil price - one of the key foreign exchange earners of Indonesia, has made a remarkable recovery in 2016 as output in Indonesia and Malaysia has been on the decline due to El Nino-inflicted dry weather and problems related to the severe man-made forest fires on Sumatra and Kalimantan in the June-October 2015 period. Moreover, Indonesia is expected to consume more crude palm oil due to the government's ambitious biodiesel program.

Indonesia's economic growth in the first quarter of 2016 was slightly disappointing at 4.92 percent (y/y). Previously, most analysts agreed that GDP growth in Southeast Asia's largest economy would touch 5 percent (y/y). However, compared to economic growth in the first quarter of 2015, the Q1-2016 GDP growth figure was acceptable. In Q1-2015 Indonesia's economic growth pace was recorded at 4.73 percent (y/y), implying that growth accelerated nearly 0.2 percentage points in Q1-2016 from the same period one year earlier.

However, concerns related to economic growth in Indonesia persist and made Bank Indonesia's growth outlook less rosy. Household consumption, which accounts for about 58 percent of total economic growth in Indonesia, remained subdued in the first quarter of 2016. Meanwhile, non-government investment was also bleak. The private sector is apparently hesitant to invest when household consumption remains subdued.

Martowardojo added that Bank Indonesia will continue to monitor two major political developments: (1) the possible implementation of the Tax Amnesty Bill, and (2) possible revisions made to the 2016 and 2017 State Budgets.

At Bank Indonesia's May 2016 policy meeting (conducted between 18-19 May) the central bank decided to leave its interest rate policy unchanged with the BI rate at 6.75 percent, the deposit facility at 4.75 percent, and the lending facility at 7.25 percent. Meanwhile, the seven-day reverse repurchase rate (reverse repo), which is set to become the central bank's new benchmark (replacing the existing BI rate) in August 2016, was left unchanged at 5.5 percent.

Read more: Bank Indonesia to Adopt 7-Day Reverse Repurchase Rate as Key Monetary Tool

The Indonesian macro-economy is stable according to Bank Indonesia with inflation having eased to 3.60 percent (y/y) in April 2016, the current account deficit shrinking to USD $4.67 billion - or 2.14 percent of GDP - in Q1-2016, and a relatively stable rupiah rate so far this year (although in the past week there emerged pressures on the rupiah due to rising expectations of another - and sooner than expected - interest rate hike in the USA).

Indonesia's Quarterly GDP Growth 2009-2016 (annual % change):

Year    Quarter I
   Quarter II    Quarter III    Quarter IV    Full-Year
2016        4.92
2015        4.73        4.67         4.74         5.04         4.8
2014        5.14        5.03         4.92         5.01         5.0
2013        6.03        5.81         5.62         5.72         5.6
2012        6.29        6.36         6.17         6.11         6.0
2011        6.45        6.52         6.49         6.50         6.4
2010        5.99        6.29         5.81         6.81         6.2
2009        4.60         4.37         4.31         4.58         4.6

Source: Statistics Indonesia (BPS)