The central bank of Indonesia (Bank Indonesia) expects Indonesia's economic growth to reach between 4.9 and 5.0 percent (y/y) in the second quarter of 2016, only rising slightly from GDP growth realization of 4.92 percent in the first quarter. Growth is forecast to remain subdued as Indonesia's household consumption has not improved markedly yet (reflected by low demand for credit). Meanwhile, the global economic context remains plagued by uncertainties, particularly ongoing concern about the economies of the USA, China and Europe.

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Indonesia's House of Representatives and the government seem to agree that the Tax Amnesty Bill, a controversial proposal from the central government to make it attractive for (former) tax evaders to come clean and repatriate their funds to Indonesia, should come into effect soon, perhaps even as early as 1 July 2016. Indonesian lawmaker Supriyatno, who leads a parliamentary working group that discusses the bill, said all factions - except two - have reached a compromise on the Tax Amnesty Bill. A total of ten factions joined the discussions.

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By relaxing the loan-to-value (LTV) ratio, the central bank of Indonesia (Bank Indonesia) expects to see House Ownership Credit (Kredit Pemilikan Rumah, abbreviated KPR) growth to accelerate by an additional 5 percent. Up to April 2016, KPR growth was recorded at 7.61 percent (y/y) only, down significantly from the years 2012-2013 when - amid the glory years of property development in Indonesia - KPR growth touched figures of between 30 - 49 percent (y/y). Back then concerns emerged whether Indonesia was about to experience a price bubble in the property sector.

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The central bank of Indonesia stated that Indonesia's foreign debt grew 6.3 percent (y/y) to USD $319.0 billion in April 2016. Foreign debt of Southeast Asia's largest economy in April consists of private sector external debt (USD $165.2 billion) and public sector external debt (USD $153.8 billion). Indonesia's private sector foreign debt continued to ease as local companies have been more careful in taking up new foreign debt due to the weakening rupiah in 2013-2015. In April, private sector external debt fell 1.1 percent (y/y).

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The central bank of Indonesia (Bank Indonesia) expects Indonesia's economic growth in the second quarter of 2016 to improve slightly to 4.9 - 5.0 percent (y/y) compared to the 4.92 percent (y/y) GDP growth realization in the first quarter of the year. Regarding growth in full-year 2016, Bank Indonesia remains optimistic that a 5.4 percent growth pace can be achieved supported by a looser monetary policy (that should boost demand for credit). Bank Indonesia cut its key interest rate (BI rate) by 0.25 percentage point to 6.50 percent in the June policy meeting.

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The central bank of Indonesia (Bank Indonesia) cut its key interest rate (BI rate) by 0.25 percentage point to 6.50 percent at Thursday's policy meeting (16/06). Although the central bank had stated at its preceding policy meeting that there remained room for monetary easing, today's move was a surprise that few analysts saw coming. The 7-day reverse repurchase rate, which is set to become the central bank's new benchmark rate on 19 August, was also cut by 25 basis points (to 5.25 percent) at today's policy meeting.

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The foreign exchange reserves of Indonesia fell USD $4.1 billion to USD $103.6 billion in May 2016 because part of the assets were used for foreign debt repayments while Indonesia's central bank (Bank Indonesia) used part to support the rupiah that had come under severe pressure in the last two weeks of May due to growing speculation about a sooner-than-expected US interest rate hike and sliding oil prices (these sentiments would reverse in the first week of June, giving rise to a strengthening rupiah).

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The central bank of Indonesia (Bank Indonesia) sees easing pressures in the global economy in May 2016, reflected by the rising crude oil price. On Thursday (26/05), crude futures exceeded the USD $50 per barrel level for the first time since November 2015 (supported by production disruptions in Canada). Although oil futures declined again the following day on profit taking, the rising trend has persisted. In early 2016 crude oil traded below USD $30 a barrel, plunging some 21 months due to the global supply glut and weak global economic growth.

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Bank Indonesia, the central bank of Indonesia, is studying whether it should relax the loan-to-value (LTV) ratio for the purchase of a house through the house ownership credit scheme (in Indonesian: kredit pemilikan rumah, abbreviated KPR). Furthermore, Bank Indonesia may allow the KPR scheme for the purchase of a second house that is still under construction. These measures would be efforts to boost credit growth, particularly in the property sector, and boost overall economic activity in Indonesia.

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The government of Indonesia revised down its forecast for economic growth in 2017 to the range of 5.3 - 5.9 percent (y/y). On Friday (20/05) Indonesian Finance Minister Bambang Brodjonegoro informed parliament about the change in the growth outlook (related to the 2017 State Budget). Initially, the government projected Indonesia's 2017 GDP growth in the range of 5.5 - 5.9 percent (y/y). Brodjonegoro did not explain, however, why the government decided to revise down its GDP growth forecast in the 2017 State Budget.

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Despite rising concerns about the slowing pace of the Indonesian economy, the deputy minister of Finance Bambang Brodjonegoro reminded investors that Indonesia's economic growth in the third quarter of 2013 still constitutes one of the highest growth rates around the globe. Economic expansion in Q3-2013 slid to 5.6% in Southeast Asia's largest economy. With the exception of China (7.8% GDP growth in Q3-2013), Indonesia's growth continues to outpace growth in other emerging markets, such as Brazil (3.3%) and Turkey (4%).

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Seperti yang kami sampaikan sebelumnya dimana pelemahan terbatas akan sulit tercapai dengan negatifnya sentimen yang justru datang dari dalam negeri. Aksi jual masih dimungkinkan akan berlanjut dan akan berpengaruh pada masih melemahnya IHSG. Laju IHSG bukannya membaik, justru semakin anjlok. Tampaknya pelaku pasar, terutama asing, memanfaatkan rilis kenaikan BI rate tersebut untuk jor-joran melakukan aksi jual. Rilis kenaikan BI rate tersebut tampak menjadi pembenaran dilakukannya aksi jual besarbesaran tersebut.

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Laju IHSG yang awalnya hanya melemah tipis dan mencoba untuk rebound, jelang sore hari berubah menjadi pelemahan setelah dipersuram oleh hasil RDG BI yang menaikkan BI rate dari level 7,25 persen menjadi 7,5 persen. Kenaikan BI rate ini tentunya dipersepsikan bahwa kondisi makroekonomi Indonesia yang belum akan membaik dan terutama timbul juga penilaian bahwa masih akan tingginya inflasi hingga akhir tahun.

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Bank Indonesia decided to raise the BI rate by 25 bps to the level of 7.50 percent, with the Lending Facility rate and Deposit Facility rate raised to 7.50 percent and 5.75 percent respectively. This policy was taken in light of the persistently large current account deficit amid widespread global uncertainty. Therefore, the decision was taken in order to ensure that the current account deficit is reduced to a more sound level and inflation in 2014 returns to around 4.5±1 percent, thereby supporting sustainable economic growth.

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The Jakarta Composite index (Indonesia's benchmark stock index or IHSG) fell on Monday (11/11) amid mixed Asian markets. Not even positive finishes on Wall Street last Friday (08/11) were able to support the IHSG. Most investors seem to be waiting for results of Bank Indonesia's Board of Governor's Meeting which is scheduled for Tuesday (12/11). This meeting will provide answers about the central bank's view of the domestic economy and whether it thinks another adjustement of the BI rate is necessary.

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Indonesia's October inflation rate was well-received by investors. On Friday (01/11), Statistics Indonesia (BPS) announced that the country's inflation in October 2013 grew 0.09 percent. Easing inflation was mainly due to falling prices of raw foods and clothes. Year-on-year (yoy), however, Indonesia's inflation is still high at 8.32 percent, although showing a moderating trend from 8.40 percent (yoy) in September 2013 and 8.79 percent (yoy) in August 2013. Inflation had skyrocketed after subsidized fuel prices were raised by an average 33 percent in June.

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Forecasts for Indonesia’s gross domestic product (GDP) growth in 2013 and beyond have been revised down by all institutions, including the Indonesian government and central bank as well as international organizations such as the World Bank and the International Monetary Fund (IMF). Initially, the country’s economic growth was expected to reach around 6.5 percent in 2013. However, most institutions have downgraded forecasts for the country’s economic growth to below the 6.0 percent mark.

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Today (18/10), the Governor of Bank Indonesia and the Chairman of the Indonesian Financial Services Authority (OJK) signed an agreement concerning “cooperation and coordination to support task implementation at Bank Indonesia and OJK”. The agreement forms a basis for expediting and optimising coordination between both organisations in terms of their function, task and authority in light of the upcoming transfer of the banking regulation and supervision function from Bank Indonesia to OJK on 31 December 2013.

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On 12 October 2013 Finance Minister and Central Bank Governors from Korea and Indonesia agreed to establish a bilateral KRW/IDR swap arrangement in the near future. The size of the swap arrangement is up to KRW 10.7 trillion/IDR 115 trillion (equivalent to USD $10 billion). The effective period of the facility will be three years, and could be extended by agreement by both sides. This Bilateral Currency Swap Arrangement (BCSA) aims to promote bilateral trade and further strengthen financial cooperation, an objective of mutual interest to both countries.

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Although Indonesia's benchmark stock index (IHSG) started mixed on Wednesday (09/10), it gradually climbed as the trading day moved on. The country's benchmark interest rate (BI rate), which was kept at 7.25 percent by Bank Indonesia on Tuesday (08/10), continued to make a positive impact. However, negative market sentiments were brought on by the US shutdown as well as the downgrade of the IMF's outlook for world economic growth in 2013 and 2014. Lastly, the weakening IDR rupiah also implied negative market sentiments.

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