The macroeconomic assumptions that have been formulated in the 2014 State Budget Draft by the government of Indonesia are not considered too realistic by several analysts. Although it is understood that one should set a high standard in order to maximize efforts, analysts feel that - given the current problematic economic context in Asian emerging economies as well as global economic turmoil - the government is far too optimistic, particularly because the government will have to devote part of its attention to the elections in mid-2014.

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According to a Bank Indonesia report that was released on Monday (19/08), consumer confidence in Indonesia has weakened after the government decided to raise prices of subsidized fuels in June 2013. The country's consumer confidence index fell 8.7 points to 108¹ in July from 117 points in June. Higher fuel prices led to higher transportation costs that subsequently made many retailers increase prices of products, thus impacting on Indonesian households' purchasing power. In July, the annual inflation rate accelerated to 8.61 percent.

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Indonesian stocks took a large dive on today's trading day (19/08) at the Indonesia Stock Exchange. The IHSG (the index of all listed stocks) fell 5.58 percent to 4,313.52 points as negative market sentiments caused foreign investors to pull money out of the Indonesian market. Investors are highly concerned about a number of macroeconomic data that have been released recently. These data indicated the slowest economic growth since Q3-2010, inflation at a four-year high and a widening trade deficit.

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President of Indonesia, Susilo Bambang Yudhoyono, mentioned in his speech ahead of the Independence Day that Indonesia's per capita GDP is expected to rise to USD $5,000 by 2014. An increasing per capita GDP triggers domestic consumption among Indonesia's rapidly expanding middle class segment and thus forms a catalyst for economic activity in the country. As can be seen in the table below, Indonesia's per capita GDP grew steadily between 2006 and 2012. In 2010, it hit the important level of USD $3,000.

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Indonesia's central bank, Bank Indonesia, decided today (15/08) to keep its benchmark interest rate (BI rate) at 6.50 percent. In recent days, heavy speculation emerged about whether Bank Indonesia would raise the BI rate for the third consecutive time in three months as the country is plagued by higher inflation (8.61 percent year-on-year in July 2013) and a weakening rupiah. Reluctance to raise the interest rate again seems to indicate that the Bank gives priority to economic growth, which has slid to a three-year low at 5.81 percent in Q2-2013.

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The economy of Indonesia continues to be dominated by the island of Java, Indonesia's most populous island with around 130 million people or 60 percent of Indonesia's total population. In the second quarter of 2013, Java contributed 58.15 percent to the nation's total economic growth. Far behind Java are Sumatra (23.90 percent) and Kalimantan (8.73 percent). Within Java, the Greater Jakarta area accounts for 16.50 percent of the country's total economic growth, followed by East Java (15.21 percent) and West Java (14.05 percent).

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Although it was clear that Indonesia would see a high inflation rate in July 2013 as the impact of higher fuel prices would kick in, Indonesia's central bank (Bank Indonesia) was surprised to see the figure go up to 3.29 percent. Currently, Indonesia's annual inflation rate stands at 8.61 percent. Bank Indonesia's governor Agus Martowardojo said that this rate is far outside the central bank's target range and announced that the institution expects annual inflation to stay above 8%  throughout 2013, higher than its previous assumption of 7.8% at end-2013.

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Today (02/08), Indonesia's bureau for statistics announced that economic growth of Indonesia in the second quarter of 2013 reached 5.81 percent (YoY), which is the lowest growth rate since Q3-2010 and also lower than most analysts as well as the Indonesian government expected. The GDP figure reflects Indonesia's cooling economy. For the fourth consecutive quarter, the rate has weakened as the country has been under pressure: high inflation, a widening trade deficit and a weakening rupiah.

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According to Finance minister Chatib Basri, the Indonesian government expects the country's gross domestic product (GDP) to have grown by 6.1 percent in the first six months of 2013. This forecast falls short of the government's 6.3 percent GDP growth assumption in the state budget (APBN). Basri stated that the lower outcome is due to global factors, such as slowing economic growth in China and India. But the government's assumption is more optimistic than the forecast of the central bank, which expects growth between 5.1 and 5.9 percent.

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The Indonesia Investment Coordinating Board (BKPM) expects that investments in the second quarter of 2013 will grow by 25 percent to IDR 96.13 trillion (USD $9.6 billion) compared to Q2-2012. Although Indonesia's economic growth is under threat of slowing down to below an annual growth rate of six percent, the government agency still believes that total investments in 2013 can meet the target of IDR 390 trillion (USD $39 billion). Investments in Q1-2013 were recorded at IDR 93 trillion.

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Credit rating agency Fitch Ratings announced on 14 March 2019 that it has affirmed Indonesia's long-term foreign-currency issuer default rating at 'BBB' with a stable outlook (investment grade level). This decision was particularly based on Indonesia’s favorable gross domestic product (GDP) growth outlook and the nation’s small government debt burden (government debt is low at an estimated 29.8 percent of GDP in 2018).

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In early November 2018 the Central Statistics Bureau (BPS) announced that Indonesia’s gross domestic product (GDP) growth reached 5.17 percent year-on-year (y/y) in the third quarter of 2018. Although it means a slowdown from the 5.27 percent (y/y) growth pace in the preceding quarter, the Q3-2018 GDP growth rate actually slightly exceeded our expectations.

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In the second half of September 2018 the World Bank released its latest Indonesia Economic Quarterly (abbreviated IEQ), titled “Urbanization for All”. The IEQ, a flagship publication of the Washington-based institution which (at least in our view) is among the most interesting reports that are on a regular basis published about the Indonesian economy, has two main aims. Firstly, it informs about the key developments that occurred in Indonesia’s economy over the past three months, and places these developments in a longer-term and global context. Secondly, the IEQ provides an in-depth examination of selected economic and policy issues and an analysis of Indonesia’s medium-term development challenges.

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It was a welcome surprise when Indonesia’s Statistics Agency (in Indonesian: Badan Pusat Statistik, or BPS) announced in early August that the country’s gross domestic product (GDP) expanded 5.27 percent year-on-year (y/y) in the second quarter of 2018.

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Although overshadowed by the news of the devastating earthquake in Lombok, Statistics Indonesia (BPS) released the official Q2-2018 gross domestic product (GDP) growth figure of Indonesia earlier today. The economy of Indonesia expanded 5.27 percent year-on-year (y/y) in the second quarter of 2018. This growth pace exceeds our expectations although it is not enough to necessitate a revision to our full-year 2018 GDP growth forecast of 5.2 percent (y/y).

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There are doubts whether Indonesia's gross domestic product (GDP) growth can reach 5.2 percent year-on-year (y/y) in full-year 2018 as Indonesia is experiencing a couple of major challenges. Challenges include the global trade war, the fragile rupiah, Bank Indonesia's higher benchmark interest rate, the current account deficit, and political tensions ahead of the 2019 legislative and presidential elections. Currently, Indonesia Investments' forecast for Indonesia's economic growth is set at 5.2 percent (y/y) in 2018.

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There are signs that household consumption in Indonesia is rebounding ahead of this year's Idul Fitri holiday. This would be a great boost for Indonesia's overall economic growth as private consumption accounts for around 57 percent of the nation's total economic growth. One of the reasons why Indonesia's gross domestic product (GDP) growth has been stuck around the 5 percent (y/y) mark in recent years is subdued household consumption (which has fallen slightly below the 5 percent y/y mark).

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The World Bank revised down its economic growth projection for Indonesia from 5.3 percent year-on-year (y/y) to 5.2 percent (y/y) for full-year 2018 amid the complex external environment: tightening monetary conditions, a potential global trade war, financial volatility, and geopolitical concerns. Such external factors put pressure on Indonesia's export performance, hence on domestic economic growth.

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In the April 2018 edition of its East Asia and Pacific Economic Update, the World Bank is cautiously optimistic about economic growth in developing East Asia and Pacific (EAP). After a better-than-expected global economy in 2017, growth in developing EAP is expected to remain stable in 2018, reflected by solid prospects in Thailand and several commodity exporters, notably Indonesia. Domestic demand is estimated to remain robust in most of the region's economies and continue to underpin growth in 2018 and beyond. However, with economies operating close to their potential, price pressures are expected to rise.

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The World Bank released the latest edition of its flagship publication Indonesia Economic Quarterly on Tuesday (27/03). The March 2018 edition of the report is entitled "Towards Inclusive Growth". In the report the World Bank is positive about Indonesia's economic outlook after seeing the nation's real gross domestic product (GDP) growth picking up at 5.2 percent year-on-year (y/y) in the fourth quarter of 2017 (accelerating from 5.1 percent y/y in the previous quarter).

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