Through capital injections the Indonesian government aims to enhance the role of various state-owned enterprises (SOEs) within the process of economic development. In the recently unveiled 2016 State Budget draft, which still requires approval from Indonesia’s House of Representatives, the government allocated a total of IDR 48.2 trillion (approx. USD $3.6 billion) to 24 SOEs in five priority sectors: food security, infrastructure & maritime development, energy security, strategic industry development, and national economic autonomy.

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On Friday (14/08) the Indonesian government unveiled its 2016 State Budget draft at a session in the House of Representatives (DPR). The draft is important as it shows government targets regarding the macroeconomy of Indonesia and it shows on what fields the government will focus in terms of public spending. The government - led by Indonesian President Joko Widodo - is optimistic that economic growth will finally rebound after four years of slowing economic growth as its 2016 GDP growth target was set at 5.5 percent (y/y).

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As Indonesia’s economic growth continued to slow in the second quarter of 2015, the Indonesian Employers Association (Apindo) warned of increasing unemployment in Southeast Asia’s largest economy. Each 1 percent gross domestic product (GDP) growth can generate between 200,000 and 300,000 new jobs in Indonesia. As such, when economic growth slows, society misses out on new jobs and with around two million Indonesians entering the labor force each year, job generation is an important task of the government.

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In response to the release of Indonesia’s official Q2-2015 GDP growth figure, which puts the country’s economic growth pace at 4.67 percent year-on-year (a six-year low), President Joko Widodo said the economy of Indonesia is bound to improve in the second quarter of the year, particularly from September onwards. Widodo said slowing economic growth was the result of troubled government budget absorption at both the central level and regional level. Moreover, the country has been plagued by external factors.

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Statistics Indonesia (BPS) announced today (05/08) that the Indonesian economy grew 4.67 percent (y/y) in the second quarter of 2015, the slowest pace since 2009. However, the result was in line with expectation. Most analysts assumed that economic growth would continue to slow as there has been no rebound in global commodity prices, interest rates remained high, people’s purchasing power weakened, government spending remained problematic, companies Q2-2015 earnings reports were not too good, and manufacturing contracted.

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Once again, the Indonesian rupiah depreciated beyond the IDR 13,500 per US dollar level on Wednesday (05/08), touching its weakest level since the Asian Financial Crisis (which began as a financial crisis but would soon develop into a deep economic, political and social crisis in Indonesia) in 1997-1998. For some Indonesian policy makers, business players and investors the current weak rupiah therefore brings back bad memories. However, there are significant changes between conditions now and those in 1997-1998.

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There are still persistent external and internal factors that make it difficult for Indonesian stocks to rise. By 12:07 am local Jakarta time, Indonesia’s benchmark stock index (Jakarta Composite Index) was down 0.25 percent to 4,788.37 points. Meanwhile, the rupiah had appreciated 0.36 percent to IDR 13,462 per US dollar by the same time according to the Bloomberg Dollar Index. What are the external (foreign) and internal (domestic) factors that influence the performance of Indonesian assets on today’s trading day (04/08)?

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The pace of economic growth of Indonesia is expected to remain below five percent year-on-year (y/y) in the second quarter of 2015 according to Reuters poll involving 22 analysts. In fact, the poll shows that further slowing economic growth is expected. In the first quarter of 2015, Indonesia’s economic growth came at 4.71 percent (y/y), the weakest growth pace in six years. According to the poll, analysts see a gross domestic product (GDP) growth rate of 4.61 percent (y/y) in the second quarter of 2015.

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Although consumer confidence among Indonesian consumers remained relatively high, there has been a decline detected in 2015. Consumer optimism has fallen as Indonesia’s economy is growing at its slowest pace in six years due to worldwide low commodity prices (giving rise to Indonesia’s weak export performance), China's economic slowdown, uneven recoveries in the US and Europe, while spending of the Indonesian government remained weak (amid bureaucratic hurdles and difficult land acquisition for projects).

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Rupiah kembali menyentuh batasan psikologis Rp 13.400 per dollar Amerika Serikat (AS). Menurut Bloomberg Dollar Index, mata uang Indonesia telah melemah 0,22% menjadi Rp 13.405 per dollar AS pada pukul 11:22 WIB pada hari Kamis (23/07), sebuah level yang terakhir disentuh rupiah saat Indonesia masih kena dampak Krisis Finasial Asia pada tahun 1998. Melewati batasan psikologis ini bisa berarti bank sentral Indonesia (Bank Indonesia) akan kembali mengintervensi untuk mendukung rupiah dalam rangka melindungi kepercayaan terhadap rupiah.

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The heavily subsidized fuel price of Indonesia is likely to be raised next month according to Indonesian media sources. Various high officials, including Economic minister Hatta Rajasa, discussed the possibility to raise the fuel price from IDR 4,500 (USD $0.46) to IDR 6,500 (USD $0.67) per liter starting from May. This increase will only apply to private passenger cars, and not to motorcycles and public transportation. However, president Susilo Bambang Yudhoyono has not made up his mind yet.

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The latest World Bank report of East Asia and the Pacific states that "driven by strong domestic demand, economies of developing East Asia and Pacific continue to be an engine of global growth, growing at 7.5 percent in 2012 - higher than any other region in the world." Amid a recovering global economy the report projects that regional growth will rise to 7.8 percent in 2013 and ease to 7.6 percent in 2014.

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The Jakarta Composite Index (IHSG) did not make a good start on the first trading day of the new week. Similar to last week's Monday, it were falling American stock indices on Friday that impacted on Monday's IHSG performance: US Retail Sales, Michigan Consumer Sentiment, and commodity prices were topics that were not well-received by market players. Moreover, weak economic data from China made many foreign investor decide to sell their Indonesian assets.

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The central bank of Indonesia (Bank Indonesia, or BI) decided to maintain its record low policy rate for the 15th straight month at 5.75 percent as it is considered consistent with its inflation target range of 3.5-5.5 percent in 2013 and 2014. The central bank also stated that the global economic recovery is accompanied by many uncertainties which result in a lower forecast for Indonesia's economic growth. The full press release of Bank Indonesia can be read below.

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In its most recent report, the Asian Development Bank (ADB) forecasts Indonesia to continue its robust economic growth. Last year, the economy of Indonesia expanded 6.23 percent, and according to the ADB this figure will rise to 6.4 percent in 2013 and 6.6 percent in 2014. However, since the start of April there have been some issues that are causing Indonesia's stock indices to go down. Although believed to be only temporary, it is worth taking a closer look.

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Various high government officials, including president Susilo Bambang Yudhoyono, Finance minister Agus Martowardojo and National Development Planning minister Armida Alisjahbana stated that Indonesia's economy is estimated to grow between 6.3 and 6.8 percent in 2014. Its main economic pillars of support are thought to be (foreign and domestic) investments, domestic consumption, and government expenditure. Poverty is targeted to be reduced to ten percent of the population.

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Last week, I provided a basic introduction to investments in Indonesia's capital markets. Now, I will devote my column to the ten largest Indonesian companies by market capitalization. But first let me explain why I take the ten largest companies? Well, simply because these ten companies account for 43.71 percent of Indonesia's total market capitalization. In other words, they reflect almost half of the current condition of the country's capital markets.

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Whenever the topic of tourism in Indonesia is touched upon, most people will instantly think of Bali. This small but famous island harbors all sorts of entertainment that will appeal to various segments of international tourism: beautiful landscapes, Balinese Hinduism, lively nightclubs, beaches and more. But apart from Bali - and despite the fact that Indonesia has much to offer on other islands - the country has disappointed in attracting a large amount of foreign tourists so far.

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Last February, the Indonesian government, through its Ministry of Trade, issued new rules with regard to Indonesia's franchise sector. This new regulatory framework - formulated in Ministry of Trade Regulation No. 7 Year 2013 on Partnership Development in Franchise Business Services for Food and Beverages (Permendag Nomor 7) - will have an impact on Indonesia's food and beverage services as limitations are set on the amount of outlets.

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This week, the World Bank published its Indonesia Economic Quarterly (IEQ, edition March 2013) titled 'Pressures Mounting'. It reports on key developments over the past three months in Indonesia’s economy, and places these in a longer-term and global context. To read the whole report, please visit the World Bank's website at www.worldbank.org or download this edition directly through this link. Below we present the executive summary.

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