The Standard Chartered Bank expects the economy of Indonesia to accelerate slightly in 2015 compared to this year’s estimated performance. The bank forecasts a growth pace of 5.2 percent year-on-year (y/y) next year, up from 5.1 percent (y/y) in 2014. Standard Chartered Bank economist Eric Sugandi recently said that the Indonesian economy will be affected by two factors: the great rotation (capital outflows from emerging markets ahead of US interest rate hikes) and growth disparity (slowing growth or recession in China and Japan).

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On 14 December 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as the central bank’s interest rate policy, an update on palm oil, the middle income trap, November car sales, the performance of the rupiah exchange rate, legal matters regarding mining, and more.

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Domestic car sales in Indonesia declined 15 percent to 91,449 vehicles in November 2014 (from the same month last year). Declining car sales in Southeast Asia’s largest economy are believed to be caused by the recent subsidized fuel price hike. In mid-November the Joko Widodo-led government raised prices of subsidized fuels (low-octane gasoline and diesel) over 30 percent in order to reduce state spending on fuel consumption and reallocate funds to structural economic and social development.

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Indonesia’s central bank decided to keep its benchmark interest rate (BI rate) at 7.75 percent at Thursday’s Board of Governors’ Meeting (11/12). The Lending Facility and Deposit Facility were kept at 8.00 percent and 5.75 percent, respectively. The central bank is convinced that the current interest rate levels are effective to combat short-term inflationary pressures (triggered by the implementation of higher subsidized fuel prices in mid-November) pushing it back to the target corridor of between 3 and 4 percent (y/y) in 2015.

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Growth of cement sales in Indonesia is estimated to have slowed in 2014 amid uncertainties brought about by the ‘political year’ (referring to the fragmented results of the country’s legislative and presidential elections and which led to the postponement of various infrastructure projects and other investments in Indonesia). Other factors that impacted negatively on cement sales this year were the central bank’s higher interest rate policy, low commodity prices and weakening purchasing power.

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The central bank of Indonesia projects non-performing loans (NPL) to rise to 2.4 percent of the country’s total outstanding loans by the end of the year, significantly up from 1.8 percent at the end of last year. Despite the acceleration of bad loans in Indonesia, the institution stated that it is still manageable. Meanwhile, loan growth in Indonesia is estimated to slow to 11 or 12 percent (y/y) by the end of 2014 (the slowest pace since 2010), down from 21.4 percent (y/y) in 2013 primarily due to the central bank’s monetary tightening policy.

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The latest survey of Indonesia’s central bank showed that consumer confidence fell slightly in November 2014 amid concern that the recent subsidized fuel price hike will lead to decreased business activity as well as reduced job availability in the next six months in Southeast Asia’s largest economy. Bank Indonesia’s consumer confidence index fell to 120.1 points from 120.6 points in October. The institution interviewed 4,600 households in 18 major Indonesian cities for this survey.

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The Indonesia Property Watch (IPW) expects that property prices in Indonesia will rise in early 2015 as a result of the recent subsided fuel price hike. On 18 November 2014, the Indonesian government raised prices of subsidized low-octane gasoline and diesel by more than 30 percent in an effort to create more fiscal room for economic and social development. The central bank responded to this move by raising its key interest rate (BI rate) by 25 basis points to 7.75 percent in an attempt to combat accelerated inflation.

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Domestic sales of low-cost green cars (LCGCs) in Indonesia may exceed the level of 200,000 units in 2015, a 14 percentage point growth from an estimated 175,000 sold LCGC units this year. Amid slowing domestic car sales (a consequence of the country’s slowing economic growth and tighter monetary policy), popularity of the recently introduced LCGC has managed to support total car sales in Southeast Asia’s largest economy. In the first ten months of 2014, a total of 1.04 million cars were sold, up 1.72 percent from the same period last year.

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On 23 November 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as the country’s higher subsidized fuel prices, the central bank’s key interest rate, a revised inflation outlook, geothermal power development, external debt, and more.

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Currently, one of Indonesia's main financial issues (and one which puts serious pressures on the Indonesian rupiah exchange rate) is the country's wide current account deficit. According to data from Statistics Indonesia, Indonesia's current account deficit totaled USD $8.4 billion in the third quarter of 2013. This figure is equivalent to a whopping 3.8 percent of Indonesia's gross domestic product (GDP). Generally, a current account deficit that exceeds 2.5 percent of GDP is considered unsustainable.

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Tampaknya laju IHSG tidak sebaik sehari sebelumnya dimana mampu menguat jelang akhir sesi perdagangan. IHSG sedari awal perdagangan terus melaju melemah setelah terimbas penurunan bursa saham Asia. Seperti yang pernah kami katakan dimana setiap adanya kenaikan akan selalu dimanfaatkan untuk aksi jual sehingga penguatan yang sempat terjadi hanya bersifat terbatas dan tidak dapat bertahan lama.

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The government of Indonesia will release two additional fiscal policy packages at the end of November or start of December that both aim to heal Indonesia's current account deficit. The two packages constitute follow ups of the policy package that was released in August 2013. Previously, deputy minister of Finance, Bambang Brodjonegoro, announced that an additional package would be released in October. However, it turned out that the government needed some more time to prepare the two additional packages.

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On Thursday 14 November 2013, Agus Martowardojo, Governor of Indonesia's central bank (Bank Indonesia), delivered his end-of-the-year speech at the Annual Bankers’ Dinner. The meeting was attended by leaders from Indonesia's House of Representatives (DPR), economic ministers, leaders of the country's banking industry and business community, non-ministerial government agencies as well as a number of international institutions, thus representing a strategic forum in terms of the national economy.

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Indonesia's benchmark stock index (IHSG) was not able to continue its rebound. On Friday (15/11), the IHSG fell 0.73 percent to 4,335.45 points amid widespread profit taking. Foreign investors recorded net selling of IDR 193 billion (USD $16.9 million) on today's trading day. Moreover, investors are concerned about the impact of the higher interest rate of the central bank (7.50 percent), particularly on the property and banking sectors in the fourth quarter of 2013.

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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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Five more new public listings are expected on the Indonesia Stock Exchange (IDX) in the remainder of 2013 despite the current less rosy macroeconomic environment in Indonesia. The companies that are expected to conduct their initial public offering (IPO) are Indomobil Multi Jasa, Dwi Aneka Jaya Kemasindo, Blue Bird, Soechi Lines, and Sawit Sumbermas Sarana. So far this year, 26 Indonesian companies went public on the IDX. At the start of the year, the IDX targeted for at least 30 new listings in 2013.

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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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