On 17 January 2016, 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 over the last seven days. Most of the topics involve economic matters such as the trade balance, property sector, the benchmark interest rate, the ASEAN Economic community, but also the recent terrorist attacks in Jakarta, and more.

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Although global media focus on the vicious terrorist attacks that occurred today in Jakarta, the country's central bank (Bank Indonesia) made a surprise move by cutting its key interest rate (BI rate) by 25 basis points to 7.50 percent at the January policy meeting. It is a surprise as Bank Indonesia emphasized repeatedly that it is primarily focused on rupiah stability while - amid severe market volatility (due to economic turmoil in China) - the rupiah remains under pressure.

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Asian stocks are again in deep red territory on Thursday (14/01), led by Chinese shares (which are on track to enter a bear market) as well as Japanese shares. It means that the rebound that had occurred earlier this week - caused by positive export data from China - was short-lived. The continued slide of oil prices (below USD $30 per barrel) and turmoil in China cause money to flow away from equity and fragile emerging market currencies.

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On Wednesday (13/01) Indonesia's central bank is set to start its monthly policy meeting. A novelty this year is that the monthly policy meetings of Bank Indonesia will take two days instead of one. Another interesting novelty is that Bank Indonesia invited Indonesia's Chief Economics Minister Darmin Nasution to attend the central bank's first policy meeting of 2016. Analyst opinions about whether Bank Indonesia has room to cut its relatively tight monetary policy are mixed.

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Angka inflasi Indonesia pada bulan Desember 2015 lebih tinggi dari yang diharapkan pada 0,96% pada basis month-to-month (m/m). Tingkat inflasi bulanan yang tinggi dikarenakan kenaikan harga makanan dan transportasi selama perayaan Natal dan Tahun Baru. Namun demikian, tingkat inflasi tahunan Indonesia jatuh ke level terendah sejak 2010 karena hilangnya dampak kenaikan harga bahan bakar bersubsidi pada bulan November 2014 dari angka inflasi tahunan, maka realisasi inflasi jatuh jauh di bawah target pemerintah (5%) dan kisaran target bank sentral (3-5%) pada tahun 2015.

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Tahun lalu Indeks Harga Saham Gabungan (IHSG) turun 12,13% sehingga berakhir pada 4,593.01 poin pada 30 Desember 2015 di tengah ketidakpastian global yang parah akibat ancaman pengetatan kebijakan moneter di Amerika Serikat (AS) dan perlambatan ekonomi yang besar dari Republik Rakyat Tiongkok (RRT). Hari ini, Bursa Efek Indonesia (BEI) akan memasuki hari perdagangan pertamanya di tahun baru. Apa yang kita harapkan dari kinerja saham Indonesia di Januari 2016?

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Pada tanggal 20 Desember 2015, Indonesia Investments menerbitkan edisi terbaru dari newsletternya. Newsletter gratis ini, yang dikirim ke pelanggan kami sekali per minggu, berisi berita-berita yang paling penting dari Indonesia yang telah dilaporkan di website kami selama tujuh hari terakhir. Sebagian besar topik membahas isu-isu ekonomi seperti update performa saham dan rupiah Indonesia, tingkat suku bunga di Indonesia, neraca perdagangan, campuran energi negara ini, update dari kinerja perusahaan-perusahaan yang terdaftar di Bursa Efek Indonesia, dan banyak lagi.

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Bank Indonesia memprediksi bahwa realisasi pertumbuhan kredit akan mencapai 9-10% pada basis year-on-year (y/y) di 2015, di bawah targetnya pada 11%-13% (y/y). Sampai dengan Oktober 2015 pertumbuhan kredit bank-bank di Indonesia mencapai 10,4%, melambat dari 11,1% di bulan sebelumnya. Juda Agung, Direktur Eksekutif Kebijakan Ekonomi dan Moneter Bank Indonesia (BI), mengatakan pertumbuhan kredit yang melambat sejalan dengan perlambatan ekonomi.

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Bank Indonesia, bank sentral dari negara dengan ekonomi terbesar di Asia Tenggara, mempertahankan suku bunga acuannya (BI rate) pada 7,50% pada pertemuan kebijakan di bulan Desember pada hari Kamis (17/12). Sementara itu, fasilitas simpanan Bank Indonesia (Fasbi) tidak berubah pada 5,50% dan fasilitas pinjaman di 8,00%. Ini adalah bulan kesepuluh berturut-turut Bank Indonesia tidak mengubah suku bunganya (pada bulan Februari 2015 bank sentral memangkas BI rate sebesar 0,25%).

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The Asian Development Bank (ADB) lowered its forecast for economic growth in Indonesia to 4.8 percent year-on-year (y/y) in 2015 and to 5.3 percent (y/y) in 2016 from previously 4.9 percent (y/y) and 5.4 percent (y/y), respectively. In its latest report on Indonesia, the ADB cited that problems related to budget disbursement and the nation’s weak export performance were the main factors to cut its growth projection for Indonesia - for both 2015 and 2016 - by 0.1 percentage point. In September 2015, the ADB had already cut its growth forecast for Indonesia on the back of negative effects of China’s economic slowdown.

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Indonesia’s HSBC Markit Purchasing Manager’s Index (PMI) showed a reading of 51.1 in April 2014, significantly up from 50.1 in the previous month, meaning that manufacturing activity in Indonesia has grown (a reading above 50.0 indicates expansion, while a reading below 50.0 indicates contraction). In fact, amid improved economic conditions as well as strong demand, manufacturing activity in Southeast Asia’s largest economy expanded at the fastest pace in 11 months.

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Standard Chartered Bank Economist Eric Sugandi expects that the central bank of Indonesia (Bank Indonesia) will have raised its benchmark interest rate (BI rate) by 50 basis points (bps) to 8.00 percent by the end of 2014. Sugandi also said that it is highly unlikely that Bank Indonesia will lower its BI rate in the next two years amid further Federal Reserve tapering and possible US interest rate hikes in 2015 and 2016. Moreover, the Indonesian government may still decide to reduce fuel subsidies further (thus triggering inflationary pressures).

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The banking sector remains a key sector for growth of Indonesia's financial industry as well as the country's general economic expansion as the sector posted the highest profits worldwide. Prasetiantoko Augustine, economist at Bank Tabungan Negara (BTN), said that profitability in Indonesia's banking sector is not only highest in the ASEAN and Southeast Asian region but also worldwide. Bank Rakyat Indonesia posted the highest profit of Indonesian banks in 2013 (IDR 21 trillion), followed by Bank Mandiri (IDR 18 trillion) and BCA (IDR 14 trillion).

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the March 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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Most emerging market currencies, including the Indonesian rupiah exchange rate, appreciated against the US dollar on Tuesday (08/04) due to carry trade (meaning the selling of low-yield currencies for higher-yielding assets) and expected stimulus from China's government to boost its economy (Chinese shares in fact gained 2.2 percent on this stimulus speculation). The rupiah appreciated 0.14 percent to IDR 11,289 per US dollar based on the Bloomberg Dollar Index, partly due to variety of domestic factors.

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The central bank of Indonesia (Bank Indonesia) decided to maintain its benchmark interest rate (BI rate) at 7.50 percent at the Board of Governors’ Meeting held on Tuesday 8 April 2014. The Lending Facility rate and Deposit Facility rate were held at 7.50 percent and 5.75 percent respectively. This policy is consistent with ongoing efforts to steer inflation back towards its target corridor of 4.5±1 percent in 2014 and 4.0±1 percent in 2015, as well as to reduce the current account deficit to a more sustainable level.

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Indonesia's gross domestic product (GDP) growth is expected to move sideways in the first quarter of 2014. Finance Minister Chatib Basri forecasts a growth rate of between 5.7 and 5.8 percent, similar to the growth pace that was recorded in the fourth quarter of 2013 (5.78 percent). Based on data from Statistics Indonesia (BPS), economic growth in Indonesia has slowed since the second quarter of 2013. In Q2-2013, Indonesia's GDP expanded by 5.89 percent, thereby ending a ten-quarter streak of +6 percentage growth.

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Indonesia's benchmark interest rate (BI rate) is expected to be maintained at 7.50 percent at Bank Indonesia's Board of Governor's Meeting on Tuesday 8 April 2014. Despite Indonesia's moderating inflation rate (7.32 percent year on year in March 2014) and the February 2014 trade surplus of USD $785 million, the BI rate may be left unchanged in order to support the further easing of Indonesia's current account deficit and to offset the impact of the possible US interest rate hikes in 2015 and 2016.

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Fitch Ratings, one of the three major global credit rating agencies, estimates that Indonesia's current account deficit will reach USD $27.4 billion, equivalent to 3.1 percent of the country's gross domestic product (GDP) in 2014. As such, Fitch Ratings' forecast is more pessimistic than forecasts presented by both Indonesia's central bank (Bank Indonesia) and government. Both these institutions expect to curb the current account deficit below the three percent of GDP mark (a sustainable level). Global investors continue to carefully monitor the deficit.

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Indonesia's residential property market has shown robust growth in recent years as demand from the country's rapidly expanding middle class for mid-level and luxury property increased steadily amid a low interest rate environment and robust national economic growth. Demand for property is also backed by high consumer confidence as a recent Nielsen survey shows that Indonesians are among the world's most confident consumers. Indonesians' consumer confidence was at a four-year high in the fourth quarter of 2013.

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