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As Indonesia’s central bank (Bank Indonesia) was very late in terms of tightening its monetary policy amid the latest global tightening cycle – and the US Federal Reserve continued its hawkish stance with another 0.75 percentage point hike in September 2022 – it has some catching up to do.
On 4 August 2022 Indonesia Investments released the July 2022 edition of its monthly report. In this report we analyze the latest (and most relevant) economic, political and social news from Indonesia.
At its latest monetary policy meeting, held on 18-19 April 2022, Bank Indonesia decided to leave its interest rates unchanged in an effort to facilitate the ongoing economic rebound. The benchmark interest rate (the BI 7-day reverse repo rate) was maintained at 3.50 percent, while the deposit facility and lending facility rates were kept at 2.75 percent and 4.25 percent, respectively.
On Thursday (7.10.2021) Indonesia Investments released its September 2021 report. This report discusses a range of subjects - related to political developments, the economy and social matters - that were influential in Indonesia in the month of September 2021.
The central bank of Indonesia (Bank Indonesia) showed that it is willing to lend a helping hand to try and boost Indonesia’s economic growth by cutting its benchmark interest rate again. On 19 September 2019 – the last day of its two-day monthly policy meeting – Bank Indonesia cut its BI 7-day reverse repo rate by 25 basis points (bps) to 5.25 percent, while the deposit facility and lending facility rates were lowered (by 25 bps) to 4.50 percent and 6.00 percent, respectively.
At July's two-day monetary policy meeting (held on 17-18 July 2019), the central bank of Indonesia (Bank Indonesia) surprised us by deciding to cut the benchmark BI 7-day Reverse Repo Rate by 25 basis points (bps) to 5.75 percent. Meanwhile, the deposit facility and lending facility rates were lowered - also by 25 bps - to 5.00 percent and 6.50 percent, respectively.
In line with expectations, the central bank of Indonesia (Bank Indonesia) decided to leave its benchmark interest rate – the BI 7-Day Reverse Repo Rate – unchanged at 6.00 percent, while also maintaining its deposit facility and lending facility rates at 5.25 percent and 6.75 percent, respectively, at the two-day monthly monetary policy meeting that was held on 19 and 20 June 2019.
In line with expectations, the central bank of Indonesia (Bank Indonesia) decided to leave its benchmark interest rate – the BI 7-Day Reverse Repo Rate – unchanged at 6.00 percent, while also maintaining its deposit facility and lending facility rates at 5.25 percent and 6.75 percent, respectively, at the two-day monthly monetary policy meeting that was held on 19 and 20 June 2019.
It is important to put Indonesia into international context because decisions that are made by Indonesian policymakers are (partly) based on global developments.
The Indonesian rupiah made a stable performance against the US dollar in February 2019. The benchmark JISDOR rate of Bank Indonesia ended the second month of the year at the position of IDR 14,062 per US dollar, appreciating modestly from the level of IDR 14,072 per US dollar at the last trading day of January 2019.
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Amid weakening emerging Asian currencies, Indonesia’s rupiah exchange rate touched a six-year low on Friday (12/12) after US consumer spending rose in November while US jobless claims fell (signalling a strong recovery in the world’s largest economy). Based on the Bloomberg Dollar Index, the rupiah depreciated 0.95 percent to IDR 12,467 per US dollar on Friday. Besides the impact of the US dollar’s bullish momentum, the rupiah also weakened on year-end US dollar demand from local companies for debt payments.
Total foreign outstanding debt of Indonesia continues to grow at a robust pace. Based on data from the country’s central bank, total external debt rose 11.2 percent year-on-year to USD $292 billion at the end of September 2014 as private Indonesian companies have been eager to seek lower interest rates abroad. Privately-held foreign debt was up 14 percent y/y to USD $159.3 billion at end-September. Central Bank official Tirta Segara said that private sector debt is concentrated in the financial, manufacturing and mining sectors.
Although we initially expected that the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) would be supported by the various macroeconomic data (inflation, trade balance, and manufacturing activity) that were released by Statistics Indonesia today, the opposite is what happened. The index went into red territory amid profit taking, although the bond market in fact strengthened and foreign investors recorded net buying at IDR 224 billion (USD $18.7 million).
The market showed today (27/10) that the composition of Indonesian President Joko Widodo’s cabinet did not live up to expectations. On Sunday afternoon, Widodo had announced the names of the ministers inside his Working Cabinet (Kabinet Kerja) after having delayed the announcement for almost a week as several of his ministerial candidates needed to be replaced having been red flagged by the country’s Corruption Eradication Commission (KPK). This then heightened expectations that Widodo’s cabinet would constitute a ‘dream team’.
It was a good start of the week for the benchmark stock index of Indonesia (known as the Jakarta Composite Index, abbreviated IHSG). Various factors, both internal and external, managed to push the index higher on Monday (20/10). Externally, the IHSG was supported by positive Asian indices which responded to last week’s good US economic data (building permits, housing starts, and consumer sentiment). Moreover, the sharply appreciating Indonesian rupiah exchange rate made Indonesian assets more attractive.
Today (20/10), Central Jakarta seems to have changed into one big party as Joko Widodo was inaugurated as Indonesia’s seventh president earlier this morning. For the remainder of the day celebrations will be held at Monas (National Monument) and surrounding areas. However, it is of vital importance that Widodo (popularly known as Jokowi) will start to focus on this presidential duties tomorrow as the country is facing a number of economic challenges. What are these challenges?
Indonesian stocks tumbled at the first trading day of the week as investors are still concerned about the condition of the global economy. Declining stock indices on Wall Street at the end of last week had a negative impact on Asian stock indices, including Indonesia’s benchmark stock index (known as the Jakarta Composite Index, or abbreviated IHSG). The IHSG fell 1.01 percent to 4,913.05, its lowest level since 4 July 2014, on Monday (13/10). Foreign investors recorded net selling of IDR 595 billion (USD $49.6 million).
In line with the volatile performance of global stocks, led by indices on Wall Street, the benchmark stock index of Indonesia (Jakarta Composite Index, or abbreviated IHSG) showed a volatile performance over the past week. US stocks mostly declined - except for the sharp rebound on Wednesday after Federal Reserve minutes signalled no higher US interest rates anytime soon - on concerns about the global economy (particularly the Eurozone), looming higher US interest rates, and the appreciating US dollar (hurting US exports).
It was a relief for investors to learn that the benchmark stock index of Indonesia (Jakarta Composite Index, or IHSG) rebounded on Thursday (09/10) after having experienced a sharp decline on the previous day. The IHSG was supported by rising Asian stocks after indices on Wall Street had surged on Wednesday (08/10). Wall Street was up as minutes of the latest Federal Reserve meeting signalled that US interest rates will remain low 'for a while'. Another positive factor was that today’s appreciation of the Indonesian rupiah exchange rate.
The International Monetary Fund (IMF) slightly cut its outlook for global economic expansion for both 2014 and 2015. The institution decided to lower its forecast due to weaker growth in Japan, Latin America and Europe. According the IMF’s latest estimate, the global economy will grow 3.3 percent year-on-year (y/y) in 2014, down from its previous estimate of 3.4 percent y/y, and 3.8 percent y/y in 2015 (down from 4.0 percent y/y in its July estimate). This is the third time this year that the IMF has had to cut its global economic growth forecast.
