The Indonesian rupiah exchange rate has appreciated 0.50 percent to IDR 11,779 per US dollar by 16:00pm local Jakarta time on Monday (09/06). This performance is in line with the general trend in Asia where emerging market currencies strengthened against the greenback on today’s trading day. The rupiah is among today’s best-performing emerging currencies as it was boosted by the higher trade surplus of China (one of Indonesia’s most important trading partners) and economic growth in Japan.

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Indonesian Finance Minister Chatib Basri expects that the higher electricity tariffs which may be introduced per 1 July 2014 (for 400-950 watt capacity) will have a relatively small impact on the pace of inflation in Southeast Asia’s largest economy. “If introduced, the higher electricity price may add 0.1 or 0.2 percentage point to inflation. The limited impact of this price hike on Indonesian inflation means that the government will not revise its inflation target for 2014 yet,” Basri said. The Indonesian government targets an inflation growth rate of 5.3 to 5.5 percent.

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Indonesian Finance Minister Chatib Basri said that the country's current account deficit, the broadest measure of international transactions, may widen in the second quarter of 2014 as many local companies engage in business expansion. Such expansion usually triggers an increased amount of imports, thus impacting on the trade balance. A widening current account deficit in the second quarter of the year is a normal trend. The balance usually improves in the third and fourth quarters.

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The start of the ASEAN Economic Community (AEC) in 2015 will turn the ASEAN region into a strong economic block. However, the region should enhance political stability and foster economic justice. These are the two basic conclusions drawn in the World Economic Forum on East Asia in Manila (the Philippines) on Thursday (22/05). This forum is a meeting place for state leaders, global businesses, politicians as well as scholars. Indonesian President Susilo Bambang Yudhoyono was one of the attendees.

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The Indonesian government announced to revise its GDP growth target for 2014 after seeing the disappointing economic growth result in the first quarter of 2014. Last week, Statistics Indonesia (BPS) had announced that GDP growth in Q1-2014 only amounted to 5.21 percent, far below official growth targets as well as analysts' forecasts. Indonesia's slowing growth was caused by slowing exports, brought on by the slow global recovery, China's slowing economy and the temporary impact of the ban on exports of unprocessed minerals.

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Based on the Bloomberg Dollar Index, the Indonesian rupiah exchange rate appreciated 0.23 percent to IDR 11,603 per US dollar on Thursday (24/04). The currency's performance was particularly influenced by weak new US single-family homes sales. These sales fell more than expected and hit a five-month low in February 2014, implying that there is continued weakness in the US housing market. Meanwhile, US durable goods orders and US initial jobless claims, which will be released later today, are expected to be weak too.

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Indonesia's HSBC purchasing manager index (PMI) hit a seven-month low at 50.1 in March 2014, down from 50.5 in the previous month. According to Indonesia's Finance Minister Chatib Basri, there is no need to revise government policy to combat the slowdown in the country's manufacturing sector as the government has deliberately slowed down the economy in order to curtail the wide current account deficit. The government of Indonesia aims to reduce the current account deficit to 2.5 percent of the country's GDP by the end of 2014.

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Indonesia's Finance Minister Chatib Basri is optimistic that Indonesia's economic growth can reach 5.8 to 6.0 percent in 2014. According to Basri, three factors support this expectation: strong household consumption, an improving global economy, and the impact of Indonesia's legislative and presidential elections (scheduled for April and July 2014). However, one of the biggest challenges for the Indonesian government will be to offset the impact of further US Federal Reserve tapering and US interest rate hikes in 2015 and 2016.

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Chatib Basri, the Finance Minister of Indonesia, said that the government will focus more on infrastructure development in order to support the third economic policy package which was announced last week by Coordinating Minister of Economic Affairs Hatta Rajasa. Previously, in August and December 2013, the government had already implemented two policy reform packages aimed at safeguarding financial stability as the country had been plagued by a wide current account deficit, high inflation, large capital outflows and sharp rupiah depreciation.

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Following a meeting of the G20 Finance Ministers, Indonesia's Finance Minister Chatib Basri said in an interview that this year's economic growth in Indonesia may slow to the lowest level since 2009 as the government and central bank implemented various measures aimed at curbing GDP growth in order to safeguard financial stability. Basri said that GDP growth in the range of 5.5 to 5.8 percent is a more realistic forecast. Slower growth will help to realize the government's aim to reduce the current account deficit to between 2.0 and 2.5 percent of GDP.

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Various reasons explain why Indonesia's main stock index (IHSG) managed to reach another record high on Monday (20/05/13) at 5,214.98 points, an 1.35 percent gain. Foreigners were back chasing Indonesian stocks (particularly blue chips), Asian indices were up (led by Hong Kong's Hang Seng Index), the listing of Bank Nationalnobu (NOBU) which gained 14.67 percent on its first trading day, positive European openings, and the positive response towards Indonesia's new Finance minister, Chatib Basri, regarded as an independent policy maker.

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In Quarter I 2013 (January-March), total investment in Indonesia increased 30.6 percent to IDR 93.0 trillion (US $9.58 billion) compared to the same period in 2012 according to data from the Indonesia Investment Coordinating Board (Badan Koordinasi Penanaman Modal, abbreviated BKPM), a government institution. Of this total amount, about seventy percent is accounted for by foreign direct investment, while the remaining thirty percent constitutes domestic direct investment.

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