On 2 March 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 G20 meeting in Sydney, foreign investment, Inflation, rupiah exchange rate performance, economic growth, ANTV's IPO, natural disasters, the presidential election, and more.

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Indonesia Investments updated the analysis of Indonesia's inflation rate in our Macroeconomic Indicators section. Indonesian inflation, which is traditionally more volatile and higher (due to robust economic growth) than in advanced countries or other emerging markets, accelerated recently after administered price adjustments in mid-2013 (particularly higher fuel prices). As a result, Bank Indonesia required to raise its benchmark interest rate (BI rate) gradually from 5.75 percent in June 2013 to 7.50 percent in November 2013.

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Indonesia Investments has updated its overview of Indonesia's gross domestic product (GDP) in the Macroeconomic Indicators section. Although Indonesia's GDP growth has slowed in the past two years amid global financial troubles and uncertainty in combination with a number of internal financial weaknesses (the country's wide current account deficit, high inflation and higher interest rate environment), it can still be labeled robust at 5.78 percent in 2013. This overview includes a discussion on GDP per capita and income distribution.

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Indonesia's central bank (Bank Indonesia) has sent a clear signal to those market participants that hope to see a lower benchmark interest rate (BI rate) in Southeast Asia's largest economy in the near future. Governor of Bank Indonesia Agus Martowardojo stated that there will be no lower BI rate as long as there is looming global uncertainty. On the contrary, the possibility of another BI rate hike is still there. In 2013, Bank Indonesia raised its BI rate on five occassions in order to combat inflation and curb the country's wide current account deficit.

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Ahead of the G20 meeting of finance ministers and central bank governors in Sydney on 22 and 23 February 2014, the International Monetary Fund (IMF) released a report titled "Global Prospects and Policy Challenges", which discusses recent global economic developments as well as an outlook for the near future. According to the report, global economic activity picked up in the second half of 2013, largely due to improved conditions in advanced economies, thus boosting exports in many emerging markets.

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Deputy Governor of Indonesia's central bank (Bank Indonesia) Perry Warjiyo said that as a consequence of the legislative and presidential elections, scheduled for April and July 2014, household consumption in Indonesia will grow an extra 0.2 percent. Domestic consumption, particularly household consumption accounts for around 55 percent of the country's gross domestic product (GDP). Bank Indonesia has curbed further growth of household consumption by raising the benchmark interest rate (BI rate) last year.

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The central bank of Indonesia (Bank Indonesia/BI) left its benchmark interest rate (BI rate) unchanged at 7.50 percent in the Board of Governor's Meeting on Thursday (13/02/14). This decision was in line with market expectations as several economic indicators have improved. In recent days, the rupiah exchange rate has shown a marked improvement to IDR 12,055 per US dollar (Bloomberg Dollar Index) as pressures on Indonesia's current account balance are easing and Bank Indonesia's foreign exchange reserves are rising.

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Statistics Indonesia (BPS) is optimistic that Indonesia's inflation rate in February 2014 can be curbed below the one percent mark. BPS official Sasmito Hadi Wibowo said that inflationary pressures are easing as floods have gone, while the LPG price moderated from last month. Prices of chicken meat and rice have remained stable but the price of chili is still growing slightly. In January 2014, severe floods caused 1.07 percent (month-to-month) of inflation due to disrupted distribution networks.

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Indonesians' consumer confidence has increased in January 2014 according to the latest survey conducted by Indonesia's central bank (Bank Indonesia). The outcome of the survey indicated a rise of Indonesia's Consumer Confidence Index (CCI) from 116.5 in December 2013 to 116.7 in January 2014¹. This index illustrates consumer perceptions of current economic conditions compared to conditions in the previous six months as well as the expectations of Indonesian consumers for economic conditions in the next six months.

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Today (03/02), Statistics Indonesia released Indonesia's official inflation rate for January 2014. The monthly inflation rate accelerated to 1.07 percent, which is higher than most analysts had forecast. The main contributor to January's inflation were higher food products prices. Amid high rainfall and severe floods in several parts of Indonesia, disrupted logistics distribution impacted on these prices. The depreciating rupiah exchange rate is also a factor that makes retailers adjust their prices. Annual inflation rate eased from 8.38 percent to 8.22 percent.

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Today (22/10), the World Bank released the October 2015 edition of its flagship Indonesia Economic Quarterly, titled "In Times of Global Volatility". In the report the World Bank states that despite current ongoing global uncertainties (caused by looming monetary tightening in the USA and China's economic slowdown), which make macroeconomic management difficult in the year ahead, pro-active government action could offset the negative impact and may help to boost growth.

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Indonesia's heavily depreciated rupiah makes it more difficult for Indonesians to study abroad or to send their children to universities abroad without having the financial aid in the form of a scholarship. For those that are thinking of making such a decision, they need to take into account the performance of the Indonesian rupiah as well as the inflation outlook in the country of destination. So far in 2015, the Indonesian rupiah has depreciated 18 percent against the US dollar, 9 percent against the euro, 14 percent against China's yuan, and 2.4 percent against the Australian dollar.

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The central bank of Indonesia announced on Thursday (17/09) that it the country’s key interest rate (BI rate) at 7.50 percent, while maintaining the deposit facility rate at 5.50 percent and the lending facility rate at 8.00 percent. According to Bank Indonesia (BI) this decision is consistent with its efforts to push inflation towards the target corridor of 4±1 percent in both 2015 and 2016. In addition, the decision is also part of Bank Indonesia’s measures to anticipate possibilities of a Fed Fund Rate (FFR) hike.

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The number of poor people in Indonesia rose. According to the latest data from Statistics Indonesia (BPS), released today (15/09), there were 28.59 million poor people in Indonesia in March 2015, equivalent to 11.22 percent of the total Indonesian population. In September 2014 Indonesia’s poverty rate stood at 10.96 percent of the Indonesian population, or 27.73 million people. Thus within a time-span of six months, the number of poor Indonesians rose by around 860,000 people. BPS releases data on the country’s poverty level twice per year covering the months March and September.

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Statistics Indonesia (BPS) announced today (01/09) that Indonesian inflation has eased slightly to 7.18 percent (y/y) in August 2015, from 7.26 percent (y/y) in the preceding month. On a month-on-month basis, inflation climbed 0.39 percent in August, below analysts’ expectations. Meanwhile, Indonesia’s manufacturing sector continued to contract in August, albeit conditions improved from the preceding month.

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During Bank Indonesia’s Board of Governors it was decided on 18th August 2015 to hold the BI Rate at 7.50 percent, while maintaining the Deposit Facility rate at 5.50 percent and the Lending Facility rate at 8.00 percent. The decision is consonant with efforts to control inflation within the target corridor of 4±1 percent in 2015 and 2016. In the short term, Bank Indonesia (BI) is focused on efforts to stabilize the rupiah amid uncertainty in the global economy, by optimizing monetary operations in the rupiah and the foreign exchange market.

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The central bank of Indonesia (Bank Indonesia) predicts mounting inflationary pressures in the months June and July due to the Ramadan and Idul Fitri festivities, the possible impact of the El Nino weather phenomenon, and the new school year. Bank Indonesia expects to see inflation at 0.66 percent month-to-month (m/m) in June 2015, particularly driven by volatile food prices (a normal phenomenon ahead of Idul Fitri). On a year-on-year (y/y) basis, Indonesian inflation is expected to accelerate to 7.40 percent, from 7.15 percent in May.

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Most stock markets and currencies in Southeast Asia weakened on Friday (29/05), including Indonesia’s benchmark Jakarta Composite Index and the rupiah. The Jakarta Composite Index fell 0.40 percent to 5,216.38 points, while the rupiah depreciated 0.01 percent to IDR 13,224 per US dollar according to the Bloomberg Dollar Index. Over the past week, Indonesian stocks and the rupiah weakened primarily due to the Greek debt crisis, looming higher US interest rates and the lack of positive domestic factors.

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Investors are clearly waiting for results of Bank Indonesia’s Board of Governor’s Meeting, conducted today (19/05). In this monthly policy meeting, Indonesia’s central bank will decide on its monetary approach. For most market participants it is of crucial importance to learn whether Bank Indonesia will adjust its interest rate policy in order to support the country’s economic growth (which slowed to a five-year low in the first quarter of 2015). Ahead of results, scheduled to be released this afternoon, Indonesian stocks and the rupiah weaken.

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Statistics Indonesia (BPS) announced on Monday morning (04/05) that Indonesia’s inflation accelerated to 6.79 percent year-on-year (y/y) in April 2015. On a month-to-month basis, Indonesian inflation was recorded at 0.36 percent in April. Although this result is in line with analysts’ previous projections, April inflation realization is in sharp contrast with the ‘usual’ inflation pace in the fourth month of the year. Usually, Indonesia records slight deflation in April as prices ease amid the peak of the harvest season.

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