Indonesian consumers are concerned about the looming subsidized fuel price hike this month according to the latest survey of Nielsen, a global information and measurement company. Based on the Nielsen Global Survey of Consumer Confidence and Spending Intentions (covering the third quarter of 2014), 28% of respondents said that higher prices of subsidized fuels are among their top two main concerns. In the previous survey (which covered Q2-2014), the subsidized fuel price hike was not even mentioned among the top five concerns.

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The central bank of Indonesia is expected to keep its key interest rate (BI rate) at 7.50 percent at the next Board of Governors’ meeting (scheduled for Thursday 13 November 2014) in anticipation of accelerated inflation triggered by higher prices of subsidized fuels. The Indonesian government plans to raise prices of subsidized gasoline and diesel before the end of the month in an attempt to curb the country’s wide current account deficit and reallocate government funds to more structural or productive activities than fuel consumption.

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On 9 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 GDP growth in the third quarter of 2014, October inflation, higher subsidized fuel subsidies, Islamic finance, unemployment, the IPO of Blue Bird, a crude palm oil update, Indonesia’s tax system, and more.

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Amid slowing economic growth, Indonesia’s unemployment rate increased slightly in August 2014. On Wednesday (05/11), Statistics Indonesia announced that 7.24 million Indonesians, or 5.94 percent of the country’s labour force, were without a job. In the previous unemployment report (covering conditions in the month February 2014), Indonesia’s unemployment rate stood at 5.70 percent of the country’s labour force (about 7.15 million Indonesians). The government agency releases Indonesia’s unemployment data twice per year.

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Jusuf Kalla, Vice President of Indonesia, confirmed that subsidized fuel prices will be raised this month. Although Kalla declined to announce the specific amount, analysts expect a sharp increase of between IDR 2,000 and 3,000 (roughly USD $0.21) per liter - a price hike of almost 50 percent - to prices of both gasoline and diesel. Currently, the price of premium gasoline is IDR 6,500 (USD $0.54) per liter and diesel IDR 5,500 (USD $0.46). Economists have long requested for higher subsidized fuel prices in Indonesia as these distort the economy.

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On Monday (03/11), several important macroeconomic data were released by statistics Indonesia. Firstly, inflation was relatively high in October at 0.47 percent month-on-month (m/m). Secondly, Indonesia posted another trade deficit in September (USD $270 million). Thirdly, Indonesia's October manufacturing activity showed a contraction (the country’s manufacturing Purchasing Manages' Index fell to a 14-month low of 49.2 in October). Lastly, a total of 791,300 foreign tourists visited Indonesia in September.

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On 2 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 GDP growth in the third quarter of 2014, an October inflation update, developments in coal mining, Internet connectivity, Soechi Lines’ IPO, Joko Widodo’s new cabinet, and more.

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Indonesia’s inflation figure this October may reach the highest level in five years primarily due to volatile food prices triggered by drought in several parts of Indonesia. Chili, in particular, has shown a widening gap between domestic demand and production thus adding inflationary pressures in Southeast Asia’s largest economy. The country’s central bank expects that the inflation figure may reach 0.4 percent (month-on-month, m/m), considerably higher than the historic average in October.

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It remains unknown whether President Joko Widodo (Jokowi) and Vice President Jusuf Kalla will announce the names of the ministers inside the new cabinet today. On Wednesday (22/10) it was reported that a number of ministerial candidates failed to pass the screening of the Corruption Eradication Commission (KPK) and the Financial Transaction Reports and Analysis Center (PPATK), which made Jokowi decide to seek for additional candidates. The market, however, would like to know the composition of the cabinet as soon as possible.

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The pace of inflation in Indonesia may reach 0.36 percent month-to-month (m/m) in October 2014, slightly higher than inflation in the preceding month (0.27 percent m/m). This forecast for October inflation is higher than this month’s historic average. Usually October tends to show low inflation or deflation as the harvest season commences and other inflationary pressures have also eased after the inflation peak in the June-August period (brought about by seasonal matters such as Islamic celebrations and the start of the new school year).

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While we saw the highest monthly inflation rate (of the year) in December 2023, it was lower than we had projected. The latest data published by Indonesia’s Statistical Office (Badan Pusat Statistik, BPS) show that headline inflation reached 0.41 percent month-on-month (m/m) in December 2023.

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As expected, the central bank of Indonesia (Bank Indonesia) decided to impose a 50 basis points (bps) interest rate hike after concluding its two-day monetary policy meeting on 16-17 November 2022.

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For me, G20 summits were always interesting occasions as the leaders of the world’s strongest economies gather to discuss plans to move forward. This year, however, it was the first time that I was quite reluctant to follow the summit (despite the 2022 edition being organized on the Indonesian island of Bali).

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As usual, we devote our first article to the Indonesian economy. But before we zoom in on the latest macroeconomic data of Indonesia, we first provide some context by discussing the global economy.

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Before turning our attention to the economy of Indonesia, it is important to take a closer look at the global economy first. Fortunately, the Organization for Economic Cooperation and Development (OECD) just released a new update (called the OECD Economic Outlook, Interim Report September 2022) and so it’s certainly worthwhile to take a look at its conclusions.

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In the second half of September 2022 the Indonesian rupiah experienced some steep depreciating pressures, nearly touching IDR 15,300 per US dollar. It prompted Bank Indonesia to step and intervene in markets to limit the currency’s decline; a step that typically leads to a drop in the country’s foreign exchange reserves.

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Indonesia’s central bank (Bank Indonesia) – finally – decided to raise its benchmark interest rate by 25 basis points to 3.75 percent after concluding its two-day policy meeting on 23 August 2022, thereby joining the global wave of rate hikes as central banks need to combat accelerated inflation, while –especially in emerging markets – higher rates also function to prevent too much capital outflows as US assets become more attractive amid aggressive US Federal Reserve tightening.

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What came as a surprise to us is that the Asian Development Bank (ADB) decided to raise its projection for Indonesia’s economic growth in full 2022 from 5.0 percent year-on-year (y/y) to 5.2 percent (y/y) in July 2022. This decision was substantiated in its Asian Development Outlook 2022 Supplement entitled Recovery Faces Diverse Challenges.

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We were surprised to learn that Indonesia’s central bank (Bank Indonesia) decided to leave its interest rates unchanged at the two-day monetary policy meeting on 23-24 May 2022. The benchmark BI 7-Day Reverse Repo Rate was kept at 3.50 percent, while the deposit facility and lending facility rates were maintained at 2.75 percent and 4.25 percent, respectively. We had expected Bank Indonesia to raise its key rate by 0.25 percent to 3.75 percent at this occasion.

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With the Ramadan month just having started, it is important to take a look at food prices in Indonesia. The Ramadan-Idul Fitri period is typically a period when prices rise amid a significant increase in demand.

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