Both Industry minister M.S. Hidayat and Economic minister Hatta Rajasa confirmed that on Friday (21/06) the government will announce the increase in price of subsidized fuel after it had already been approved by the House of Representatives (DPR) last Monday (17/06). Immediately after the announcement, the price of fuel is set to be raised. It has been reported that the government's announcement will be revealed at midnight, implying that the price hike is effective starting from Saturday.

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After a long plenary session on Monday (17/06), Indonesia's House of Representatives (DPR) and the government have agreed to the revised 2013 State Budget (APBN-P). The revision was needed as original macroeconomic assumptions began to fall out of tune with reality. Due to global and domestic conditions a number of assumptions needed to revised down. Most controversial decision that was taken is the increase in price of subsidized fuel by 44 percent to IDR 6,500 (USD $0.66) per liter.

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Late on Monday evening (17/06), the increase in the price of subsidized fuel, as stated in Law No. 19/2012, was approved by Indonesia's House of Representatives (DPR) through a voting session as political parties could not agree collectively on the price hike as well as on cash programs for the poor to mitigate effects of the higher fuel price. Demonstrations against the price hike were staged in various regions. In Medan (North Sumatra), Jambi (Central Sumatra) and Ternate (North Moluccas), it led to clashes between the police force and protestors.

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The plenary session of Indonesia's House of Representatives (DPR) is still ongoing as the various political parties could not agree yet on the increase in the price of subsidized fuel. Five political parties agree to the price hike, while four others have rejected it. If the political parties can not agree to the proposal, then it will be decided by individual voting starting from midnight (Indonesian time). The price hike has been long awaited as a measure to relieve pressure on Indonesia's budget deficit.

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Today (15/06), it was reported in Indonesia's media that the government will announce details regarding the new price of subsidized fuel on Monday (17/06) after a plenary session of the House of Representatives (DPR). The Union of Indonesian Workers (Konfederasi Serikat Pekerja Seluruh Indonesia) has announced that it will stage a large demonstration on 17 or 18 June at the DPR/MPR building (the seat of the government) in Indonesia's capital city as well as smaller demonstrations in various cities across the archipelago.

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The central bank of Indonesia (Bank Indonesia) decided today to raise its benchmark interest rate by 25 basis points to 6.0 percent. The decision was made amid concerns about the inflationary impact of a hike in subsidized fuel prices (planned this June) as well as increasing uncertainty in global financial markets as central banks' may scale back stimulus programs. The Indonesian rupiah has weakened considerably in 2013 and forms the worst performer in Asia after the Japanese yen among the 11 most-traded currencies tracked by Bloomberg.

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To ease pressures on the IDR rupiah, Indonesia's central bank has used about USD $2.0 billion of its foreign exchange reserves to support the currency as the country's continuing trade deficit as well as concerns about the possible increase in price of subsidized fuel in June has caused much uncertainty about the level of inflation in the near future and puts downward pressure on the rupiah. Indonesia's foreign exchange reserves fell to USD $105.2 billion in late May 2013 from USD $107.3 billion at the end of April.

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Indonesia's minister of Economy, Ir. M. Hatta Rajasa, stated that the government of Indonesia intends to realize economic growth of at least 6.2 percent in the second quarter of 2013 in order to remain on track for 6.3 percent growth for full year 2013. Although he reminded that it will take hard effort to realize this target, his message contained more optimism than Finance minister Chatib Basri's statement earlier this week who sees 6.0 percent of economic growth as the limit in Q2-2013.

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In recent months, positive fundamentals have coloured stock indices green. Despite volatility, these positive fundamentals remain today. Therefore, analysts of JP Morgan emphasize that people should not turn their backs to stock markets now. Risks are obviously always present but the analysts stress that people should not be too concerned about ongoing volatility. In fact, volatility should be used to one's advantage by purchasing when the index is low. Below are five arguments that JP Morgan mentions as reason to keep buying stocks.

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According to data released by Statistics Indonesia (Badan Pusat Statistik, abbreviated BPS), a non-departmental government institution, Indonesia's inflation figure eased 0.03 percent (month-to-month) in May 2013. The Head of BPS, Suryamin, said that it was the first time since ten years that the country experienced deflation in the month of May. The deflation figure is particularly triggered by the government's policy to allow for more imports of certain food products (such as onions, garlic, tomatoes, and chili).

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On Thursday (19/09), most currencies and stock indices outside the USA were bullish after the Federal Reserve decided to continue its massive monthly USD $85 billion bond buying program. Today (20/09), Asian currencies and stock indices took the foot off the gas as many investors sought to cash in on yesterday's gains. The MSCI Asia Pacific was still able to rise slightly (0.1 percent) after jumping 2.2 percent yesterday, but Indonesia's benchmark stock index (IHSG) plunged 1.86 percent (after gaining 4.65 percent yesterday).

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Investors all around the world are in anticipation of the Federal Reserve's decision to scale back the monthly USD $85 billion bond-buying program known as quantitative easing (QE3). If indeed scaled back, then another important question remains: how much will the bond-buying program be toned down? Today (18/09), is the last day of the Fed's FOMC meeting in which these decisions are made. The market expects no drastic end to the program, instead a gradual toning down (between USD $10 to $20 billion) is anticipated.

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Indonesia's poverty rate is expected to jump to between 11.13 and 11.37 percent of the total Indonesian population in 2013 due to inflationary pressures. Inflation may reach 9.2 percent at the year end. The new poverty forecast is significantly higher than the government's original target of 9.5 to 10.5 percent as set in the country's State Budget. The revised forecast was presented by Indonesia's Ministry of National Development Planning (Bappenas). Poverty basket inflation is expected to rise accordingly.

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Last week, Indonesia's benchmark stock index (IHSG) climbed 7.3 percent to end at 4,375.53 on Friday (13/09). This growth is remarkable as it remains unknown what the Federal Reserve will do with its quantitative easing program (QE3). The next Fed meeting - scheduled for 17-18 September - is expected to provide more clarity regarding this matter. Positive sentiments that lifted the IHSG were Indonesia's slightly increased foreign exchange reserves, its stable rupiah after another BI rate hike, and the Bilateral Swap Deals (BSA) with Japan and China.

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It was decided at the Board of Governors’ meeting (RDG) of Bank Indonesia on 12 September 2013 to raise the BI Rate by 25 bps to 7.25%, the rate on the Lending Facility by 25 bps to 7.25% and the rate on the Deposit Facility by 25 bps to 5.50%. This action forms part of the follow-up measures taken to reinforce the policy mix instituted by Bank Indonesia, which focuses on controlling inflation, stabilizing the rupiah exchange rate and ensuring the current account deficit is managed to a sustainable level.

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Indonesia's largest company by market capitalization is still HM Sampoerna, the country's largest tobacco company. The company has been the top company in Indonesia since March 2013 when it replaced Astra International, Indonesia's largest diversified conglomerate, on the top spot. Astra had been Indonesia's largest company since 2010. Currently, the third-largest company in terms of market capitalization is Unilever Indonesia. Unilever, which is Indonesia’s largest consumer goods producer, jumped four places in the ranking since late 2012.

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Last week, Indonesia's benchmark stock index (IHSG) remained under pressure and was corrected 122,735 points, or 2.9 percent. At the start of the week, a number of important data were released. Inflation in August 2013 was 1.12 percent (month-to-month), 7.94 percent (calender year 2013), and 8.79 percent (year on year). Major contributors to Indonesia's inflation rate were food products (0.45 percent), followed by housing, water, electricity and gas (0.16 percent), and transportation, communication and financial services (0.16 percent).

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In recent years, Indonesia's car sales have shown robust growth, culminating in a record high number of 1.12 million sold car units in 2012. This is an important statistic because car sales inform us about the state of the economy. Generally, rising car sales indicate an expanding economy while declining car sales indicate that the economy is slowing down. When we take a look at the table below, there is a link visible between Indonesia's GDP growth and rising car sales, except for 2011 to 2012 when GDP growth declined while car sales rose.

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Although many global indices were up, Indonesia's benchmark stock index (IHSG) fell a total of 2.93 percent during last week's trading. One important issue on global indices is the tapering off of the Federal Reserve's quantitative easing (QE3). On 17 and 18 September, the next meeting of the FOMC is scheduled, which is expected to discuss the future of QE3. Notably, as the meeting comes closer, most global indices in fact rise. Thus, market players seem to have become less concerned about an end to QE3.

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In recent weeks, Indonesia has to cope with a large amount of negative publicity as large capital outflows from the country's financial markets occurred, partly due to weak economic results regarding the current account balance, inflation and the the rupiah. Interest rates are rising, thus eroding people's purchasing power and consequently curbing economic growth. However, the Global Competitiveness Index 2013-2014, released by World Economic Forum, contained a positive outcome for Southeast Asia's largest economy.

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