The government of Indonesia revised down its forecast for economic growth in 2017 to the range of 5.3 - 5.9 percent (y/y). On Friday (20/05) Indonesian Finance Minister Bambang Brodjonegoro informed parliament about the change in the growth outlook (related to the 2017 State Budget). Initially, the government projected Indonesia's 2017 GDP growth in the range of 5.5 - 5.9 percent (y/y). Brodjonegoro did not explain, however, why the government decided to revise down its GDP growth forecast in the 2017 State Budget.

Read more ›

Slowly but surely Indonesia is obtaining the investment grade rating from the world's three key credit rating agencies. Fitch Ratings already reinstated Indonesia's investment grade rating in 2011, a step that was followed by Moody's Investors Service in 2012. Although Standard & Poor's (S&P) has been more careful, there emerged speculation that S&P will assign the investment grade status to Indonesia soon (perhaps in June 2016). Last week, a S&P team visited Indonesia - to study the country's latest policy reforms and developments - and signaled that its assessment is positive.

Read more ›

Efforts to raise people's purchasing power and household consumption in Indonesia will be key to push for higher economic growth in 2016. According to the latest data from Statistics Indonesia (BPS), Indonesia's gross domestic product (GDP) growth reached 4.92 percent (y/y) in the first quarter of 2016. Although this result failed to meet analysts' projections (which generally stood around 5 percent y/y), it was higher than the 4.73 percent (y/y) economic growth pace that was posted in the same quarter one year earlier.

Read more ›

According to the latest data from Statistics Indonesia (BPS) the unemployment rate of Indonesia fell to 5.5 percent of the nation's labor force, or 7.02 million people in absolute terms, in February 2016 (compared to an unemployment rate of 5.81 percent one year earlier). The data from BPS also indicate that Indonesia's workforce - remarkably - shrank from 128.3 million in February 2015 to 127.8 million people in February 2016 particularly due to a decline in workers in the agriculture sector.

Read more ›

Economic growth of Indonesia was weaker-than-estimated in the first quarter of 2016. According to the latest data from Statistics Indonesia (BPS), released today (04/05), Indonesia's gross domestic product (GDP) growth reached 4.92 percent (y/y) in Q1-2016. Most analysts expected to see a GDP growth pace slightly above the 5 percent (y/y) mark and therefore the publication of BPS was disappointing and raises questions whether Indonesia's economic growth can in fact accelerate significantly in 2016.

Read more ›

The stock performance of Indonesian companies listed on the Indonesia Stock Exchange (IDX) in 2016 is expected to be better than last year's performance. One of the factors that supports this assumption is Indonesia's accelerating economic growth. Most - if not all - analysts expect GDP growth to rebound from its six-year low of 4.79 percent (y/y) in 2015. Indonesia's Q4-2015 GDP growth at 5.04 percent (y/y) was already promising (supported by government spending). In 2016 a growth pace in the range of 5.0 - 5.2 percent (y/y) should be possible. Although the link is not perfect, there is a correlation between a nation's stock market and its GDP growth.

Read more ›

Credit disbursement in Indonesia's banking sector grew at its slowest pace in six years in the first quarter of 2016. This weak performance is attributed to the slowdown in the country's real sector. Muliaman D. Hadad, Chairman of Indonesia's Financial Services Authority (OJK), said credit expansion grew 10 percent (y/y) to IDR 4,084 billion (approx. USD $300 billion) in Q1-2016. However, Hadad remains optimistic that credit expansion will accelerate in the second half of the year in line with forecasts for accelerating GDP growth. This will be a better context for businesses to expand.

Read more ›

On 17 April 2016, 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 over the last seven days. Most of the topics involve hot topics and economic matters such as an update on GDP growth, Bank Indonesia's new benchmark monetary tool, the palm oil sector, the coal price, the trade balance, an excise tax on plastic items, and more.

Read more ›

Darmin Nasution, the Chief Economics Minister of Indonesia, said economic growth of Indonesia in the first quarter of 2016 may be somewhat curtailed as the (food) harvest season has shifted from March to April and May. The harvest season is important for the economy because it causes a multiplier effect. However, government-led infrastructure investment may still be able to push Indonesia's gross domestic product (GDP) growth higher in Q1-2016 compared with the 5.04 percent (y/y) growth of Q4-2015. Nasution said he expects a Q1-2016 GDP growth rate around 5.1 - 5.2 percent (y/y).

Read more ›

Despite last week's rallying oil prices, rising stocks on Wall Street and in Europe, as well as expectation of a more gradual increase in US interest rates, Indonesia's benchmark stock index (Jakarta Composite Index) plunged 1.23 percent on Monday (11/04). Overall, the performance of Asian stock markets was mixed reflected by stock trading in the two big economies of China and Japan. Whereas Japanese stocks fell due to the stronger yen (touching a new 17-month high against the US dollar), Chinese stocks climbed on easing worries about deflationary pressures (after China's March CPI inflation remained flat at 2.3 percent y/y).

Read more ›

The foreign exchange reserves of Indonesia keep on falling from its historical peak of USD $124.64 billion in August 2011 to USD $92.67 billion at the end of July 2013. This development seems to highlight long-standing weaknesses in Indonesia's sovereign's external finances, as credit agency Fitch Ratings detected on several occasions before. The republic of Indonesia is currently characterized by four deficits, to wit a current account deficit, a balance of payments deficit, a trade balance deficit and a fiscal deficit.

Read more ›

Cement sales in Indonesia grew by seven percent to 32.9 million tons in the period January to July 2013. This pace of growth is significantly lower compared to the double-digit cement growth rate last year and thus forms another sign of cooling economic growth in Southeast Asia's largest economy (cement sales are a good indicator to measure the state of economic growth of a country). A slowdown in domestic cement sales is likely to continue in the second half of 2013, partly due to a decline in infrastructure projects.

Read more ›

Although the holy fasting month of Ramadan and subsequent Idul Fitri celebrations always provide a boost for national economic growth in Indonesia as domestic consumption tends to peak, analysts believe that it will not contribute significantly to the government's 6.3 percent GDP growth target this year. During Ramadan and Idul Fitri (known as Lebaran), Indonesian consumers generally spend more on food products, clothes, shoes, tickets for transport and hotels than in other months, and thus lead to increased economic activity.

Read more ›

Worldwide, most stock indices fell on Wednesday (07/08), particularly Japan's Nikkei index, after it has been speculated that the Federal Reserve may phase out the third round of its quantitative easing program in September 2013. This program, involving a monthly USD $85 billion bond-buying package, aims to spur US economic growth while keeping interest rates low. However, one important side effect has been rising stock markets around the globe. Now the end of QE3 is in sight, investors shy away from riskier assets.

Read more ›

Growth of Gross Fixed Capital Formation (GFCF) in Indonesia has continued to slow down in the first six months of 2013. In the first quarter of 2013, GFCF rose 5.78 percent but in the second quarter the pace fell to 4.67 percent. These results are much lower than last year's quarterly growth rates as can be seen in the table below. In fact, the growth rate in Q2-2013 constitutes the lowest growth rate in the last 13 quarters. In Q2-2013, all sectors experienced weakening investments except for domestic machinery and equipment.

Read more ›

The government of Indonesia is busy preparing seven tax incentives to boost investment flows in 2014. Investments currently account for approximately 32 percent of the country's gross domestic product (GDP). Only domestic consumption owns a larger stake towards the economy with 55 percent. The regulatory framework related to the seven incentives is expected to be finalized by the end of this year. The incentives consist of five new ones and the relaxation of two older incentives, namely the tax holiday and tax allowance.

Read more ›

Indonesia’s inflation rate in July 2013 was significantly higher than analysts had previously estimated. The country’s July inflation figure accelerated to 3.29 percent. On year-on-year basis, it now stands at 8.61 percent, the highest inflation rate since many years. Particularly food commodity and transportation prices rose steeply. The main reason for Indonesia's high inflation is the reduction in fuel subsidies. In late June, the government increased the prices of subsidized fuels in order to relieve the ballooning budget deficit.

Read more ›

Indonesia's main stock index (IHSG) increased 3.98 points to close at 4,724.41 on the last trading day (19/07). During last week, the index rose a limited 1.97 percent amid the context of a weakening IDR rupiah (Indonesia's currency even fell below the psychological boundary of IDR 10,000 against the US dollar). The IHSG's performance last week was mainly supported by rising shares in the country's finance, property, construction and metal mining sectors, while the cement and plantation sectors were corrected.

Read more ›

Although the main stock index of Indonesia (IHSG) ended on a positive note last Friday (05/07) by rising 0.46 percent to 4,602.81, foreign investors still sold a net IDR 262 billion (USD $26.5 million) worth of shares, while the value of transactions in the regular market was only IDR 3.17 trillion (USD $320.2 million). The rise of the IHSG at the end of last week was more due to support from Asian indices that were up after the European Central Bank and Bank of England kept interest rates at 0.5 percent.

Read more ›

Realization of Indonesia's budget deficit in the first half of 2013 reached IDR 54.5 trillion (USD $5.5 billion) or 0.58 percent of the country's gross domestic product (GDP). The figure is still well below the target that is set in the revised state budget of 2013, namely IDR 224.2 trillion (USD $22.6 billion) or 2.38 percent of GDP. As a percentage of GDP, the outcome of the deficit in the first half of 2013 was lower than that in the first half of 2012. However, if we compare it with the years 2010 and 2011, the budget deficit in the first half of 2013 is high.

Read more ›