On Friday morning (05/02) Statistics Indonesia (BPS) announced that Indonesia's economy expanded 5.04 percent year-on-year in the fourth quarter of 2015, slightly higher than most analysts had been expecting. Full-year 2015 gross domestic product (GDP) growth was 4.79 percent (y/y). Although this figure is in line with expectations (which ranged between 4.70 and 4.80 percent), the growth pace still constitutes a six-year low for Indonesia, Southeast Asia's largest economy. Meanwhile, BPS also announced it had revised Q3-2015 GDP up from 4.73 (y/y) to 4.74 (y/y).

Read more ›

The central bank of Indonesia (Bank Indonesia) reported that Indonesian consumers are becoming increasingly optimistic about economic prospects and their personal financial situation this year, evidenced by a 5.1 point rise in Bank Indonesia's Consumer Confidence Index to 112.6 points in January 2016. This index is based on a survey, involving 4,600 households in 18 cities across the archipelago (a reading above 100 indicates optimism, while a reading below 100 indicates pessimism).

Read more ›

As expected, credit growth in Indonesia slowed in 2015 amid the nation's overall economic slowdown. Loan growth was particularly affected by weaker demand for property and working capital loans. Indonesia's gross domestic product (GDP) growth in 2015 is estimated to have slowed to 4.7 percent year-on-year (y/y), the country's slowest growth pace since 2009. In its January policy meeting Bank Indonesia decided to cut its key interest rate by 25 basis points to 7.25 percent, a move that should encourage loan growth this year in Southeast Asia's largest economy.

Read more ›

New York-based Moody's Investors Service kept Indonesia's sovereign credit rating at Baa3 (stable outlook), the lowest level within the investment grade rating. Although the rating agency is positive about the strong nature of Indonesia's economy and the prudent fiscal policy that is safeguarded by the Indonesian government and central bank, it sees few room for an upgrade soon (to Baa2) as government revenue is not expected to rise significantly in the period ahead. Moody's released this statement on Thursday (28/01).

Read more ›

Although oil prices somewhat recovered from 12-year lows on Friday (08/01) on China's rebounding stock market there is concern that Indonesia will not achieve its 2016 oil lifting target as the country's oil producers become less eager to boost production rates amid unattractive oil prices. Yesterday, Brent oil fell to USD $32.16 per barrel - the lowest level since 2004 - after China devalued its yuan and Chinese stocks plunged over 7 percent causing the circuit-breaking mechanism to kick in and even causing a global stock selloff.

Read more ›

Economic turmoil that has pushed China’s growth to a 25-year low has a direct effect on Indonesia as China is the key trading partner of Indonesia. Concern about China’s economic slowdown (and the impact of this slowdown on the world economy) persist in 2016 as the country's Caixin/Markit manufacturing purchasing managers' index (PMI) contracted for the 10th straight month in December 2015 (at 48.2), while the services reading for December fell to a 17-month low (50.2).

Read more ›

Last year the benchmark stock index of Indonesia (Jakarta Composite Index) fell 12.13 percent to finish at 4,593.01 points on 30 December 2015 amid severe global uncertainty due to looming tighter monetary policy in the USA and the rapid economic slowdown of China. Today, the Indonesia Stock Exchange will have its first trading day of the new year. What do we expect from the performance of Indonesian stocks in January 2016?

Read more ›

The Finance Ministry of Indonesia released a statement on Sunday (03/01) saying that Indonesia failed to meet the majority of economic targets that were set in the (revised) 2015 State Budget. Primary reasons for the weaker-than-targeted performance are low commodity prices, sluggish global economic growth, China's economic slowdown, and capital outflows triggered by the tighter monetary policy of the US Federal Reserve. Only realization of inflation and the treasury yield were in line with the government's targets.

Read more ›

With the year 2015 coming to an end, it is worthwhile to take a look at the challenges that Indonesia faced this year and whether these challenges will remain in 2016. In short, we believe that the current external challenges persist into the new year. Although the country's economic growth is projected to accelerate to 5.3 percent year-on-year (y/y) in 2016 from an estimated 4.7 percent (y/y) in 2015 (the fifth consecutive year of slowing gross domestic growth expansion), this growth is primarily caused by improved government spending.

Read more ›

Indonesian inflation may reach 2.9 percent year-on-year (y/y) only in full-year 2015, the lowest level since 2009 when inflation in Southeast Asia's largest economy was recorded at 2.78 percent (y/y). In recent years Indonesia's inflation has been volatile with peaks correlating with administered price adjustments (primarily fuel and electricity price hikes as the government is keen on limiting spending on subsidies). Another characteristic of Indonesia is that inflation is generally high (compared to advanced economies), which is in line with the higher economic growth pace (than that of advanced economies).

Read more ›

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.

Read more ›

According to global credit rating and research agency Fitch Ratings, Indonesia's major banks are robust against the rupiah currency slide due to their low unhedged foreign currency exposure, strong loss-absorption cushions and - in some cases - foreign ownership. The slowdown in the economy will weigh on these (rated) banks' operating environment, but is unlikely to damage their credit profiles to any great extent. Below we provide Fitch Ratings' report. This report can also be accessed on their website.

Read more ›

The government of Indonesia has revised the macroeconomic assumptions that are stated in the State Budgets (APBN) of 2013 and 2014 after a meeting with the budgetary body of the House of Representatives (Badan Anggaran DPR) on Wednesday (28/08). It is the third time that the 2013 State Budget has been revised in order to put it more in line with recent global developments. As the government was also too optimistic when drafting the 2014 Budget, it felt the need for a revision (only 12 days after the announcement of the Budget).

Read more ›

Although Indonesia is one of the victims of the reversal of investment flows from emerging markets to developed markets, it is still far from a crisis. Global uncertainty regarding the possible ending of the Federal Reserve's monthly USD $85 billion bond-buying program (QE3) and, to a lesser extent, the possible invasion of the US in Syria have worried investors and resulted in the withdrawal of funds from emerging markets. Funds are flowing back to western developed countries that have recently been showing signs of continued economic recovery.

Read more ›

Indonesia's current account deficit, which caused much alarm among the investor community, is expected to ease to about 2.5 percent of gross domestic product (GDP) in the second half of 2013. This assumption is supported by Indonesia's central bank and various analysts. The country's current account deficit reached USD $9.8 billion or 4.4 percent of GDP in Q2-2013. In combination with the weakening rupiah, higher inflation and the possible end to the Federal Reserve's quantitative easing program, investors have been pulling money out of Indonesia.

Read more ›

As had been announced previously, today (23/08) the government of Indonesia released an 'emergency plan' that aims to improve the financial sector while restoring confidence in the country's fundamentals as turmoil emerged on Indonesia's stock exchange, bonds market and the rupiah. Economic minister Hatta Rajasa said that this plan consists of four packages. These four packages cover the current account deficit, rupiah performance, economic growth, purchasing power, inflation and investments.

Read more ›

The government of Indonesia proposes to allocate IDR 336.24 trillion (USD $32.6 billion) for subsidy spending in the 2014 state budget draft: IDR 284.7 trillion (USD $27.6 billion) for energy subsidies and IDR 51.6 trillion (USD $5.0 billion) for non-energy subsidies. The proposed amount implies a 3.41 percent fall in total subsidy allocation compared to Indonesia's state budget in 2013. However, despite a reduction, subsidy expenditure is still large at 18.5 percent of total government spending (IDR 1,816.7 trillion).

Read more ›

Analysts expect that Indonesia's benchmark stock index (IHSG) will end mixed today (20/08) after yesterday's large plunge amid heavy market concerns. Yesterday, the index dropped 5.58 percent to 4,313.52 points, the lowest since October 2011. Indonesia posted a current account deficit in the second quarter of 2013, while Thailand entered into a recession. The MSCI Emerging Market index¹, which includes both countries, fell 1.4 percent to a six-week low. Below a short overview of factors that caused negative sentiments on Indonesia's market.

Read more ›

For several weeks now, Indonesia's main stock index (IHSG) has been experiencing a sharp correction. As I wrote in my previous columns, market participants have been waiting for several important macro economic data, to wit Indonesia's economic growth figure for the second quarter of 2013, the July 2013 inflation rate, and the country's trade balance statistics for the first six months of this year. Now all above results have been released, we can analyze further the impact of these macroeconomic results as well as investors' reaction to it.

Read more ›

The government of Indonesia has the ambition to reduce Indonesia's unemployment rate to about 5.7 percent in 2014. This ambition was pronounced by Armida Alisjahbana, the minister of National Development Planning. According to the latest data released by Statistics Indonesia, the country's unemployment rate currently stands at 5.92 percent. The minister stressed that the unemployment target of 6 percent that was set in Indonesia's National Medium Term Development Plan to be reached in 2014, has already been achieved.

Read more ›