The Governor of Indonesia's central bank (Bank Indonesia), Agus Martowardojo, expects that the pace of inflation in Indonesia in January 2014 is most likely to become one of the lowest January inflation rates in the last five years although it remains important that food supplies are maintained at safe levels. The higher price of LPG in Southeast Asia's largest economy is expected to contribute only slightly to January's inflation rate. Martowardojo also stated that Indonesia's macroeconomy is stable at the start of a new year.

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Chatib Basri, the Finance Minister of Indonesia, expects Indonesia's economy to expand 5.6 percent in the fourth quarter of 2013. As such, total gross domestic product (GDP) growth of Southeast Asia's largest economy in 2013 will total between 5.6 to 5.7 percent in 2013. This result will imply that Indonesia's economic expansion in 2013 has slowed down for the second straight year, mainly due to global economic turmoil. In 2011 and 2012, the country's economy expanded by 6.5 percent and 6.2 percent respectively.

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Various analysts believe that the benchmark stock index of Indonesia (the Jakarta Composite Index or IHSG) can make a good jump in 2014 to the level of between 5,000 to 5,300 points (from 4,182 currently) despite the looming end of the Federal Reserve's quantitative easing program (QE3) which may result in temporary capital outflow from Indonesia's capital markets. The analysts believe that positive internal developments will provide solid support for the IHSG. These developments include the trade balance, rupiah exchange rate and general elections.

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The International Monetary Fund (IMF) detects a slowdown in GDP growth in major emerging market economies and decline in commodity prices, and more recently, a reversal in push factors tied to a prospective exit from extraordinarily easy global monetary conditions, has put pressure on Indonesia’s balance of payments and heightened its vulnerability to shocks. Domestic policy accommodation and rising energy subsidies have also given rise to increased external and fiscal imbalances.

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An improving economic growth outlook in both Japan and the USA paired with stronger-than- expected growth in the People’s Republic of China (PRC) support a steady growth outlook for developing Asia, says a new Asian Development Bank (ADB) report. The Asian Development Outlook Supplement, released on Wednesday (11/12), forecasts growth of 6.0 percent in 2013 for ADB’s 45 developing member countries, improving to 6.2 percent in 2014. The forecasts are unchanged from the Asian Development Outlook Update issued in October.

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After two long days of intense negotiations, Director of the World Trade Organization Roberto Azevedo announced that the discussions have resulted in the Bali declaration on Saturday morning (07/12). The agreement between the participants were put in 10 documents, known as the Bali Package, and cover trade facilitation (trade liberalizations), agriculture, cotton and development. Azevedo stressed the importance of the agreement when he said "[for the] first time in our history, the WTO has truly delivered."

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Despite the World Bank and International Monetary Fund (IMF) having revised down their forecasts for Indonesia's economic growth in 2014, the Center for Economic and Public Policy Studies (Pusat Studi Ekonomi dan Kebijakan Publik) expects that the country's economy will grow stronger in 2014 than this year. In 2014, the World Bank and IMF expect Indonesia's gross domestic product to grow 5.4 percent and 5.5 percent respectively. Both estimates are 0.2 percent down from their GDP growth forecasts for the year 2013.

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Several analysts expect that the central bank of Indonesia (Bank Indonesia) will raise its key interest rate (BI rate) again in the first Semester of 2014 in order to anticipate the winding down of the Federal Reserve's monthly USD $85 billion stimulus program (quantitative easing). Currently, the BI rate is set at 7.50 percent but analysts say that the market should be prepared for a hike to 8.0 percent in the first half of 2014. Between June and November 2013, Bank Indonesia has already raised its benchmark interest rate from 5.75 to 7.50 percent.

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Agus Martowardojo, Governor of Indonesia's central bank, expects the Indonesian economy to consolidate in 2014. The country is currently experiencing an economic correction with GDP growth slowing to 5.62 percent in the third quarter of 2013. Martowardojo said that the current account deficit still needs time to reach a healthy level. Indonesia's current account deficit stood at USD $8.4 billion (equivalent to 3.8 percent of the country's GDP) in the third quarter of 2013, down from USD $9.8 billion (4.4 percent of GDP) in the second quarter.

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Agus Martowardojo, Governor of Indonesia's central bank (Bank Indonesia), stated that the country's economy is expected to grow 5.7 percent in 2013. Bank Indonesia believes GDP growth in the fourth quarter of 2013 to fall below the growth figure realized in Q3-2013 (5.62 percent). Martowardojo said that the government needs to continue measures to improve the country's exports, while trying to curtail imports of oil and gas as domestic demand for fuels remained high, even after the increase in prices of subsidized fuels in June 2013.

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The western banking collapse of 2008 did more than cost investors large sums of money, it exposed markets to a renewed sense of vulnerability in that is typically thought of as the world’s most stable financial institutions. But one of the unintended (or unforeseen) results of these events has been the upsurge in alternative retirement destinations for those that are ending their working careers. Perhaps most surprising is the upsurge in the number of retirees moving to the Asia-Pacific region.

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Indonesia's benchmark stock index (IHSG) continued its upward movement on Wednesday (29/01) when it gained 1.74 percent to finish at 4,417.35. The IHSG was supported by positive American and European stock indices on the previous day and by strengthening emerging market currencies that felt the impact of higher interest rates in India and Turkey. In Indonesia, consumer, infrastructure and plantation stocks were popular as the current high rainfall is regarded as bringing a positive impact on these sectors.

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The Standard Chartered Bank expects Indonesia's economy to expand 5.8 percent in 2014, followed by a 6 percentage growth in 2015 as an improving global economy has a positive effect on emerging economies, including Indonesia. The world economy is estimated to grow between 3.2 and 3.5 percent this year and expected to accelerate to 3.8 percent in 2015. David Mann, the regional Head of Research at the Standard Chartered Bank in Asia, said that Indonesia's economic performance in 2013 was negatively influenced by external factors.

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Today (27/01), Indonesia's benchmark stock index (the Jakarta Composite Index, abbreviated IHSG) fell 2.58 percent to 4,322.78 points. This sharp decline can only be explained by profit taking amid market uncertainty. As I have reported before, the IHSG is highly susceptible to profit taking when negative sentiments arise in the market. Factors that accounted for these sentiments were the continued depreciation of the rupiah exchange rate and falling Asian stock markets (that were impacted by Wall Street's negative ending last week).

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Despite mixed European and American markets on Wednesday (23/01) and declining Asian markets on Thursday (23/01) as these responded to weak Chinese manufacturing data and South Korea's Q4-2013 GDP outcome, it was unable to block Indonesia's benchmark stock index (Jakarta Composite Index or IHSG) from extending its upward movement. The IHSG was supported by various positive company releases, including financial results of 2013, capital expenditure announcements, and new products or services releases.

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The upward revision of the IMF's outlook for global economic growth (raised to 3.7 percent) was able to boost several commodity prices. This then was a reason for investors to purchase mining stocks, which made a positive impact on the performance of Indonesia's benchmark stock index (known as the Jakarta Composite Index or IHSG) on Wednesday (22/01). Stocks in the consumer and trade sectors were also popular as speculation emerged that demand for consumer goods will rise due to the severe floods in several cities in Indonesia.

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The forming of a morning doji star indeed indicated that there was potential for continued upward movement of Indonesia's benchmark stock index (Jakarta Composite Index or IHSG) despite the profit taking actions that emerged and limited the gain of the index (particularly those stocks that went into the overbought area). Factors that contributed positively to today's (21/01) performance of the Jakarta Composite Index were rising Asian stock markets and a rebound in commodity stocks as a number of commodities recorded slightly higher prices.

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The movement of Indonesia's benchmark stock index (known as IHSG or Jakarta Composite Index) on today's trading day (20/01) was rather volatile. Investors returned to the market after the fall of the index was limited at the end of last week. However, China's slowing economic growth in the fourth quarter of 2013 (7.7 percent) brought negative market sentiments. Still, foreign investors were net buyers of Indonesian stocks today and in combination with an appreciating rupiah exchange rate, the index rose 0.44 percent to 4,431.57 points.

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On Thursday's trading day (16/01), Indonesia's benchmark stock index (Jakarta Composite Index) fell victim to profit taking after two days of sharp gains (although the index did not came close to its gap at 4,393-4,398 points). The index was also pulled down due to the World Bank's pessimistic forecast for growth of Indonesia's economy as well as today's mixed Asian stock indices. Lastly, the continued Indonesia rupiah exchange rate depreciation contributed to negative market sentiments.

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According to the World Bank, a sharp dismantling of capital injections by the central banks can lead to a 80 percent reduction of capital inflows into the emerging economies, including Indonesia. This can cause serious damage or even a crisis situation in an emerging market because capital flows to these countries are more triggered by global factors than domestic ones. The winding down of the Federal Reserve's bond-buying program (quantitative easing) has been gradual for now but if interest rates rise quickly it can hurt emerging economies.

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