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Today's Headlines Macroeconomy

  • IMF: Slowing Growth and Widening Macro-Imbalances in Indonesia

    IMF: Slowing Growth and Widening Macro-imbalances in Indonesia

    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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  • Enhanced Financial Cooperation Central Banks of Indonesia and Japan

    Enhanced Financial Cooperation Central Banks of Indonesia and Japan

    The Bank of Japan (BoJ) and Bank Indonesia (BI) signed the third Bilateral Swap Arrangement (BSA) on 12 December 2013. The arrangement is an expansion of the current BSA which almost doubles the size of the facility from USD $12 billion to $22.76 billion. This arrangement also introduces a new feature in the form of a crisis prevention scheme to support potential and/or actual liquidity needs. Both institutions also agreed to establish a cross-border liquidity arrangement to enhance the stability of financial markets.

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  • Indonesia's Foreign Exchange Reserves Unchanged in November 2013

    Indonesia's Foreign Exchange Reserves Unchanged in November 2013

    The central bank of Indonesia (Bank Indonesia) announced that Indonesia’s official reserve assets totaled USD $97.0 billion at the end of November 2013 thus unchanged from the end of the previous month. Bank Indonesia stated that this amount is equivalent to 5.5 months of import or 5.3 months of import and servicing of government external debt. After having grown sharply in recent years, Indonesia's foreign exchange reserves have fallen from USD $112.8 billion at end-2012 as Bank Indonesia tried to support the depreciating rupiah exchange rate.

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  • OECD: Strong Growth in Indonesia but Takes Time to be High-Income Economy

    The latest report of the Organisation for Economic Co-operation and Development (OECD), titled "Structural Policy Challenges in Indonesia", mentions that Indonesia - with an annual GDP growth projection of about 6 percent - is estimated to be the country with the highest level of economic growth among the ASEAN countries between 2014 and 2018. The report is positive about the region's economic future that lies ahead, particularly China, despite the global crisis having managed to slow down economic expansion.

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  • Indonesia's Economic Growth in 2014: Growing or Slowing?

    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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  • Slowing Economic Growth: What about Indonesia's Property Sector in 2014?

    Opinions about the growth prospects of Indonesia's property sector in 2014 have turned rather negative amid the country's slowing economic expansion, tighter monetary policy (mortgage restrictions and higher down payment rules), the depreciating rupiah and uncertainties about the country's legislative and presidential elections in mid-2014. In 2012 and the first half of 2013, Indonesia's property sector had been investors' darling showing spectacular growth amid a booming economy, high housing demand and a low interest environment.

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  • In Anticipation of Tapering, Bank Indonesia May Raise its BI Rate Again

    In Anticipation of Tapering, Bank Indonesia May Raise its BI Rate Again

    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 Comments on Indonesia's Macroeconomy in 2014

    Agus Martowardojo Comments on Indonesia's Macroeconomy in 2014

    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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  • Fitch Ratings: Indonesia's Major Banks Able to Withstand Higher NPLs

    Fitch Ratings: Indonesia's Major Banks Able to Withstand Higher NPLs

    Despite Indonesia's macroeconomic conditions and liquidity experiencing a correction, Fitch Ratings believes that Indonesia's major banks are able to withstand a reasonably high degree of asset-quality stress, mainly due to the banks' strong standalone loss absorption cushions and likely support from highly rated foreign parent companies. Because of the banks' sound earnings buffers, they are expected to cope with the higher non-performing loans (NPLs) which are expected to emerge in the next one or two years ahead.

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  • Bank Indonesia Expects Indonesia's Economy to Grow 5.7% in 2013

    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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Latest Columns Macroeconomy

  • Government Stance on Indonesian Economy and Investors' Reaction

    Last week Friday (30/08), Indonesia's benchmark stock index (IHSG) ended 2.23 percent up to the level of 4,195.09 points, continuing its three-day 'winning streak'. Underlying reasons being the central bank's new policy package (that was released as a response towards the negative impact of global turmoil on Indonesia's financial stability) and the higher benchmark interest rate (BI rate). The BI rate was raised 50 basis points on Thursday (29/08) to 7.0 percent to stabilize the weakening rupiah that fell to IDR 11,000 per US dollar.

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  • Indonesian Government Revises State Budgets of 2013 and 2014

    Indonesian Government Revises Macroeconomic Assumptions of 2013 and 2014

    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).

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  • Global Markets Down due to Syria; Indonesia Stock Index Falls 3.71%

    Most of us who were hoping for a limited weakening of Indonesia's benchmark stock index (IHSG) today (27/08) were to be disappointed. Instead of a limited decline, the IHSG fell 3.71 percent to 3,967.84 points. Market participants are concerned about both the global and domestic economy, thus pulling money out from Indonesia. The weakening rupiah and weak stock index openings in Europe (due to tensions in Syria) pushed the IHSG further down into red territory. Foreign investors were again net sellers of Indonesian assets.

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  • Indonesian Government Develops Palm Oil Based Biodiesel to Curb Oil Import

    In order to curb imports of oil, the government of Indonesia intends to stimulate the production of crude palm oil-based biofuel by increasing the mandatory content of fatty acid methyl ester (which is made from palm oil) in biodiesel products from 7.5 percent to 10 percent. Through this policy, the government claims to be able to save up to USD $3 billion as it needs less fuel imports. Fuel imports totaled USD $5.8 billion in the first six months of 2013 and form a major cause for the USD $9.8 billion current account deficit in Q2-2013.

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  • Current Account Deficit of Indonesia Expected to Ease to 2.5% of GDP

    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.

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  • Indonesian Government Reacts to the Impact of Global Financial Turmoil

    Despite the announcement of an economic policy package aimed at overcoming the impact of global financial turmoil, Indonesia's main stock index (IHSG) was not able to end the week on a positive note, while the value of the rupiah on the spot market depreciated 1.68 percent to IDR 11,058 per US dollar on Friday (23/08) amid a majority of strengthening Asian currencies, including the Indian rupee (0.67 percent) and the Thai baht (0.28 percent). Based on Bank Indonesia's mid rate, the rupiah fell 4.4 percent against the US dollar to IDR 10,848 last week.

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  • Bank Indonesia Takes Steps to Maintain Macroeconomic Stability

    Bank Indonesia Takes Steps to Maintain Macroeconomic Stability

    Similar to the Indonesian government, Indonesia's central bank also announced a fiscal policy package to support sustainable nationwide economic growth by curbing inflation, maintaining a more sustainable balance of payments as well as strengthening financial system stability. These additional policies are expected to synergise with the policy package unveiled by the government on Friday (23/08). These measures were taken as both the rupiah and Indonesia's main stock index (IHSG) are in a downward spiral.

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  • Despite Government's 'Rescue Package' IHSG and Rupiah Weaken

    Today's release of the economic rescue package was not able to put Indonesia's main stock index (IHSG) into green territory. Also, the Indonesian rupiah maintained its losing streak. The IHSG fell 0.04 percent to 4,169.83 points. Interestingly enough, the IHSG was rising previous to the release of the package. After the release, however, it started to weaken slightly, which seems to indicate that market participants were a bit disappointed with the contents of the package as it contained no quick fixes to the economy.

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  • Indonesian Government Releases 'Emergency Plan' to Support Economy

    Indonesian Government Releases 'Emergency Program' to Support Economy

    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.

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  • Indonesia Stock Index (IHSG) and Rupiah Are Extending its Losing Streak

    On Tuesday (20/08), Indonesia's benchmark stock index (IHSG) continued its decline with its fourth consecutive day of losses. Amid major concerns about Indonesia's economic growth, high inflation, tighter monetary policy and current account deficit, the IHSG fell 3.21 percent to 4,174.98 points. It means that the index now stands about 21 percent lower than its record peak in May 2013. Foreign investors have been pulling money out of the Indonesian market. According to Bloomberg, about USD $255 million has been retracted in the last two days.

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