In the seventh economic stimulus package, the Indonesian government cuts income tax (up to 50 percent) for employees in labor-intensive industries who earn less than IDR 50 million (approx. USD $3,600) per year. This facility, unveiled on Friday (04/12), aims to combat financial pressures on companies caused by the economic slowdown and next year's higher minimum wages (in order to avert a rise in unemployment as companies may feel the need to sack employees). This tax incentive will be offered for a period of two years and - if successful - will be extended.

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Due to the El Nino-inflicted drought that has plagued Indonesia in 2015 (curtailing output o agricultural commodities, the country's tea exports are expected to plunge by 40 percent year-on-year (y/y) to about 48,000 tons this year. The El Nino in 2015 is one of the strongest on record. This weather phenomenon, which occurs once every five years on average, involves periodical warm ocean water temperatures off the western coast of South America that can cause climatic changes across the Pacific Ocean, leading to severe droughts in key agricultural-producing countries in Southeast Asia.

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On 6 December 2015, 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 economic matters such as updates on inflation, an economic growth update, the 7th stimulus package, the rupiah exchange rate, and more.

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The Asian Development Bank (ADB) lowered its forecast for economic growth in Indonesia to 4.8 percent year-on-year (y/y) in 2015 and to 5.3 percent (y/y) in 2016 from previously 4.9 percent (y/y) and 5.4 percent (y/y), respectively. In its latest report on Indonesia, the ADB cited that problems related to budget disbursement and the nation’s weak export performance were the main factors to cut its growth projection for Indonesia - for both 2015 and 2016 - by 0.1 percentage point. In September 2015, the ADB had already cut its growth forecast for Indonesia on the back of negative effects of China’s economic slowdown.

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