Indonesia Investments Released Its December 2024 Report: 'Welcoming a New Year'

Introduction – December 2024 Report

Indonesia Investments wishes all our subscribers and readers a happy, prosperous and successful 2025!!

Unfortunately, there are plenty of concerns that linger on as geopolitical turmoil in the eastern part of Europe and the Middle East persists, while the high interest rate environment (led by a ‘hawkish’ US Federal Reserve) undermines economic activity (and prevents the central banks in other countries –including Bank Indonesia– from cutting their benchmark interest rates as this move could easily lead to an increase in capital outflows, and thus putting more pressure on currencies and stocks).

Moreover, incoming US President Donald Trump also gives rise to uncertainty as he pledged aggressive policies to prioritize the economic welfare of the United States once he steps back into office in January 2025. It remains to be seen whether this is a situation that brings opportunities or disadvantages for Indonesian trade.

In this December 2024 edition, we take an insightful look into a range of interesting topics. For example, the persistently high international cocoa bean prices. These give us a valid reason to offer a detailed analysis of Indonesia’s cocoa sector (plantations, production, consumption and trade), and whether these lucrative cocoa bean prices are a blessing for Indonesia (or an example of a missed opportunity for Indonesia).

Another interesting article involves Indonesia’s micro and small entrepreneurs. This group is a very important asset for the Indonesian economy, but at the same time it is also a fragile group, typically (near) poor, that is embedded in the huge informal sector of Indonesia.

As usual, we also offer analyses of Indonesia’s latest available macroeconomic data, such as inflation, trade, manufacturing, consumer confidence, credit growth, car and motorcycle sales, retail sales, etc.), to assess the state of the Indonesian economy at the very end of 2024.

Another relevant topic discussed in this December 2024 report is that of the value-added tax (VAT) rate increase. Per 1 January 2025 the VAT rate was raised from 11 percent to 12 percent. However, the government seems to have made a last-minute change of mind as Indonesian Finance Minister Sri Mulyani Indrawati announced on 31 December 2024 that the 12 percent rate only applies to goods that are subject to the luxurious goods tax (locally known as PPnBM).

This is of course a very strange policy flip-flop as the government announced a series of policy packages aimed at supporting the Indonesian consumer in exchange for the higher VAT (for example, a temporary 50 percent discount on electricity bills for low voltage households, and incentives for buying a house or hybrid car). It makes one wonder whether government expenditures in the context of the VAT hike are bound to be larger than the income it generates from the 12 percent VAT on luxury goods.

And so, again, we are seeing a great example of regulatory uncertainty, unclarity, and policy flip-flops in Indonesia; something which has been ranking among the biggest structural bottlenecks in Indonesia’s investment environment.

Richard van der Schaar, MA Indonesian Studies
Managing Director

Indonesia Investments
Yogyakarta, Indonesia
2 January 2025

Order the full December 2024 report here. The report (an electronic report, PDF, in English) can be ordered by contacting us through email and/or WhatsApp:

- info@indonesia-investments.com
- +62(0)882.9875.1125

Price of this report:

Rp 150,000 (or equivalent in other currencies)

Take a glance inside the report here!

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