Agus Martowardojo, Governor of Indonesia’s central bank (Bank Indonesia), said on Thursday (27/08) that the nation’s economic growth pace is expected to reach 4.89 percent (y/y) in full-year 2015, down from 5.0 percent (y/y) in the preceding year and it would mark the fifth straight year of economic slowing. Earlier this week, Bank Indonesia had already revised down its economic growth forecast to the range of 4.7 - 5.1 percent (y/y) in 2015 (from 5.0 - 5.4 percent previously).

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Last week, Indonesia’s central bank (Bank Indonesia) refrained from adjusting its relatively high interest rate regime as it is committed to support the ailing rupiah and combat high inflation. Another decision that was revealed by Bank Indonesia is the soon-to-be-introduced regulation that limits total (non-collateral) monthly US dollar purchases to USD $25,000 (down from USD $100,000 previously). This regulation will be implemented in a move to thwart speculators that want to take advantage of the weak and volatile rupiah.

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Just before the market closed on Tuesday (18/08) the Indonesian rupiah experienced a remarkable recovery, signalling that the country’s central bank (Bank Indonesia) intervened to support the ailing currency (after Malaysia’s ringgit, the rupiah is the second-worst performing emerging currency in Asia so far this year, weakening 11.2 percent against the US dollar). Today, based on the Bloomberg Dollar Index, the Indonesian rupiah was gradually falling toward IDR 13,860 per US dollar until it suddenly appreciated markedly.

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For the sixth straight month, the central bank of Indonesia (Bank Indonesia) left its interest rate regime unchanged at Tuesday’s Board of Governor’s meeting (18/08) as it aims to guard the rupiah against severe volatility (which occurred after China’s yuan was allowed to devalue, while markets are still preparing for monetary tightening in the USA) and tries to combat inflation.

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The central bank of Indonesia (Bank Indonesia) announced on Friday (14/08) that the country’s current account deficit narrowed to USD $4.48 billion, or 2.1 percent of gross domestic product (GDP), in the second quarter of 2015. In the same quarter last year the deficit stood at USD $9.59 billion). As such, the current account deficit (CAD) has become more sustainable and this may provide some support for the rupiah which is currently facing tough times (ahead of a looming US interest rate and China’s yuan devaluation).

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The pace of economic growth of Indonesia is expected to remain below five percent year-on-year (y/y) in the second quarter of 2015 according to Reuters poll involving 22 analysts. In fact, the poll shows that further slowing economic growth is expected. In the first quarter of 2015, Indonesia’s economic growth came at 4.71 percent (y/y), the weakest growth pace in six years. According to the poll, analysts see a gross domestic product (GDP) growth rate of 4.61 percent (y/y) in the second quarter of 2015.

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Bank sentral Indonesia (Bank Indonesia) memprediksi melihat inflasi Indonesia di bulan Juli dalam cakupan 0,46 - 0,60% pada basis month-on-month (m/m). Inflasi di Indonesia selalu memuncak pada bulan Juni, Juli dan Agustus karena peningkatan belanja konsumen karena perayaan Ramadan & Idul Fitri dan juga awal tahun ajaran baru. Pada awal bulan ini, Gubernur Bank Indonesia (BI) Agus Martowadojo mengatakan bahwa inflasi tahunan diprediksi untuk turun di bawah 7% di bulan Juli, dari 7,26% (y/y) di bulan Juni.

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Menurut Bloomberg Dollar Index, rupiah terus melemah pada hari Senin (20/07). Mata uang Indonesia melemah 0,31% menjadi Rp 13.395 per dollar Amerika Serikat (AS), level terlemahnya sejak 1998 waktu negara ini dilanda oleh Krisis Finansial Asia. Sementara itu, aktivitas Bank Indonesia masih terbatas sampai hari Rabu (22/07) karena libur umum (perayaan Idul Fitri), menyebabkan bank sentral untuk sementara tidak mempublikasikan Jakarta Interbank Spot Dollar Rate (JISDOR).

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Indonesia mencatat surplus perdagangan 477 juta dollar Amerika Serikat (AS) pada bulan Juni 2015, surplus perdagangan ke-7 secara beruntun. Meskipun begitu, menurut data terakhir dari BPS, diterbitkan pada hari Rabu (14/07), ekspor Indonesia pada Juni ini jatuh 12,8% (year-on-year) menjadi 13,4 miliar dollar AS, sementara impor jatuh 17,4% (year-on-year) menjadi 12,9 miliar dollar AS. Angka-angka ini menunjukkan bahwa surplus perdagangan Indonesia terutama disebabkan oleh permintaan domestik yang lemah dan lebih melambat daripada permintaan global (yang terus melambat juga). Kondisi ini meningkatkan kekuatiran mengenai pertumbuhan perekonomian domestik dan global.

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Seperti yang telah diprediksi, Bank Indonesia tidak mengubah tingkat suku bunganya pada pertemuan Dewan Gubernur Bank Indonesia (BI) pada hari Selasa (14/07). BI rate yang menjadi acuan dipertahankan pada 7,50%, sementara fasilitas simpanan Bank Indonesia (Fasbi) dan suku bunga lending facility dipertahankan masing-masing pada 5,50% dan 8,00%. Bank Indonesia meyakini bahwa kondisi tingkat suku bunga saat ini sejalan dengan upaya untuk menurunkan inflasi dan juga mendukung rupiah yang melemah menjelang perkiraan pengetatan moneter lebih lanjut oleh Amerika Serikat (AS) di kemudian hari pada tahun ini.

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The continued presence of negative market sentiments made it impossible for Indonesia's Jakarta Composite Index (IHSG) to rebound. The looming end of the FED's quantitative easing program - which may be wound down sooner than expected - is a big cause for concern. The depreciating Indonesia rupiah exchange rate intensifies these concerns, particularly regarding companies that have exposure to volatile US dollar movements. Furthermore, investors are waiting for further US economic data as well as for Bank Indonesia's next meeting.

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Apparently positive market sentiments brought on by the macroeconomic data released on Monday (02/12) did not last long. Yesterday, Indonesia's benchmark stock index (IHSG) was lifted by the October 2013 trade surplus and limited November inflation. However, investors are now back to reality and prefer to wait for results of Bank Indonesia's Board of Governor's meeting (12/12) and the Federal Reserve's FOMC meeting (17-18/12). The former will inform about Indonesia's interest rate, the latter about the future of quantitative easing.

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The inflation rate of Indonesia rose slightly in November 2013 (month-to-month) and confirms estimations that inflation in Southeast Asia's largest economy is under control after having accelerated sharply due to the introduction of higher subsidized fuel prices June 2013. In recent months, inflation moved sideways and is expected to ease considerably in the first quarter of 2014. Indonesia's consumer price index rose 0.12 percent in November due to rising electricity, processed foods and health care costs.

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After five consecutive days of depreciation, the Indonesian rupiah exchange rate finally managed to strengthen against the US dollar. Bank Indonesia's Jakarta Interbank Spot Dollar Rate rose 0.26 percent to IDR 11,946 per US dollar on Monday (02/12). According to Bloomberg data, the rupiah rose 1.85 percent to IDR 11,744 as of 02:25:50 ET as market participants have reacted positively to Indonesian trade and inflation data that were released today: October showed a trade surplus, while in November inflation was kept at 0.12 percent.

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On Friday (29/11), the last trading day of November 2013, the Indonesian rupiah exchange rate continued its downward spiral. The Jakarta Interbank Spot Dollar Rate¹ fell 0.39 percent to IDR 11,970 per US dollar amid concern about the winding down of the quantitative easing program, Indonesia's wide current account deficit, a disappointing US dollar-denominated bond auction and surging US dollar demand for earnings repatriation as well as foreign debt payment. Considering the full month of November, the rupiah depreciated 6.61 percent.

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Currently, one of Indonesia's main financial issues (and one which puts serious pressures on the Indonesian rupiah exchange rate) is the country's wide current account deficit. According to data from Statistics Indonesia, Indonesia's current account deficit totaled USD $8.4 billion in the third quarter of 2013. This figure is equivalent to a whopping 3.8 percent of Indonesia's gross domestic product (GDP). Generally, a current account deficit that exceeds 2.5 percent of GDP is considered unsustainable.

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The government of Indonesia will release two additional fiscal policy packages at the end of November or start of December that both aim to heal Indonesia's current account deficit. The two packages constitute follow ups of the policy package that was released in August 2013. Previously, deputy minister of Finance, Bambang Brodjonegoro, announced that an additional package would be released in October. However, it turned out that the government needed some more time to prepare the two additional packages.

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On Thursday 14 November 2013, Agus Martowardojo, Governor of Indonesia's central bank (Bank Indonesia), delivered his end-of-the-year speech at the Annual Bankers’ Dinner. The meeting was attended by leaders from Indonesia's House of Representatives (DPR), economic ministers, leaders of the country's banking industry and business community, non-ministerial government agencies as well as a number of international institutions, thus representing a strategic forum in terms of the national economy.

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Indonesia's benchmark stock index (IHSG) was not able to continue its rebound. On Friday (15/11), the IHSG fell 0.73 percent to 4,335.45 points amid widespread profit taking. Foreign investors recorded net selling of IDR 193 billion (USD $16.9 million) on today's trading day. Moreover, investors are concerned about the impact of the higher interest rate of the central bank (7.50 percent), particularly on the property and banking sectors in the fourth quarter of 2013.

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The economic stabilisation policies launched by Indonesia's central bank (Bank Indonesia) and the Indonesian government in recent months have brought a steady improvement in the country's current account balance. The current account deficit moderated from the previous quarter’s record USD $9.9 billion (equivalent to 4.4 percent of the country's GDP) to USD $8.4 billion (3.8 percent of GDP) in the third quarter of 2013. A shrinking current account deficit is highly awaited by investors. The text below is the official press release of Bank Indonesia.

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