In anticipation of tighter US dollar supplies, the government of Indonesia is considering the issuance of euro-denominated bonds in 2014. This would be the first time for the government to issue bonds in the currency. Robert Pakpahan, head of the debt office within Indonesia's Finance Ministry, said that they are discussing both euro- and yen-denominated sovereign bonds, equivalent to USD $6 billion. The bonds will be used to cover the country's budget deficit, which is set at 1.69 percent of GDP or IDR 175.4 trillion (USD $15.5 billion) in 2014.

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The Rating and Investment Information Inc (R&I), a rating agency from Japan, kept Indonesia’s Sovereign Credit Rating at BBB- with a stable outlook. In their press release, R&I stated that the four key factors behind the decision are: (a) Indonesia’s capacity to achieve sustainable economic growth in the long term (at around six percent per year); (b) conservative fiscal management (causing a marginal fiscal deficit); (c) a sound banking sector; and (d) a low level of government debt.

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A senior official at Indonesia's central bank (Bank Indonesia) stated that the country's current account deficit is expected to ease to 2.5 - 2.7 percent of Indonesia's gross domestic product (GDP) by 2014. In the second quarter of 2013, the account deficit reached USD $9.8 billion or 4.4 percent of GDP in Q2-2013, an alarmingly high figure that has caused much concern among the investor community. This deficit is particularly brought on by a large deficit in the country's oil & gas sector in combination with strong domestic demand for imports.

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The central bank of Indonesia (Bank Indonesia) announced that Indonesia's foreign exchange reserves have increased slightly in September 2013. On 30 September, the reserves stood at USD $95.67 billion, a 2.88 percent increase from USD $92.99 billion one month earlier. The reserves in September are equivalent to 5.4 months of imports, or 5.2 months when servicing of government external debt is included. Recent US dollar demand for the import of oil is what put pressure on the reserves.

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Indonesia’s economy continues to adjust, as weaker commodity prices, tighter international financing, and slowing domestic demand moderate the growth rate to 5.6 percent for 2013. This downward revision is discussed in the latest edition of the World Bank’s Indonesia Economic Quarterly (IEQ). Further moderation of growth (at 5.3 percent) may be expected in 2014, with growth in high income economies firming but international market conditions likely remaining volatile.

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An updated profile of Bank Mandiri is presented in our Indonesian Companies' section. Bank Mandiri, which is Indonesia’s largest financial institution by assets, offers businesses and individuals throughout Indonesia a full set of banking and non-banking products and services. The bank was established as a result of the Asian Financial Crisis when four state-owned banks (Bank Exim, Bank Bumi Daya, Bank Dagang Negara and Bapindo) were merged into Bank Mandiri as part of the government's bank restructuring program.

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The government of Indonesia is busy preparing an extra package of policy responses aimed at stabilizing Indonesia's financial markets. Previously, the government had released a sort of 'rescue package' in late August after the rupiah depreciated sharply and the country's stock indices plunged. Panic had emerged due to the looming end of the Federal Reserve's quantitative easing program. Coupled with internal issues, it resulted in robust capital outflows from Indonesia. The new package will be released in October.

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Indonesia is expected to replace the United States as the world's largest importer of oil by 2018, unless the country is able to limit domestic oil consumption or boost the nation's oil production. Recently, Indonesia has put more effort in limiting oil imports as these have caused a widening trade deficit. The trade deficit was at a new record high at USD $5.65 billion in the first seven months of 2013, particularly caused by the country's oil & gas deficit (USD $7.6 billion), while the non-oil & gas sector posted a surplus of USD $1.9 billion.

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Indonesia's construction industry, which accounts for about ten percent of the country's gross domestic product (GDP), is experiencing turbulent times as the sector is impacted upon by three issues, namely higher minimum wages, higher subsidized fuel prices as well as the depreciating rupiah (against the US dollar). Concerns have arisen that a number of projects cannot be finished due to these issues. Moreover, companies may feel forced to dimiss workers in order to keep a healthy financial balance sheet.

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The Federal Reserve's decision not to change its quantitative easing program seems to have led to a bullish market in Asia. Indonesia's benchmark stock index (IHSG) rose 4.37 percent to 4,658.2 points after the first session on Thursday's trading day (19/09). All sectoral indices were up, with the property sector in leading position. Big cap stocks, in particular, performed well. Investors are relieved that the Fed did not alter its stimulus program. Thus, funds are expected to continue flowing to emerging markets, including Indonesia.

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Although Indonesian Finance Minister Chatib Basri provided positive news to the market by stating that the country's trade deficit (and co-related current account deficit) will probably not be as large in the second quarter of 2014 (as compared to the same quarter in 2013) as well as an expected increase in Indonesian banks' consumer credit, the benchmark stock index (known as Jakarta Composite Index or IHSG) was unable to rise on Wednesday's trading day (04/06). Particularly local investors were eager to sell their Indonesian shares.

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The Indonesian rupiah exchange rate continued to depreciate further on Wednesday (04/06). According to the Bloomberg Dollar Index, the currency of Indonesia had weakened 0.38 percent to IDR 11,855 per US dollar by 15:00pm local Jakarta time. The depreciation occurred due to US dollar demand from local importers for payments and renewed concern about the country's trade balance. Today's performance of the rupiah is in line with the performance of other Asian currencies as investors return to the US dollar on higher US yields.

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Supported by enthousiastic foreign investors, the benchmark stock index of Indonesia (Jakarta Composite Index or also known as IHSG) managed to climb 0.61 percent to 4,942.16 points on Tuesday (03/06). Particularly consumer, trade and mining stocks were popular on today's trading day. It is interesting to note that this growth happened amid sharp rupiah depreciation as the currency still feels the negative impact of the USD $1.97 billion April 2014 trade deficit that was released yesterday (02/06).

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Although initially the benchmark stock index of Indonesia (known as Jakarta Composite index or IHSG) fell after the market responded to today's release of Indonesia's April trade deficit and May inflation, the index ended in the green zone due to foreign net buying and general positive Asian indices (influenced by higher stock indices on Wall Street at the end of last week). Particularly Indonesia's big cap stocks in the miscellaneous industry and consumer sectors were popular as these were relatively cheap after having tumbled at the end of last week.

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The Indonesian rupiah exchange rate depreciated 0.77 percent to IDR 11,766 per US dollar on Monday (02/06) based on the Bloomberg Dollar Index. From the start of trading the currency of Southeast Asia's largest economy immediately plummeted as market participants anticipated a trade deficit in April 2014. Last Friday, the central bank of Indonesia (Bank Indonesia) announced that it expects Indonesia to post a deficit in April, whereas earlier statements of the central bank had mentioned a slight surplus.

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Asian stocks declined on Friday's trading day (30/05) after a government report showed that the US economy - the world's largest economy - shrank by one percent (year-on-year) in the first quarter of 2014, the country's first contraction since early 2011. The contraction was far worse than the initial forecast at 0.1 percent. The main cause of the contraction was the severe winter that hit the USA. The benchmark stock index of Indonesia (Jakarta Composite Index) fell 1.84 percent to 4,893.91 points on Friday (30/05).

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Based on Bank Indonesia's benchmark rupiah exchange rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR), the Indonesian rupiah exchange rate depreciated 0.44 percent this week. Although Asian currencies have been largely supported by renewed capital inflows as investors are optimistic that central banks across the globe continue to provide stimulus to boost local economies, the rupiah has been under pressure due to various domestic issues. These issues include politics as well as fuel subsidies.

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The Indonesian rupiah exchange rate continued its recent depreciating trend on Wednesday (28/05). According to the Bloomberg Dollar Index, the currency had depreciated 0.46 percent to IDR 11,633 against the US dollar at the end of the trading day. The rupiah's performance is in line with the general trend in Asia where most currencies lost ground to the greenback on today's trading day. As various US economic data indicate a continued recovery of the US economy, the market expects more US monetary tightening.

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The Indonesian rupiah exchange rate continued to depreciate further on Monday’s trading day (26/05). Based on the Bloomberg Dollar Index, the currency of Indonesia had depreciated 0.17 percent to IDR 11,595 per US dollar by 1pm local Jakarta time. On Monday morning the US dollar was strengthening against most emerging currencies in Asia. Meanwhile, the central bank's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.63 percent to IDR 11,633 against the US dollar.

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On the last trading day of the week, the benchmark stock index of Indonesia (known as the Jakarta Composite Index of IHSG) rose 0.06 percent to the level of 4,973.06 points. Trading volume was low as investors are still carefully monitoring political and economic developments in Indonesia. Earlier in the week, political uncertainty increased when the country's second-largest political party (Golkar) decided to join the coalition that supports the Prabowo Subianto and Hatta Rajasa pair in the July presidential election.

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