Although Indonesia’s debt-to-GDP ratio is currently still at a safe level at roughly 32.8 percent, the country’s central bank (Bank Indonesia) expressed its concern about the high debt service ratio (DSR) and debt-to-export ratio. The DSR is the ratio of debt service payments (principal and interest) of a country to its export earnings. Generally, a healthy ratio is somewhere in the range of 0 and 20 percent. However, Indonesia’s DSR has risen from 20 percent in 2007 to 50 percent in 2014.

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On 13 July 2014, 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 in the last seven days. Most of the topics involve political and economic topics such as the presidential election, an analysis of the interest rate environment, car sales, IPOs on the Indonesia Stock Exchange, a tender announcement, and more.

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After a trading week that was characterized by high gains in the stock and financial markets on optimism that Joko Widodo (Jokowi) will become the next president of Indonesia, both the Indonesian rupiah exchange rate and benchmark Jakarta Composite Index fell today (11/07). This seems an obvious sign that the euphoria about a Jokowi win has waned and investors are looking again to the true economic fundamentals of Southeast Asia’s largest economy. By 13:00 pm local Jakarta time, the Jakarta Composite Index had fallen 1.66 percent.

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The US dollar continues to depreciate against emerging currencies after the minutes of the Federal Reserve’s latest FOMC meeting, released Wednesday (09/07), suggest that the US central bank will maintain historic low interest rates (0.0 - 0.25 percent) into 2015. The Fed informed that US interest rates hikes will only occur ”a considerable time” after the US asset-buying program (quantitative easing) has ended. Based on the latest minutes, this program is expected to end in October 2014.

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Although not all quick count scores indicate a Joko Widodo (Jokowi) win, Indonesia’s stock and financial markets have gained considerably on Thursday (10/07) - one day after the 2014 Indonesian presidential election - on speculation that the General Elections Commission (KPU) will declare Jokowi the winner of the election on 22 July 2014. Out a total of 12 quick counts (mentioned below), eight showed a Jokowi win. Importantly, these seven quick counts include the authoritative agencies that traditionally have been highly accurate.

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According to data from the Indonesian Automotive Industry Association (Gaikindo), domestic car sales in Indonesia rose 13 percent to 109,706 car units in June 2014 from the previous month (97,147 vehicles) as people increased car purchases ahead of the Idul Fitri (Lebaran) festivities, which commence after the holy fasting month of Ramadan has ended on 28 July. Idul Fitri involves the exodus of millions of Indonesians from the cities to their places of origin. Ahead of this celebration, car sales always increase.

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On 06 July 2014, 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 in the last seven days. Most of the topics involve political and economic topics such as the presidential election, a rupiah and stock market update, an analysis of inflation and the trade balance, corruption, poverty, GDP growth, prospects of the copper price, and more.

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The Indonesian rupiah exchange rate had depreciated 0.20 percent to IDR 11,819 per US dollar by 15:30pm local Jakarta time based on the Bloomberg Dollar Index. This performance is in line with the performance of other emerging currencies in Asia, which all tend to weaken against today’s strengthening US dollar. One of the factors that pressures on the rupiah is the geopolitical tensions in Iraq which have resulted in a rising oil price (last week the oil price rose by 4.5 percent).

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The Indonesian rupiah exchange rate has appreciated 0.50 percent to IDR 11,779 per US dollar by 16:00pm local Jakarta time on Monday (09/06). This performance is in line with the general trend in Asia where emerging market currencies strengthened against the greenback on today’s trading day. The rupiah is among today’s best-performing emerging currencies as it was boosted by the higher trade surplus of China (one of Indonesia’s most important trading partners) and economic growth in Japan.

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An improving US economy can lead to capital outflows worth IDR 130 trillion (US $11.2 billion) from Indonesia as funds are expected to flow back to the USA when interest rates are raised. Since 2009, emerging markets, including Indonesia, benefited from capital inflows amid large monetary stimulus provided by the Federal Reserve (quantitative easing as well as low interest rates). Although the stimulus was aimed at boosting the US economy, emerging markets felt the side effects (such as capital inflows and appreciating emerging market currencies).

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On Wednesday (05/02), Statistics Indonesia (BPS) reported that the economy of Indonesia expanded 5.78 percent in 2013. This result implies that in 2013 Indonesia experienced the slowest pace of GDP growth since its 4.63 percentage growth in 2009. However, this slowing growth was basically self-inflicted as both the Indonesian government and central bank (Bank Indonesia) used various monetary and fiscal policies to curb economic expansion in order to tackle several financial issues.

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Despite higher car prices due to the depreciating rupiah exchange rate, domestic car sales in Indonesia rose 11 percent to 107,496 in January 2014 compared to the same month last year. January sales were particularly supported by sales of the low cost green car (LCGC) and low multipurpose vehicle (LMPV). Both these car types enjoy high popularity in Indonesia. In 2013, the Indonesian government provided tax incentives for the establishment of a domestic LCGC industry.

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In the last month of 2013, Indonesia's trade balance posted a surplus of USD $1.52 billion, almost twice as high as economists had previously predicted. The December surplus implied Indonesia's third consecutive monthly trade surplus and fifth monthly trade surplus in full year 2013. However, considering the whole year, the trade balance still posted a deficit of USD $4.06 billion in 2013 as the total value of exports amounted to USD $182.57 billion while imports reached USD $186.63 billion.

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Despite the release of positive macroeconomic data on Monday (03/02), Indonesia's rupiah exchange rate depreciated 0.22 percent to IDR 12,240 per US dollar based on the Bloomberg Dollar Index. China’s Manufacturing PMI fell to a six-month low of 50.5 in January and put pressure on stocks and currencies in emerging markets. Moreover, the Federal Reserve's further reduction of its quantitative easing program (to USD $65 billion per month) continues to strengthen the US dollar at the expense of emerging currencies.

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On Wednesday 5 February 2014, Statistics Indonesia (BPS, a non-departmental government institute) is expected to release Indonesia's official GDP growth figure for the year 2013. It is estimated that the outcome will be the lowest GDP growth figure since 2009 when Southeast Asia's largest economy grew 4.6 percent after feeling the impact of the global financial crisis. In 2013, again, Indonesia felt the negative influence of external troubles. And in combination with domestic factors, Indonesia's economic growth is expected to be around 5.7 percent in 2013.

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In the Bloomberg Dollar Index, Indonesia's rupiah exchange rate depreciated 0.47 percent to IDR 12,238 per US dollar on Monday (27/01). The decline of the rupiah was in line with today's trend of weakening Asia Pacific currencies (against the US dollar). Meanwhile, the central bank's mid rate (the Jakarta Interbank Spot Dollar Rate or JISDOR) depreciated 0.17 percent to IDR 12,198 per US dollar. Market participants are concerned about Indonesia's January 2014 inflation and further Federal Reserve tapering.

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In the fourth week of January, Bank Indonesia's rupiah exchange rate (the Jakarta Interbank Spot Dollar Rate or JISDOR) depreciated 0.41 percent against the US dollar. This weakening trend of the rupiah was caused by various factors. Most importantly, the US dollar has been gaining strength against emerging currencies, including Indonesia, as speculation emerged that the Federal Reserve will curtail its massive monthly bond-buying program (quantitative easing) by more than just USD $10 billion per month.

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The Indonesia rupiah exchange rate depreciated 0.13 percent to IDR 12,181 per US dollar based on the Bloomberg Dollar Index on Friday (24/01). Asian currencies felt the impact of a contraction of Chinese manufacturing as HSBC’s preliminary Purchasing Managers’ Index slipped to 49.6 in January 2014. Meanwhile, US existing homes sales in December were best since 2006 while US jobless claims were near a six-week low. These data fuel speculation that the Fed will continue to wind down its bond-buying program.

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The Indonesia rupiah exchange rate depreciated 0.18 percent to IDR 12,165 at 16.30 local Jakarta time on Thursday (23/01), based on the Bloomberg Dollar Index. Main reason for this decline is concern that Indonesia's central bank (Bank Indonesia) will maintain its benchmark interest rate (BI rate) at 7.50 percent despite an expected increase in January inflation due to massive floods as well as higher industrial electricity and LPG prices. Indonesia's January inflation rate is estimated to be around 1 percent.

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The forming of a morning doji star indeed indicated that there was potential for continued upward movement of Indonesia's benchmark stock index (Jakarta Composite Index or IHSG) despite the profit taking actions that emerged and limited the gain of the index (particularly those stocks that went into the overbought area). Factors that contributed positively to today's (21/01) performance of the Jakarta Composite Index were rising Asian stock markets and a rebound in commodity stocks as a number of commodities recorded slightly higher prices.

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