Indonesian Finance Minister Sri Mulyani Indrawati believes economic growth of Indonesia in 2017 can exceed the target that was set by the central government in the state budget. While the official target in the 2017 State Budget was set at 5.1 percent year-on-year (y/y), Sri Mulyani expects to see the growth rate at 5.2 percent (y/y) on the back of rising consumption and investment, while she predicts an end to the trend of falling imports and exports.

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Indonesia Statistics (BPS) announced on Wednesday (15/03) that Indonesia's exports and imports grew at a slower pace in February 2017 (compared to the preceding month). This performance was in line with expectations. While Indonesia's exports grew 11.16 percent year-on-year (y/y) to USD $12.57 billion in February 2017, its imports grew 10.61 percent (y/y) to USD $11.26 billion over the same period.

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Indonesia's exports of footwear to the United States (USA) are expected to reach the value of USD $1.5 billion in 2017, up 12 percent year-on-year (y/y) from USD $1.34 billion last year. This increase is expected to come on the back of US President Donald Trump's eagerness to limit imports from China by introducing higher tariffs. This policy should now open up opportunities for Indonesian footwear exporters.

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Due to rising commodity prices Indonesia saw its export performance surge in January 2017. According to the latest data from Indonesia's Statistics Agency (BPS), Indonesia's exports grew 27.71 percent year-on-year (y/y) to USD $13.38 billion from the same month one year earlier, the fastest pace of export value growth since September 2011 and also exceeding analysts' estimates. This export growth was particularly attributed to higher prices of coal and crude palm oil (CPO).

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Indonesia's Statistics Agency (BPS) informed that both the nation's exports and imports rose for a third straight month (on a year-on-year basis) in December 2016. However, the growth pace slowed compared to the preceding month. Indonesia's exports climbed 15.6 percent (y/y) to USD $13.77 billion in the last month of 2016, slightly exceeding expectations and touching the highest export earnings of the past 24 months. Meanwhile, Indonesia's imports climbed 5.8 percent (y/y) to USD $12.78 billion in December 2016, also slightly surpassing expectations.

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The Centre for Strategic and International Studies (CSIS) believes Indonesia's export performance can grow up to 3.2 percent year-on-year (y/y) in 2017 based on the most recent global growth projections. Yose Rizal, Head of the Economics Department within CSIS, said this 3.2 percent growth outlook is a modest one and Indonesia's export performance should actually perform better. In fact, for economic development of Indonesia, Rizal says export growth in the range of (at least) 4 - 5 percent (y/y) is required.

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The Indonesian Employers Association (Apindo) proposes two strategies to boost Indonesia's export performance in 2017: (1) seek new export markets and (2) export 'halal' products (which adhere to Islamic law) to the Middle East. Last week Indonesia's Trade Ministry revised down its export target for 2017. The Ministry now expects Indonesia's export performance to grow 5.6 percent (y/y) to USD $136 billion this year (from an estimated USD $129 billion in 2016). The revision makes the nation's export target in line with the slow recovery of international demand.

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The slow recovery of global demand made Indonesia decide to revise down its export growth target for non-oil and gas products in 2017. Indonesian Trade Minister Enggartiasto Lukita said the government now targets a 5.6 percent year-on-year (y/y) growth in non-oil and gas exports (down from its earlier target of 11.9 percent y/y). This target is regarded as more realistic considering the slow recovery of international demand. To boost export growth in 2017 the government aims to diversify export markets as well as to, simply, export more products to existing export markets.

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Indonesia's Statistics Agency (BPS) announced on Thursday (15/12) that the nation's export performance in November 2016 showed a sharp increase. Sasmito Hadi Wibowo, Deputy for Statistics Distribution and Services at BPS, said Indonesia's export growth was "rather spectacular" and gives rise to optimism that global demand and trade have improved. In November Indonesia posted a USD $838 million trade surplus, down from the revised USD $1.24 billion in the preceding month. In all of the first eleven months of 2016, Indonesia recorded a trade surplus.

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Indonesia recorded a USD $1.21 billion trade surplus in October 2016 according to the latest data from the nation's Central Statistics Agency (BPS). In line with expectations both exports and imports rose last month supported by rising commodity prices (hence boosting the country's export performance) and an increase in machinery and electrical appliance imports into Indonesia. Meanwhile, BPS revised September's trade surplus to USD $1.27 billion, from USD $1.22 billion reported last month.

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The trade surplus of Indonesia widened in September 2017 as export growth outpaced import growth. Indonesia's Statistics Agency (BPS) announced on Monday (16/10) that the nation's trade balance showed a USD $1.76 billion surplus in September, higher than analysts' forecasts and slightly higher than the USD $1.72 billion surplus in the preceding month.

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The Indonesian government is currently studying the opportunities and challenges with regard to the making of a new bilateral trade deal with the USA. These efforts are a side-effect of US Vice President Mike Pence's recent visit to Indonesia when he signed 11 trade and investment deals worth a combined USD $10 billion.

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Ahead of the Islamic Ramadan and Idul Fitri celebrations, consumption tends to increase in Indonesia. One of the products that is searched for by Indonesian consumers (those who adhere to Islam) is Muslim fashion such as clothes and the veil. In fact, the Indonesian government wants the nation to become Asia's center for Muslim fashion by the year 2018 and the world's Muslim fashion leader by 2020. Muslim clothes are also envisaged to become a key export product. Currently, Indonesia's Muslim fashion exports are still rather insignificant.

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Indonesia's balance of payments registered a deficit in the first quarter of 2016. Based on the latest data from Indonesia's central bank (Bank Indonesia), the deficit stood at USD $287 million in Q1-2016, down from a USD $1.3 billion surplus in the same quarter last year. The balance of payments deficit was the result of the nation's Q1-2016 capital and financial transaction surpluses (USD $4.17 billion) not being able to cover the current account deficit (CAD). Indonesia's Q1-2016 CAD shrank to USD $4.67 billion, or 2.14 percent of the nation's gross domestic product (GDP).

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Although Indonesia's economic growth in the first quarter of 2016 was below analysts' estimates, most analysts agree that the nation's economic growth in the second quarter of the year could reach 5 percent (y/y), supported by domestic consumption and capital inflows. In Q1-2016 Indonesia's economic growth climbed at a pace of 4.92 percent (y/y) - accelerating from the 4.73 percent (y/y) GDP growth pace in the same quarter one year earlier - but significantly below estimates of most analysts. For example, Bank Indonesia expected GDP growth around 5.1 - 5.2 percent (y/y).

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The Centre for Strategic and International Studies (CSIS) believes that the economy of Indonesia will benefit if the government decides to participate in the Trans-Pacific Partnership (TPP) because this free trade deal would make the Indonesian economy more efficient and makes Indonesian exports more competitive. However, Philip Vermonte, Executive Director of CSIS, said a comprehensive study on the matter is yet to be carried out. Others remain concerned about a possible huge rise in imports into Indonesia if Southeast Asia's largest economy would join the TPP deal.

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The government of Indonesia is yet to find a middle way between encouraging the development of processing facilities for the country's mining output and the relaxation of mineral ore exports. Based on Law No. 4/2009 on Mineral and Coal Mining (New Mining Law), exports of mineral ore should have been fully banned in 2014. However, due to the lack of domestic smelting capacity a last-minute regulation was signed in early January 2014 by former Indonesian President Susilo Bambang Yudhoyono that softened this ban.

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Indonesia is eager to enhance trade relations with Europe through the establishment of the Indonesia-European Union (EU) Comprehensive Economic Partnership Agreement (CEPA). Thomas Lembong, Indonesia's Trade Minister, said joining this free trade deal will modernize and improve Indonesia's existing trade regulations. Joining the Indonesia-EU CEPA is the current top priority of the Indonesian government in terms of free trade deals. It aims to have reached an agreement with the EU by late-2017. Afterwards, Indonesia will seek to join the Trans-Pacific Partnership (TPP) and it also showed interest to join the European Free Trade Association (EFTA).

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Broad market trends in the Indonesian rupiah have held relatively consistent over the last year, with a modest devaluation seen against the US dollar. We did see fluctuations in these trends during the summer months but many of these moves came as a result of external influences. One of the best examples here is the media turmoil that posted during this period with respect to a slowdown in the Chinese economy, and this has left many investors wondering whether the rupiah will be able to stand on its own merits and reverse some of its earlier weakness.

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Indonesia has always been hesitant to join free-trade deals with other nations on fears that domestic industries cannot compete with foreign counterparts, which could lead to an influx of cheaper, yet higher-quality foreign products. During his visit to the White House, Indonesian President Joko Widodo said Indonesia intends to join the Trans-Pacific Partnership (TPP) trade deal. Back home, this statement led to concern. What are the negative consequences for Indonesia when joining this deal?

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