The central bank of Indonesia (Bank Indonesia) announced on Friday (13/02) that Indonesia’s current account deficit - the broadest measure of trade in goods and services - improved to 2.81 percent of gross domestic product (GDP), or USD $6.2 billion, in the fourth quarter of 2014 (from a revised 2.99 percent of GDP in the preceding quarter). The full-year 2014 deficit amounted to USD $26.2 billion, equivalent to 2.95 percent of GDP from a (revised) deficit of USD $29.1 billion (3.18 percent of GDP) in 2013.

Read more ›

Benedict Bingham, Senior Resident Representative for Indonesia at the International Monetary Fund (IMF), expects that the central bank of Indonesia (Bank Indonesia) will remain committed to the tighter monetary policy in a bid to safeguard the country’s fiscal fundamentals amid external pressures. Apart from sluggish global economic growth, the looming interest rate hike in the USA (later this year) is expected to rock Indonesia as it will trigger capital outflows from emerging markets.

Read more ›

The latest Consumer Confidence Survey released by Indonesia’s central bank indicated that Indonesian consumers were more optimistic in January 2015 (compared to the previous month) on the back of recent fuel price cuts. The index, based on a total of 4,600 households across 18 major Indonesian cities, climbed to 120.2 points in January, up from 116.5 in the preceding month (a score above 100 signals consumer optimism). In December the index had declined due to higher administered fuel prices.

Read more ›

Inflation in Indonesia is expected to have eased to 7.50 percent year-on-year (y/y) in January 2015 on the back of cheaper domestic fuel prices (triggered by sliding global oil prices). The month-on-month pace (m/m) in the first month of 2015 may have tumbled to near zero percent from 2.46 percent (m/m) in December 2014. Last year, Indonesian inflation had accelerated to 8.36 percent (y/y) primarily due to the implementation of higher prices for government administered low-octane gasoline and diesel in November 2014.

Read more ›

The Indonesian government, central bank (Bank Indonesia) and Commission XI of the House of Representatives (DPR) agreed to revise several macroeconomic targets in the Revised 2015 State Budget (APBN-P 2015). The revisions include the country’s economic growth (GDP) pace, the average rupiah exchange rate, and inflation target. In essence, the revisions indicate that Indonesian authorities have become less optimistic about the Indonesian economy in 2015 amid external pressures.

Read more ›

The current account deficit of Indonesia, which is expected to have improved slightly from 3.3 percent of the country’s gross domestic product (GDP) in 2013 to about 3 percent of GDP in 2014, is forecast to continue to improve in 2015 hence placing less pressures on the rupiah exchange rate and the economy in general. A wide current account deficit makes the country vulnerable to capital outflows in times of global shocks (for example looming higher US interest rates) as the deficit signals that Indonesia relies on foreign funding.

Read more ›

The central bank of Indonesia (Bank Indonesia) decided to keep its benchmark interest rate (BI rate) at 7.75 percent at its Board of Governors’ Meeting on Thursday (15/01). The country’s Lending Facility and Deposit Facility were maintained at 8.00 percent and 5.75 percent, respectively. According to the bank this interest rate environment is sufficient to push inflation, which has accelerated to 8.36 percent year-on-year (y/y) in December due to fuel subsidy reforms, back towards its target of 3 to 5 percent (y/y) in 2015.

Read more ›

Despite having intervened to support the rupiah exchange rate, Indonesia’s central bank announced that the country’s foreign exchange reserves rose USD $800 million to USD $111.9 billion at the end of December 2014. The rise was primarily due to foreign exchange income from Indonesia’s oil and gas exports as well as the withdrawal of government’s foreign debt. Tirta Segara, Executive Director of Bank Indonesia, said that foreign exchange savings and banks swaps with Bank Indonesia had also increased at the end of 2014.

Read more ›

Although many currencies weakened against the US dollar after the US Federal Reserve stated that it is on track to raise its key Fed Fund Rate "somewhere next year" amid structural improvement of the US economy (after having kept the rate near zero for a "considerable time"), Indonesia's rupiah opened strong on Thursday (18/12). Based on the Bloomberg Dollar Index, Indonesia’s currency had appreciated 0.91 percent to IDR 12,553 per US dollar at 9:15 local Jakarta time.

Read more ›

Indonesia’s central bank decided to keep its benchmark interest rate (BI rate) at 7.75 percent at Thursday’s Board of Governors’ Meeting (11/12). The Lending Facility and Deposit Facility were kept at 8.00 percent and 5.75 percent, respectively. The central bank is convinced that the current interest rate levels are effective to combat short-term inflationary pressures (triggered by the implementation of higher subsidized fuel prices in mid-November) pushing it back to the target corridor of between 3 and 4 percent (y/y) in 2015.

Read more ›

Contrary to the previous trading day, most emerging Asian currencies strengthened against the US dollar on Tuesday (09/12) supported by the yen’s advance as falling oil prices dented risk appetite. Based on the Bloomberg Dollar Index, Indonesia’s rupiah appreciated 0.47 percent to IDR 12,331 per US dollar today. Despite local firms’ increased US dollar demand to settle debt before the year-end, market participants were happy to learn that Indonesia’s central bank is active in the foreign exchange market to guard the currency.

Read more ›

Despite positive stock indices in the USA and Europe at the end of last week as well as mostly positive indices in Asia today (08/12), the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) fell due to investors’ appetite for profit taking. Several matters made investors decide to sell their Indonesia shares, including the World Bank’s downward revision of Indonesia’s economic growth in 2015, Japan’s recession, weakening Chinese exports, and the sharply depreciating rupiah exchange rate.

Read more ›

The central bank of Indonesia expects that Indonesia’s current account deficit will decline to below the three percent of gross domestic product (GDP) mark by the end of this year supported by sharply falling global oil prices and Indonesia’s recent subsidized fuel price hike. Hendar, Deputy Governor of the central bank, said that for every USD $1 decline in global oil prices, the country’s current account deficit narrows by about USD $170 million. Indonesia’s current account deficit fell to 3.1 percent of GDP in Q3-2014 (from 4.06 percent of GDP in Q2-2014).

Read more ›

The Governor of Indonesia’s central bank, Agus Martowardojo, said that he expects inflation to accelerate to 6.1 percent year-on-year (y/y) in November 2014, significantly up from 4.83 percent y/y in the previous month. Accelerated inflation is caused by the multiplier effect triggered by the recent subsidized fuel price hike in Southeast Asia’s largest economy. On 18 November 2014, the government introduced higher prices for subsidized fuels in a bid to reallocate public spending from fuel consumption to structural development.

Read more ›

The Indonesian rupiah exchange rate depreciated 0.09 percent to IDR 12,164 per US dollar on Tuesday (25/11) according to the Bloomberg Dollar Index. The performance is caused by local companies’ month-end US dollar demand as well as US dollar buying by Indonesia’s central bank. Although unconfirmed, it is speculated that the central bank is boosting its foreign exchange reserves ahead of a looming external shock triggered by higher US interest rates in the second or third quarter of 2015.

Read more ›

Total foreign outstanding debt of Indonesia continues to grow at a robust pace. Based on data from the country’s central bank, total external debt rose 11.2 percent year-on-year to USD $292 billion at the end of September 2014 as private Indonesian companies have been eager to seek lower interest rates abroad. Privately-held foreign debt was up 14 percent y/y to USD $159.3 billion at end-September. Central Bank official Tirta Segara said that private sector debt is concentrated in the financial, manufacturing and mining sectors.

Read more ›

Non-bank corporations in Indonesia that hold external (foreign-denominated) debt will be forced to hedge their foreign exchange holdings against the Indonesian rupiah with a ratio of 20 percent in the period 1 January 2015 to 31 December 2015 in an effort to limit risks stemming from increased private sector external debt. At end-August 2014, privately-held foreign debt stood at USD $156.2 billion (53.8 percent of the country’s total external debt), increasing three-fold from end-2005 and thus jeopardizing macroeconomic stability.

Read more ›

The wide current account deficit of Indonesia is expected to have eased in the third quarter of 2014. According to information from the country’s central bank, the current account deficit narrowed to 3.1 percent of gross domestic product (GDP) in Q3-2014 from 4.27 percent of GDP in the previous quarter. A deficit below the level of 3 percent of GDP is generally regarded as a sustainable level. The improvement in Q3-2014 is mainly due to resumed mineral exports after the government and several miners managed to finalize renegotiations.

Read more ›

Bank Indonesia decided to hold the key interest rate (BI rate) at 7.50 percent in October, with the Lending Facility and Deposit Facility rates kept at 7.50 percent and 5.75 percent, respectively. This level is expected to help control inflation at 4.5±1 percent in 2014 and 4.0±1 percent in 2015, as well as to reduce the current account deficit to a more sustainable level. Despite stable domestic conditions, Bank Indonesia sees risks: contagion risk stemming from US monetary tightening and possible higher subsidized fuel prices.

Read more ›

Bank Indonesia Governor Agus Martowardojo said that although the recent weakening trend of the Indonesian rupiah exchange rate is in line with the performance of other Asian currencies, the central bank is prepared to intervene in the market in an effort to support the currency and keep it in a comfortable range. On Monday (06/10), Bank Indonesia Executive Director Tirta Segara already stated that foreign exchange intervention was conducted in September 2014 in order to stabilize the rupiah exchange rate.

Read more ›