Opinions about the growth prospects of Indonesia's property sector in 2014 have turned rather negative amid the country's slowing economic expansion, tighter monetary policy (mortgage restrictions and higher down payment rules), the depreciating rupiah and uncertainties about the country's legislative and presidential elections in mid-2014. In 2012 and the first half of 2013, Indonesia's property sector had been investors' darling showing spectacular growth amid a booming economy, high housing demand and a low interest environment.

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After experiencing slowing growth in recent months, Indonesian cement sales in October 2013 increased 7.9 percent (year-on-year) to 5.58 million metric tons according to data from the Indonesia Cement Association (ASI). As such, cement sales rebounded from the 5.3 percent growth (yoy) in the previous month. The October growth rate was mainly caused by increased cement demand from islands other than Java. In particular, demand from Sumatra rose significantly. Indonesia's second most populous island bought 1.15 million tons of cement.

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Fitch Ratings, one of the three major global rating agencies, affirmed Indonesia's sovereign credit rating at BBB- with a stable outlook. In a press release, the rating agency mentioned four key factors that led to the affirmation of the sovereign rating. These are: good policy management by Indonesia's central bank (Bank Indonesia) and government amid external pressures, relatively high economic growth, prudent fiscal management (resulting in low public debt), and a strong banking sector (confirmed by multiple stress tests).

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Agus Martowardojo, Governor of Indonesia's central bank, expects the Indonesian economy to consolidate in 2014. The country is currently experiencing an economic correction with GDP growth slowing to 5.62 percent in the third quarter of 2013. Martowardojo said that the current account deficit still needs time to reach a healthy level. Indonesia's current account deficit stood at USD $8.4 billion (equivalent to 3.8 percent of the country's GDP) in the third quarter of 2013, down from USD $9.8 billion (4.4 percent of GDP) in the second quarter.

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Agus Martowardojo, Governor of Indonesia's central bank (Bank Indonesia), stated that the country's economy is expected to grow 5.7 percent in 2013. Bank Indonesia believes GDP growth in the fourth quarter of 2013 to fall below the growth figure realized in Q3-2013 (5.62 percent). Martowardojo said that the government needs to continue measures to improve the country's exports, while trying to curtail imports of oil and gas as domestic demand for fuels remained high, even after the increase in prices of subsidized fuels in June 2013.

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Indonesia's unemployment rate rose slightly in August 2013 from the same month last year. The country's open unemployment rate rose from 6.14 percent to 6.25 percent (of the total labour force). In absolute numbers this translates to 7.4 million jobless Indonesians. Head of Statistics Indonesia, Suryamin, said that Indonesia's slowing economic growth was the main reason for the rise in unemployment, while the supply of human resources increased. In the third quarter of 2013, Indonesia's GDP growth fell to 5.62 percent (yoy).

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The Indonesian government is in the process of revising the country's Negative Investment List (the list that states which sectors of the economy are closed to foreign investment). Head of the Indonesia Investment Coordinating Board (BKPM), Mahendra Siregar, said that a number of (sub) sectors, previously closed to foreign investment, will be opened up this year. These sectors include telecommunication, financial institutions, pharmaceuticals, tourism, airport and seaport transportation services and management, healthcare, and advertising.

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Today (06/11), Statistics Indonesia announced that Indonesia's gross domestic product (GDP) expanded 5.62 percent in the third quarter of 2013 from the same period in 2012. The result implies the continuation of Indonesia's slowing economic growth as Q3-2013 constitutes the fifth consecutive quarter in which the country recorded slowing economic growth. Previously, the government had already expressed its concern about the GDP growth figure in Q3-2013 because the current high inflation rate curbs household consumption.

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Perry Warjiyo, Deputy Governor of Indonesia's Central Bank (Bank Indonesia), expects that the inflation rate in October 2013 will fall below 0.26 percent (which is the average October inflation rate since 2007). Warjiyo said that a survey of Bank Indonesia indicated that up to the third week of October, inflation had only reached 0.06 percent. Low inflation - or preferably deflation - is needed to curb Indonesia's current high inflation rate. In September 2013, annual inflation was recorded at 8.40 percent.

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Moody's Investors Service, one of the big credit rating agencies, stated in its 'Credit Analysis: Indonesia' report that - despite the ongoing current account deficit (which is considered to be structural) and a relatively shallow and volatile domestic capital market (which contributes to Indonesia’s reliance on external funding) - the agency is positive about Indonesia's outlook due to its growth prospects, narrow fiscal deficits and low public debt. Indonesian government bonds are rated at Baa3, which is Moody's lowest investment-grade status.

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The central bank of Indonesia (Bank Indonesia) is expected to keep its benchmark interest rate (BI rate) relatively high in order to safeguard Indonesia's financial stability in 2016 (instead of seeking accelerated economic growth through a rate cut). Despite easing pressures on inflation and the country's current account balance, Bank Indonesia Governor Agus Martowardojo said that persistent global uncertainty (referring to the looming US Fed Fund Rate hike and China's slowdown) justifies the tight monetary stance.

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Indonesian car sales may rise up to ten percent (y/y) to 1.1 million vehicles in 2016, from an estimated 1 million this year, amid accelerating economic growth in Indonesia. Car sales in 2015 have been disappointing, declining 18 percent (y/y) to 853,008 units in the first ten months of 2015, due to people's weakening purchasing power. Sales in 2016 are expected to be boosted by sales of the low-cost green car (LCGC), which was introduced on the Indonesian market in late-2013, and the crossover utility vehicle, a car that has gained popularity recently.

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Global credit rating agency Fitch Ratings affirmed Indonesia's sovereign credit rating at BBB- (investment grade) with a stable outlook. The country's long-term foreign and local currency issuer default rating, the senior unsecured foreign and local currency bonds, and Islamic certificates (sukuk) were all affirmed at BBB-. Meanwhile, the short-term foreign currency IDR was affirmed at 'F3', the country ceiling at BBB, and the outlook on the long-term IDRs are stable. Through the affirmation Fitch acknowledges Indonesia's ongoing commitment to structural reforms amid recent economic woes.

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Indonesian assets weakened on Friday (06/11) on expectation that US non-farm payrolls and US employment data would improve, suggesting that a Fed Fund Rate hike may occur in December 2015. Such expectations were correct. After Indonesian and other Asian markets had closed on Friday, the US Labor Department announced that October payrolls rose 271,000 (the largest increase this year), while the US unemployment rate touched a seven-year low at 5 percent. Furthermore, the average hourly earnings over the past 12 months climbed by the most since 2009.

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Indonesia's economic performance in the third quarter of 2015 was a bit disappointing as the 4.73 percent year-on-year (y/y) growth pace in Q3-2015 was slightly below market expectations at 4.8 percent (y/y). On a positive note, however, Indonesia's gross domestic product (GDP) growth accelerated from the six-year low of 4.67 percent (y/y) in the preceding quarter. A look at the table below shows that Indonesia's third quarter GDP growth rarely outpaces growth in the second quarter. This is a hopeful sign indeed.

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Today (22/10), the World Bank released the October 2015 edition of its flagship Indonesia Economic Quarterly, titled "In Times of Global Volatility". In the report the World Bank states that despite current ongoing global uncertainties (caused by looming monetary tightening in the USA and China's economic slowdown), which make macroeconomic management difficult in the year ahead, pro-active government action could offset the negative impact and may help to boost growth.

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American financial services company Standard & Poor's warns that defaults by Indonesian companies are a serious threat over the next 18 months given their eroded balance sheets amid the country's current economic slowdown. The warning came after Indonesian mobile phone retailer Trikomsel Oke announced plans to restructure about USD $155 million worth of debt as it may not be capable to meet obligations indefinitely.

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The government of Indonesia unveiled the last installment of a series of three stimulus packages on Wednesday (07/10). The first two installments had been unveiled last month. In general, these stimulus packages aim to boost economic growth of Indonesia (which has slowed to a six-year low) and restore investors' confidence in the Indonesian rupiah and stocks. When markets believed that the Federal Reserve would soon raise its key interest rate, Indonesia was plagued by severe capital outflows pushing the rupiah to a 17-year low.

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In the latest edition of its flagship publication, the World Economic Outlook (WEO), the International Monetary Fund (IMF) says it is concerned that sluggish global economic growth will persist in the foreseeable future particularly on the back of slowing growth in emerging markets (which account for the lion's share of global growth). The IMF's forecast for global growth in 2015 and 2016 was both cut by 0.2 percentage point to 3.1 percent (y/y) and 3.6 percent (y/y), respectively, from the July WEO Update. In 2014, the world economy grew 3.4 percent (y/y).

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The government of Indonesia unveiled the second installment of its September economic policy package on Tuesday (29/09). The package is introduced in an attempt to boost economic growth in Southeast Asia’s largest economy and defend the ailing rupiah. Indonesia’s GDP growth slowed to a six-year low of 4.67 percent (y/y) in Q2-2015, while the rupiah has depreciated to a 17-year low against the US dollar. Capital outflows from Indonesia are the result of monetary tightening in the USA, low commodity prices and sluggish global economic growth (particularly China’s hard landing).

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