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Albeit still at an admirable level, Indonesia’s economic growth rate fell slightly short of expectations in the third quarter of 2024 (Q3-2024). Based on the data released by Indonesia’s Statistical Agency (Badan Pusat Statistik, BPS) on 5 November 2024, Indonesia’s gross domestic product (GDP) grew by 4.95 percent year-on-year (y/y) in Q3-2024.
On Tuesday 5 November 2024 Indonesia Investments released the October 2024 edition of its monthly report, titled: "Eight President of Indonesia Enters Office – the Transition in Focus". It presents analyses of political, economic and social matters that were relevant in Indonesian society in October 2024.
The middle class plays an important role in the economic development of Indonesia. Typically, nations with large middles class grow faster for a combination of reasons. And so, if Indonesia wants to achieve its ambition of becoming a developed country by 2045, then a significant percentage of its population (preferably over 70 percent) needs to join the middle class in the next two decades.
On Friday 4 October 2024 Indonesia Investments released the September 2024 edition of its monthly report. The report discusses a range of economic, political and social topics to assess the state of the Indonesian economy.
In another article (available in this monthly report) we present a detailed analysis of Indonesia’s economic growth in Q2-2024 (which came in at 5.05 percent year-on-year), based on the gross domestic product data that were released by the Statistical Agency (Badan Pusat Statistik, BPS) in early August 2024.
On Friday 6 September 2024 Indonesia Investments released the August 2024 edition of its monthly report. This report discusses various economic, political and social topics that were relevant (to Indonesia) in the month of August 2024.
On Monday 5 August 2024 Indonesia Investments released the July 2024 edition of its monthly report. This report discusses various economic, political and social topics that were relevant (to Indonesia) in the month of July 2024.
In last month’s report we saw that Indonesia’s official economic growth rate was (in line with expectations) quite strong at 5.11 percent year-on-year (y/y) in Q1-2024. Moreover, last month we also saw that most of the macroeconomic data point at the continuation of strong growth in Q2-2024 (with the only major exception being the country’s car sales data that still showed deep red numbers).
On Friday 05 July 2024, Indonesia Investments released the June 2024 edition of its monthly report. The report zooms in on the latest economic, political and social developments that (potentially) impact on the investment environment of Indonesia.
On Tuesday 4 June 2024 Indonesia Investments released the May 2024 edition of its monthly report. The report discusses various topics -related to the economy, politics and social matters in Indonesia- that were relevant in the month of May 2024.
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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.
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.
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.
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.
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.
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.
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).
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).
In the latest update of its flagship publication Asian Development Outlook 2015, the Asian Development Bank (ADB) said softer economic growth prospects of China and India in combination with slow recovery in the major industrial markets were reason why the ADB has cut its economic growth forecast for developing Asia in 2015 and 2016. The ADB now estimates GDP growth in developing Asia at 5.8 percent (y/y) in 2015 and 6.0 percent (y/y) in 2016, down from previous GDP growth forecasts of 6.3 percent (y/y) for both years.
The central bank of Indonesia announced on Thursday (17/09) that it the country’s key interest rate (BI rate) at 7.50 percent, while maintaining the deposit facility rate at 5.50 percent and the lending facility rate at 8.00 percent. According to Bank Indonesia (BI) this decision is consistent with its efforts to push inflation towards the target corridor of 4±1 percent in both 2015 and 2016. In addition, the decision is also part of Bank Indonesia’s measures to anticipate possibilities of a Fed Fund Rate (FFR) hike.
