Finance minister Chatib Basri said that the Indonesian government should revise its outlook for GDP growth in 2014 from 6.4% (mentioned in the 2014 State Budget) to about 6.0%. A more realistic outlook, which is in line with the current global and domestic financial context, is needed. Global uncertainty due to the possible ending of the Federal Reserve's quantitative easing program has resulted in capital outflows from emerging markets, including Indonesia. Various countries, developed and emerging ones, have lowered outlooks for 2014 GDP growth.

Read more ›

Business players in Indonesia's property sector are not happy with the government's intention to collect more tax from the sector in 2014 and onwards. The property sector has been one of the fastest growing sectors in Indonesia's economy in recent years as demand for property has surged significantly among Indonesia's expanding middle class, resulting in massive profit numbers for Indonesian property companies. Meanwhile, the government of Indonesia has been busy taking efforts to increase tax revenues.

Read more ›

The macroeconomic assumptions that have been formulated in the 2014 State Budget Draft by the government of Indonesia are not considered too realistic by several analysts. Although it is understood that one should set a high standard in order to maximize efforts, analysts feel that - given the current problematic economic context in Asian emerging economies as well as global economic turmoil - the government is far too optimistic, particularly because the government will have to devote part of its attention to the elections in mid-2014.

Read more ›

According to a Bank Indonesia report that was released on Monday (19/08), consumer confidence in Indonesia has weakened after the government decided to raise prices of subsidized fuels in June 2013. The country's consumer confidence index fell 8.7 points to 108¹ in July from 117 points in June. Higher fuel prices led to higher transportation costs that subsequently made many retailers increase prices of products, thus impacting on Indonesian households' purchasing power. In July, the annual inflation rate accelerated to 8.61 percent.

Read more ›

Indonesian stocks took a large dive on today's trading day (19/08) at the Indonesia Stock Exchange. The IHSG (the index of all listed stocks) fell 5.58 percent to 4,313.52 points as negative market sentiments caused foreign investors to pull money out of the Indonesian market. Investors are highly concerned about a number of macroeconomic data that have been released recently. These data indicated the slowest economic growth since Q3-2010, inflation at a four-year high and a widening trade deficit.

Read more ›

President of Indonesia, Susilo Bambang Yudhoyono, mentioned in his speech ahead of the Independence Day that Indonesia's per capita GDP is expected to rise to USD $5,000 by 2014. An increasing per capita GDP triggers domestic consumption among Indonesia's rapidly expanding middle class segment and thus forms a catalyst for economic activity in the country. As can be seen in the table below, Indonesia's per capita GDP grew steadily between 2006 and 2012. In 2010, it hit the important level of USD $3,000.

Read more ›

Indonesia's central bank, Bank Indonesia, decided today (15/08) to keep its benchmark interest rate (BI rate) at 6.50 percent. In recent days, heavy speculation emerged about whether Bank Indonesia would raise the BI rate for the third consecutive time in three months as the country is plagued by higher inflation (8.61 percent year-on-year in July 2013) and a weakening rupiah. Reluctance to raise the interest rate again seems to indicate that the Bank gives priority to economic growth, which has slid to a three-year low at 5.81 percent in Q2-2013.

Read more ›

The economy of Indonesia continues to be dominated by the island of Java, Indonesia's most populous island with around 130 million people or 60 percent of Indonesia's total population. In the second quarter of 2013, Java contributed 58.15 percent to the nation's total economic growth. Far behind Java are Sumatra (23.90 percent) and Kalimantan (8.73 percent). Within Java, the Greater Jakarta area accounts for 16.50 percent of the country's total economic growth, followed by East Java (15.21 percent) and West Java (14.05 percent).

Read more ›

Although it was clear that Indonesia would see a high inflation rate in July 2013 as the impact of higher fuel prices would kick in, Indonesia's central bank (Bank Indonesia) was surprised to see the figure go up to 3.29 percent. Currently, Indonesia's annual inflation rate stands at 8.61 percent. Bank Indonesia's governor Agus Martowardojo said that this rate is far outside the central bank's target range and announced that the institution expects annual inflation to stay above 8%  throughout 2013, higher than its previous assumption of 7.8% at end-2013.

Read more ›

Today (02/08), Indonesia's bureau for statistics announced that economic growth of Indonesia in the second quarter of 2013 reached 5.81 percent (YoY), which is the lowest growth rate since Q3-2010 and also lower than most analysts as well as the Indonesian government expected. The GDP figure reflects Indonesia's cooling economy. For the fourth consecutive quarter, the rate has weakened as the country has been under pressure: high inflation, a widening trade deficit and a weakening rupiah.

Read more ›

In a World Bank blog, World Bank economist Alex Sienaert posted an update on the economy of Indonesia. After Statistics Indonesia (BPS) released the country’s latest GDP growth figures in early February, two important revisions regarding Indonesia’s GDP statistics have been made: (1) BPS has shifted the basis of the computation from the year 2000 to 2010, and (2) it adopted a significantly updated methodology and presentation of the statistics (updating national accounts from the 1993 System of National Accounts [SNA] to SNA 2008).

Read more ›

Although Indonesia’s economic growth slowed further in 2014, there is optimism that growth will accelerate in 2015 despite sluggish global economic conditions (curbing Indonesia’s export performance) and Bank Indonesia’s relatively high interest rate environment. Indonesia’s central bank has raised its BI rate several times over the past one and a half years in an effort to combat high inflation (caused by fuel price hikes), curb capital outflows ahead of US monetary tightening, limit the current account deficit and support the rupiah.

Read more ›

The Indonesian rupiah exchange rate appreciated and Indonesian stocks rose on Wednesday (04/02) on the back of rallying oil prices, a successful bond auction, easing tensions in Europe, and weak US factory orders. Based on the Bloomberg Dollar Index, Indonesia’s rupiah appreciated 0.21 percent to IDR 12,630 per US dollar on Wednesday (04/03). Meanwhile, the benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) climbed 0.45 percent to 5,315.28 points.

Read more ›

In his presentation at the Indonesia Investment Summit 2015, organized in Jakarta on 15-16 January, Standard Chartered Bank Senior Economist Fauzi Ichsan said that despite the challenges amid global uncertain times, there remains plenty room and opportunity for Indonesia to grow robustly on the long-term. In fact, by 2030 Ichsan believes that Indonesia will be among the world's top ten countries in terms of largest economies. For investors it is important to understand the challenges and key pillars of economic growth.

Read more ›

At the Indonesia Investment Summit 2015, organized in Jakarta on 15-16 January 2015, Bank Indonesia official Arief Mahmud presented several views of the central bank on the current Indonesian economy and the global and domestic challenges that it faces. As is widely known, Indonesia has been experiencing a process of slowing economic growth since 2011 due to sluggish global economic growth in combination with the rebalancing of the domestic economy. However, growth is expected to accelerate in 2015.

Read more ›

Takehiko Nakao, President of the Asian Development Bank (ADB), estimates that the Indonesian economy will grow 5.6 percent year-on-year (y/y) in 2015, lower than the target that has been set by the Indonesian government in the 2015 State Budget (5.8 percent y/y). Nakao is slightly less optimistic as he expects a slowdown in government spending this year. On a positive note, Nakao’s forecast implies a sharp improvement in Indonesia’s economic growth in 2015 from an estimated 5.1 percentage point (y/y) GDP growth in 2014.

Read more ›

The latest survey of Indonesia’s central bank indicates that consumer confidence fell in December 2014. The central bank’s Consumer Confidence Index fell 3.6 points to 116.5 in the last month of 2014 (a score above 100 signals optimism among consumers) due to the impact of higher subsidized fuel prices implemented in November 2014. This move triggered higher prices of products and services. The central bank’s Consumer Confidence Index is based on interviews with 4,600 households in 18 Indonesian cities.

Read more ›

A team of the International Monetary Fund (IMF), led by David Cowen (advisor at the IMF’s Asia and Pacific Department), visited several Indonesian cities in the first three weeks of December 2014 to conduct research on the economic fundamentals of Southeast Asia’s largest economy. This research included the study of recent macroeconomic developments as well as the formulation of prognosis scenarios for the short and middle term. The IMF team held discussions with the government, Bank Indonesia, private entrepreneurs and scholars.

Read more ›

In order to avoid the middle-income trap and join the ranks of the high income countries by 2030 (reaching a per capita income level of at least USD $12,500), Indonesia needs to raise economic growth beyond the 7 percent year-on-year (y/y) level. If the current gross domestic product (GDP) growth rate is maintained (between 5 and 6 percent y/y) then it will take another decade to break from the middle income trap and become a high income country. However, GDP growth in 2014 is projected at a bleak 5.2 percent (y/y).

Read more ›

Growth of the manufacturing industry in Indonesia is expected to be significantly weaker in 2015 than initially forecast. Indonesia’s Industry Ministry cut its 2015 forecast for expansion of the country’s manufacturing industry to 6.1 percent (year-on-year) from the previous estimate of 6.8 percent. In tandem with slowing economic growth in Southeast Asia’s largest economy, manufacturing growth has slowed to 4.99 percent (y/y) in Q3-2014. Moreover, the HSBC/Markit PMI contracted to a record low of 48.0 in November 2014.

Read more ›