Indonesia's economic growth in the first quarter of 2016 could reach 5 percent (or more) year-on-year provided that the government manages to optimize spending on infrastructure projects and improve people's purchasing power. Large drops in domestic car and motorcycle sales so far this year show that Indonesia's purchasing power remains bleak. Other indicators - such as cement and retail sales - are also not too strong. Firmanzah, economist at the Paramadina University, said the 0.09 percent (m/m) deflation that occurred in February could be a sign of further weakening purchasing power.

Read more ›

The Indonesian rupiah continues to appreciate sharply. By 13:15 pm local Jakarta time on Friday (04/03), Indonesia's currency had appreciated 0.96 percent to IDR 13,105 per US dollar (Bloomberg Dollar Index), its strongest level since May 2015. Meanwhile, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.76 percent to IDR 13,159 per US dollar. What explains this strong performance of the rupiah?

Read more ›

Stakeholders in Indonesia's property sector may regret to learn that Indonesia's House of Representatives (DPR) decided to postpone deliberations on the tax amnesty bill until (at least) April 2016. This tax amnesty bill, originally planned to be implemented in early 2016, offers attractive tax rates to those tax evaders who declare untaxed wealth and repatriate their funds to Indonesia. If implemented in early 2016, then the bill was estimated to generate up to USD $4.4 billion in additional tax revenue in 2016. Meanwhile, part of repatriated funds would find their way into the nation's property sector.

Read more ›

Astra International reported a 25 percent year-on-year (y/y) decline in net profit to IDR 14.4 trillion (approx. USD $1.1 billion) over 2015. This is the company's lowest net profit figure in the past five years. Main reasons for this weak performance is falling domestic consumption in Indonesia and persistently sliding commodity prices. Astra International, an investment holding company, is among the largest diversified conglomerates in Indonesia and regarded the barometer of the Indonesian economy due to the group's presence in various sectors.

Read more ›

Indonesia's manufacturing industry was worth IDR 2,097.7 trillion (approx. USD $156 billion) in 2015, contributing 18.1 percent to the country's gross domestic product (GDP), up from 17.8 percent of GDP in the preceding year. However, this higher contribution of manufacturing to the economy is mainly caused by the declining roles of oil & gas, commodities, agriculture and mining within the Indonesian economy. These sectors have all seen their roles decline amid persistently low commodity prices.

Read more ›

Today, Bank Indonesia will start its February two-day policy meeting. Markets are eagerly awaiting whether the central bank of Indonesia will indeed cut its key interest rate (BI rate) again. Last month, it had cut the BI rate by 0.25 percent to 7.25 percent as inflation, the current account deficit and the rupiah rate were all under control. Although the rate cut was welcomed by the business community it was considered not enough to push borrowing costs lower in Southeast Asia's largest economy hence unable to boost economic activity significantly.

Read more ›

Indonesian stocks and the rupiah are having a great day on Friday (05/02). During the first trading session Indonesia's benchmark Jakarta Composite Index surged 2.33 percent to 4,774.68 points, while the Indonesian rupiah had appreciated 0.46 percent to IDR 13,577 per US dollar (Bloomberg Dollar Index) by 12:35 pm local Jakarta time. These positive developments are caused by the country's better-than-expected Q4-2015 GDP growth result. This morning it was announced that the Indonesian economy expanded 5.04 percent (y/y) in the fourth quarter of 2015.

Read more ›

On Friday morning (05/02) Statistics Indonesia (BPS) announced that Indonesia's economy expanded 5.04 percent year-on-year in the fourth quarter of 2015, slightly higher than most analysts had been expecting. Full-year 2015 gross domestic product (GDP) growth was 4.79 percent (y/y). Although this figure is in line with expectations (which ranged between 4.70 and 4.80 percent), the growth pace still constitutes a six-year low for Indonesia, Southeast Asia's largest economy. Meanwhile, BPS also announced it had revised Q3-2015 GDP up from 4.73 (y/y) to 4.74 (y/y).

Read more ›

The central bank of Indonesia (Bank Indonesia) reported that Indonesian consumers are becoming increasingly optimistic about economic prospects and their personal financial situation this year, evidenced by a 5.1 point rise in Bank Indonesia's Consumer Confidence Index to 112.6 points in January 2016. This index is based on a survey, involving 4,600 households in 18 cities across the archipelago (a reading above 100 indicates optimism, while a reading below 100 indicates pessimism).

Read more ›

As expected, credit growth in Indonesia slowed in 2015 amid the nation's overall economic slowdown. Loan growth was particularly affected by weaker demand for property and working capital loans. Indonesia's gross domestic product (GDP) growth in 2015 is estimated to have slowed to 4.7 percent year-on-year (y/y), the country's slowest growth pace since 2009. In its January policy meeting Bank Indonesia decided to cut its key interest rate by 25 basis points to 7.25 percent, a move that should encourage loan growth this year in Southeast Asia's largest economy.

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 ›

International credit rating agency Fitch Ratings maintained Indonesia’s sovereign rating at BBB-/stable outlook (investment grade). Baradita Katoppo, President Director of Indonesia’s Fitch Ratings branch, said that the firm is positive about the country’s financial fundamentals and prudent fiscal policy as the central bank has showed to prefer stability over growth, resulting in slowing credit growth and rising foreign exchange reserves in Southeast Asia’s largest economy. Economic growth is expected to fall to 5.1 percent (y/y) in 2014.

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 ›

Today (20/10), Central Jakarta seems to have changed into one big party as Joko Widodo was inaugurated as Indonesia’s seventh president earlier this morning. For the remainder of the day celebrations will be held at Monas (National Monument) and surrounding areas. However, it is of vital importance that Widodo (popularly known as Jokowi) will start to focus on this presidential duties tomorrow as the country is facing a number of economic challenges. What are these challenges?

Read more ›

Indonesian Finance Minister Chatib Basri said that the lower pace of economic growth in China, the world’s second-largest economy, is a major concern for Indonesia as it leads to declining demand for commodities (and thus places downward pressure on commodity prices). As Indonesia is a major commodity exporter - such as coal, crude palm oil, nickel ore and tin - the country feels the impact of weak global demand for commodities. About 60 percent of Indonesia’s exports are commodities, mostly raw ones.

Read more ›

The government of Indonesia agreed with the House Budget Committee to adjust the economic growth target of Southeast Asia’s largest economy in 2015 to 5.8 percent, 0.2 percentage point up from the initial growth target proposed by the government in the Financial Memorandum as well as the 2015 State Budget Draft (APBN). Still, the 5.8 percent gross domestic product (GDP) growth target constitutes the lowest growth target set in Indonesia’s state budget (excluding revised state budgets) since the year 2010.

Read more ›

The Indonesian government admits that it is difficult to achieve the 5.5 percent gross domestic product (GDP) growth target that was set in the Revised 2014 State Budget (APBN-P 2014). In fact, Deputy Finance Minister Bambang Brodjonegoro stated that Southeast Asia’s largest economy will have to work hard to reach +5.3 percentage point GDP growth this year. “We have to be realistic. Hopefully GDP growth will improve in the second half of 2014 to a level of 5.3 percent. The current forecast for GDP growth in 2014 is 5.2-5.3 percent,” he said.

Read more ›

Property stocks listed on the Indonesia Stock Exchange (IDX) have outperformed all other stocks between the first trading day of 2014 up to 29 August 2014. The IDX’ property sector category rose 37.6 percent in the indicated period, whereas the benchmark stock index (Jakarta Composite Index, abbreviated IHSG) - which involves all stocks traded on the IDX - climbed 18.7 percent over the same period. On the IDX, stocks are placed in ten sectoral categories. The second-best performing sectoral index was finance (+24.5 percent).

Read more ›