The weakening growth trend of the Chinese economy may not have ended yet. Despite the nation's gross domestic product (GDP) growth rebounding to 6.9 percent year-on-year (y/y) in 2017, its economy is expected to cool in 2018 as a government-led crackdown on debt risks and factory pollution drags on overall activity in the world's second-largest economy. This is a problem for Indonesia as well because China is Indonesia's biggest trading partner.

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The International Monetary Fund (IMF) released a new report about the Indonesian economy - released on 6 February 2018 - in which the Washington-based institution paints a positive picture of the prospects for economic growth in Indonesia. Indonesia's real GDP growth is projected to rise gradually to 5.6 percent year-on-year (y/y) over the medium term, led by robust domestic demand.

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The central bank of Indonesia (Bank Indonesia) stated on Thursday (28/12) that it expects to see Indonesia's economic growth at 5.05 percent year-on-year (y/y) in full-year 2017, up modestly from 5.02 percent (y/y) in the preceding year. Bank Indonesia Governor Agus Martowardojo said the Indonesian economy is recovering unevenly yet gradually.

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Like in most other nations across the world, Indonesia is also experiencing rapid urbanization. Currently, 56 percent of the Indonesian population lives in urban areas (at the start of the century - in 2000 - the figure was 42 percent). Although urbanization is - in theory - an engine of economic growth, Indonesia is not reaping the full benefits of urbanization.

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The World Bank released the December 2017 edition of its flagship publication "Indonesia Economic Quarterly" on Thursday (14/12). This latest edition, which is titled "Decentralization that delivers", paints a positive picture about Indonesia's economic growth and financial system stability for the year 2018 and beyond.

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The International Monetary Fund (IMF) released several preliminary statements related to the latest visit of a IMF team, led by Luis E. Breuer, to Indonesia (the visit took place between 1 - 14 November 2017). Overall, the team sees the continuation of good economic growth in Indonesia, supported by prudent macroeconomic policies, improved global GDP growth and rising commodity prices, as well as sustained efforts to strengthen the nation's competitiveness.

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Although, overall, Indonesia's gross domestic product (GDP) growth in the third quarter of 2017 was slightly disappointing at a pace of 5.06 percent year-on-year (y/y), investment, export and government consumption all strengthened. Hence, the main reason why Indonesia's Q3-2017 GDP growth was below expectations is sliding growth of household consumption.

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Indonesia's Statistics Agency (BPS) announced today (06/11) that the nation's gross domestic product (GDP) grew 5.06 percent year-on-year (y/y) in the third quarter of 2017. Like in the preceding two quarters, this latest figure is (slightly) below analysts' estimates. On average, analysts had expected growth in the range of 5.10 - 5.20 percent (y/y) in Q3-2017.

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Indonesian Finance Minister Sri Mulyani is optimistic that Indonesia's economic growth in 2018 can exceed the government target of 5.4 percent year-on-year (y/y) as set in the 2018 State Budget, which was approved by Indonesian parliament last week. Her optimism is based on an expected pickup in investment and exports next year.

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Lana Soelistianingsih, economist at Samuel Aset Manajemen, said it will be very difficult for Indonesian authorities to achieve its 11.5 percent tax-to-GDP ratio target in 2017 despite the positive impact of the government's recently completed tax amnesty program.

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The central bank of Indonesia (Bank Indonesia) announced two important matters on Thursday (14/08). Firstly, the institution decided to maintain the benchmark interest rate (BI rate) at 7.50 percent, the overnight deposit facility rate (Fasbi) at 5.75 percent, and the lending facility rate at 7.50 percent. Secondly, it announced that Indonesia’s current account deficit widened to USD $9.1 billion, or, 4.27 percent of the country's gross domestic product (GDP) in the second quarter of 2014, a widening that is larger than initially forecast.

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Indonesia’s gross domestic product (GDP) growth in the first half of 2014 reached 5.17 percent (year-on-year), thus continuing the slowing growth trend that has been recorded by the country since 2011. Forecasts for GDP growth in the second half of 2014 indicate a slight improvement (to the range of 5.2 to 5.3 percent year-on-year) supported by strong household consumption, increased government spending and further growth of the trade and services sector. However, in recent quarters the official GDP figure has been lower than most forecasts.

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Weakening global stock indices meant that it would be difficult for the benchmark stock index of Indonesia (Jakarta Composite Index or IHSG) to continue its upward movement on Tuesday (05/08). Moreover, there were few positive sentiments originating from the Archipelago as Indonesia’s Q2-2014 GDP growth (+5.12 percent year-on-year) was below expectation and the country’s trade balance showed a deficit of USD $300 million in June 2014. Meanwhile, the Indonesian rupiah exchange appreciated slightly.

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Statistics Indonesia (BPS) announced on Tuesday (05/08) that Indonesia’s economy grew 5.12 percent in the second quarter of 2014 from the same quarter last year. This means that gross domestic product (GDP) growth of Indonesia has continued the slowing trend it has been experiencing since 2011. The 5.12 percentage point GDP growth in Q2-2014 is the slowest growth pace that has been recorded by Southeast Asia’s largest economy since the fourth quarter of 2009. What explains this slowing economic growth of Indonesia?

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When campaigning, presidential candidates will always promise a bright future in order to gain votes. It is particularly easy for a new presidential candidate to promise golden mountains as opposed to the incumbent president who needs to be more cautious making promises as people can point to the (failed) results of his promises during the presidential term. The 2014 Indonesian presidential election was particularly interesting as we saw two new presidential candidates and, thus, the ‘inflation of promises’.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the June 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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At Bank Indonesia’s Board of Governors’ meeting, convened today (10/07), it was decided to keep the country’s benchmark interest rate (BI rate) at 7.50 percent, and the Lending Facility and Deposit Facility rates held at 7.50 percent and 5.75 percent, respectively. According to the central bank this policy is consistent with efforts to steer inflation back towards the target corridor of 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.

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Although the Indonesian rupiah exchange rate appreciated 0.86 percent to IDR 11,995 per US dollar on Friday (27/06) as economic data from China, South Korea and Taiwan sparked optimism that regional growth has picked up, the recent depreciating trend of Indonesia’s currency burdens the country’s manufacturing industry. This industry is still dependent on imports of raw materials, capital goods and auxiliary materials, which are paid using US dollars causing the domestic industry to feel the financial impact of a weaker rupiah.

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Senior economist at the Institute for Development of Economics and Finance (INDEF), Didier Damanhuri, believes that Indonesia’s two presidential candidates - Joko Widodo (popularly known as Jokowi) and Prabowo Subianto - are both similar in economic approach as both men are primarily focused on high gross domestic product (GDP) growth as the measurement for economic development, while, in fact, many countries that only focus on GDP growth show a high degree of economic inequality.

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On Monday (23/06), the World Bank released its latest analysis regarding the Indonesian economy. In its report, titled ‘Indonesia: Avoiding the Trap’, the World Bank states that Indonesia needs to implement a six reforms in priority areas in order to avoid the so-called middle income trap (referring to the situation where a country gets stuck at a certain income level). Without these critical reforms, the country’s economic growth will slow and may not be able to escape the middle income trap.

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