The Standard Chartered Bank expects the economy of Indonesia to accelerate slightly in 2015 compared to this year’s estimated performance. The bank forecasts a growth pace of 5.2 percent year-on-year (y/y) next year, up from 5.1 percent (y/y) in 2014. Standard Chartered Bank economist Eric Sugandi recently said that the Indonesian economy will be affected by two factors: the great rotation (capital outflows from emerging markets ahead of US interest rate hikes) and growth disparity (slowing growth or recession in China and Japan).

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In its latest report entitled ‘Growth Hesitates in Developing Asia’ (which is a supplement to the ‘Asian Development Outlook 2014 Update’), the Asian Development Bank (ADB) slightly downgraded economic growth in developing Asia to 6.1 percent (y/y) in 2014 from its September estimate of 6.2 percent (y/y). Despite slowing momentum the ADB believes that current low oil prices constitute a great opportunity for Asian countries to conduct structural reforms as many of these countries are net oil importers.

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On 14 December 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as the central bank’s interest rate policy, an update on palm oil, the middle income trap, November car sales, the performance of the rupiah exchange rate, legal matters regarding mining, and more.

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Indonesia’s central bank decided to keep its benchmark interest rate (BI rate) at 7.75 percent at Thursday’s Board of Governors’ Meeting (11/12). The Lending Facility and Deposit Facility were kept at 8.00 percent and 5.75 percent, respectively. The central bank is convinced that the current interest rate levels are effective to combat short-term inflationary pressures (triggered by the implementation of higher subsidized fuel prices in mid-November) pushing it back to the target corridor of between 3 and 4 percent (y/y) in 2015.

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The central bank of Indonesia projects non-performing loans (NPL) to rise to 2.4 percent of the country’s total outstanding loans by the end of the year, significantly up from 1.8 percent at the end of last year. Despite the acceleration of bad loans in Indonesia, the institution stated that it is still manageable. Meanwhile, loan growth in Indonesia is estimated to slow to 11 or 12 percent (y/y) by the end of 2014 (the slowest pace since 2010), down from 21.4 percent (y/y) in 2013 primarily due to the central bank’s monetary tightening policy.

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On Monday (08/12) the World Bank released the December edition of its Indonesia Economic Quarterly, entitled ‘Delivering Chance’. In the report the World Bank cut its forecast for economic growth in Indonesia next year to 5.2 percent (y/y), from 5.6 percent (y/y) in the July edition of its flagship publication, due to weaker investment growth and sluggish exports. Indonesia’s GDP growth in 2014 is projected at 5.1 percent (y/y), slightly below the World Bank’s previous estimate of 5.2 percent.

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Main news headlines in Indonesia still cover the higher subsidized fuel prices implemented starting from the early hours of Tuesday (18/11). The previous evening, Indonesian President Joko Widodo had announced that prices of subsidized gasoline and diesel were to be raised by over 30 percent, immediately leading to long queues at local gas stations as well as public outcry as people’s purchasing power will diminish. Analysts and economists, however, agree that this move is correct and can lead to structurally higher GDP growth.

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Global rating agency Fitch Ratings affirmed Indonesia’s Sovereign Credit Rating at BBB-/stable outlook (investment grade status) on Thursday (13/11). This rating affirmation by the credit rating agency can be regarded as international recognition of prudent fiscal policy in Southeast Asia’s largest economy amid global uncertain times. Policy responses pursued by both the government and central bank of Indonesia have been well received by Fitch Ratings and managed to safeguard economic stability.

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The central bank of Indonesia (Bank Indonesia) announced today (after the Board of Governors’ meeting) that it keeps the benchmark interest rate (BI rate) at 7.50 percent. The lending facility rate and the deposit rate are maintained at 7.50 percent and 5.75 percent, respectively. Agus Martowardojo, Governor of Bank Indonesia, said that interest rates were maintained as the country’s current account deficit narrowed to 3.07 percent of gross domestic product (GDP) in the third quarter of 2014.

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The central bank of Indonesia is expected to keep its key interest rate (BI rate) at 7.50 percent at the next Board of Governors’ meeting (scheduled for Thursday 13 November 2014) in anticipation of accelerated inflation triggered by higher prices of subsidized fuels. The Indonesian government plans to raise prices of subsidized gasoline and diesel before the end of the month in an attempt to curb the country’s wide current account deficit and reallocate government funds to more structural or productive activities than fuel consumption.

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What came as a surprise to us is that the Asian Development Bank (ADB) decided to raise its projection for Indonesia’s economic growth in full 2022 from 5.0 percent year-on-year (y/y) to 5.2 percent (y/y) in July 2022. This decision was substantiated in its Asian Development Outlook 2022 Supplement entitled Recovery Faces Diverse Challenges.

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Despite the ongoing challenges (that mainly originate from abroad), there is reason to be optimistic about Indonesia’s economic growth in 2022 as the COVID-19 threat has eased.

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On 7 February 2022, Indonesia’s Statistical Agency (Badan Pusat Statistik, or BPS) announced the latest gross domestic product (GDP) data of Indonesia, covering the final quarter of 2021.

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In the first month of 2022, we detected some positive signs, both abroad and at home (in Indonesia) as there is growing evidence that the Omicron variant is encouraging strong herd immunity around the world, while not making too many people ill to the extent that they require hospitalization.

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There are reasons to be optimistic about Indonesia’s economic activity in the fourth quarter of 2021. Obviously, the underlying reason being that new confirmed COVID-19 infections have not been far from zero in Indonesia throughout the final quarter of the year. As a consequence, the government of Indonesia did not need to impose tough restrictions, hence economic activity is allowed to blossom.

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The economic rebound in the second quarter of 2021 – with a +7.07 percent year-on-year (y/y) growth pace – was great for Indonesia, albeit it is obviously related to the ‘low base effect’ (as Indonesia had hit its rock bottom in the same quarter one year earlier). But what about the future, or more precisely: Q3-2021?

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August is always a cause for celebrations in Indonesia as the country commemorates its independence from the colonial Dutch regime every 17 August. This year, it was the 76th year Indonesians celebrated their Independence Day. Obviously, Indonesia Investments sends the warmest wishes for the country's continued prosperity and success to all Indonesians!

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As we have discussed in earlier reports and articles, the tourism industry is among the heaviest affected industries amid the COVID-19 crisis. Travel restrictions (such as mandatory COVID-19 tests and vaccines) and in some cases full travel bans set by governments across the world are discouraging people from traveling.

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It feels as if the world is, again, at a turning point. While there is a wide range of data that indicate improving economic conditions (both in Indonesia and the world as a whole), there also emerged room for concern.

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Right at the very start of July 2021, Indonesian President Joko Widodo announced ‘emergency measures’ (in Indonesian called Pemberlakukan Pembatasan Kegiatan Masyarakat Darurat, or PPKM Darurat, which roughly translates to the Enforcement of Restrictions on Activities in Society) in a renewed effort to combat the COVID-19 pandemic in Indonesia.

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