Indonesian Finance Minister Sri Mulyani Indrawati believes economic growth of Indonesia in 2017 can exceed the target that was set by the central government in the state budget. While the official target in the 2017 State Budget was set at 5.1 percent year-on-year (y/y), Sri Mulyani expects to see the growth rate at 5.2 percent (y/y) on the back of rising consumption and investment, while she predicts an end to the trend of falling imports and exports.

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Indonesian banks are expected to be cautious boosting credit disbursement in the next couple of quarters because the non-performing loan (NPL) ratio is currently high with the gross NPL ratio hovering above 3 percent since mid-2016, approximately the same level as it was in 2011 when Indonesia's five-year economic slowdown commenced. Although various external and internal matters were to blame for Indonesia's 2011-2015 economic slowdown, the high NPL ratio today can undermine economic acceleration as credit growth is curbed.

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The Asian Development Bank (ADB) kept its forecasts for economic growth in Indonesia at 5.1 percent (y/y) in 2017 and 5.3 percent (y/y) in 2018, implying it expects the trend of accelerating economic growth in Southeast Asia's largest economy to continue. The Manila-based institution mentions improvement in private investment and trade (namely expectation of rising exports) as main sources for growth of Indonesia's gross domestic product (GDP) in the years ahead.

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Colliers International Indonesia, a leading commercial real estate consultancy, expects to see an improvement in the residential property sector of Indonesia in 2017, particularly in the capital city of Jakarta, after this sector experienced two weak years previously. In terms of sales and price increases, apartments are most the promising property object this year according to analysts.

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According to the World Bank the economy of Indonesia will continue to accelerate in 2017 supported by strengthening global economic growth, overall rising commodity prices (meaning investment and export performance should improve), the nation's low current account deficit, low inflation, and strong fundamentals of the Indonesian economy. These circumstances should boost Indonesia's gross domestic product (GDP) growth to 5.2 percent year-on-year (y/y) in 2017 (from 5.0 percent in the preceding year).

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The central bank of Indonesia cut its outlook for Indonesia's economic growth in the first quarter of 2017. Earlier, the lender of last resort estimated Indonesia's Q1-2017 gross domestic product (GDP) at 5.05 percent year-on-year (y/y). Although the new growth projection has not been unveiled yet, Bank Indonesia Governor Agus Martowardojo said it sees GDP growth now below 5.05 percent (y/y) in the first quarter of the year.

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Passenger car sales in Indonesia are estimated to rise 11.5 percent per year in the 2017-2021 period supported by Indonesia's expanding middle class. This conclusion originates from research that was conducted by London-based BMI Research. Meanwhile, business consulting firm Frost and Sullivan sees Indonesian car sales rise 5 percent (y/y) to 1.11 million vehicles in 2017 supported by the popular low cost green cars and multipurpose vehicles.

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In 2016 Indonesia was the third-largest Asian country in terms of modern retail sales growth after India and China. Last year Indonesia's modern retail sales expanded 10 percent to IDR 200 trillion (approx. USD $15 billion). Roy Nicholas Mandey, Chairman of the Indonesian Retailers Association (Aprindo), said Indonesia remains an attractive country for retailers due to the enormous size of the population. Moreover, due to economic growth this population constitutes a strengthening consumer force. Lastly, Indonesians are known as people who are eager to try and buy new products.

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There is concern about Indonesia's tax buoyancy. Tax buoyancy is the indicator that measures efficiency and responsiveness of revenue mobilization in response to growth in gross domestic product (GDP) or national income. While, Indonesia's GDP accelerated 5.02 percent (y/y) in 2016, the country's tax revenue realization only rose 4.2 percent (y/y) to IDR 1,104.9 trillion (approx. USD $83.1 billion). Since 2011 (when commodity prices plunged heavily) tax buoyancy has been weakening in Indonesia.

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Investment in Indonesia is expected to rise in 2017. This covers both direct investment and portfolio investment. Domestic direct investment (DDI) should grow on the back of Indonesia's low interest rate environment (making it cheaper for domestic investors to purchase credit) as well as higher capital injections (from the state budget) into Indonesia's state-owned enterprises. Meanwhile, foreign direct investment (FDI) is expected to rise on the back of Indonesia's accelerating economic growth and government reforms. Both FDI and DDI should also rise amid rising commodity prices.

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The Standard Chartered Bank expects Indonesia's economy to expand 5.8 percent in 2014, followed by a 6 percentage growth in 2015 as an improving global economy has a positive effect on emerging economies, including Indonesia. The world economy is estimated to grow between 3.2 and 3.5 percent this year and expected to accelerate to 3.8 percent in 2015. David Mann, the regional Head of Research at the Standard Chartered Bank in Asia, said that Indonesia's economic performance in 2013 was negatively influenced by external factors.

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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 December 2013 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the current account deficit, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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Over a decade ago, economist Jim O'Neill became famous for the introduction of the term BRIC (indicating the promising economic perspectives of Brazil, Russia, India and China). Now the BRICs have lost some of its significance, he has turned to a new acronym: MINT. These MINT countries - consisting of Mexico, Indonesia, Nigeria and Turkey - share a number of features that make them potential giant economies in the future: promising demographic structure, strategic geographical location, and commodity-rich soil.

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On Thursday 12 December 2013, Indonesia's central bank (Bank Indonesia) announced that the country's benchmark interest rate (BI rate) remains unchanged at the level of 7.50 percent in December 2013. This announcement was a bit surprizing as about 80 percent of analysts expected Bank Indonesia to raise the BI rate in order to support the depreciating Indonesia rupiah exchange rate. Starting the year at IDR 9,670 per US dollar, the rupiah has fallen around 25 percent to IDR 12,081 per US dollar.

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The central bank of Indonesia (Bank Indonesia) estimates that Indonesia's current account deficit will ease to 3.5 percent of the country's gross domestic product (GDP) by the end of 2013. Indonesia's wide current account deficit has been one of the major financial troubles this year and managed to weaken investors' confidence in Southeast Asia's largest economy. Thus, Indonesia became one of the hardest hit emerging countries after the Federal Reserve started to speculate about an ending to its quantitative easing program.

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In Bank Indonesia's board of governors' meeting, which was held on Thursday (12/12), it was decided to maintain the country's benchmark interest rate (BI rate) at 7.50 percent. This decision was in line with market expectation but was unable to support the Jakarta Composite Index and rupiah exchange rate. The lending facility and deposit facility interest rates were also maintained at 7.50 percent and 5.75 percent respectively. Bank Indonesia decided not to change the rate as Indonesia's inflation outlook for 2014 is still within target.

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Rudi Wahyono, Executive Director of the Indonesian Center for Information and Development Studies (Cides), believes that Indonesia's economic expansion in 2014 will be divided in two stages: before and after the legislative and presidential elections. Before the 2014 elections, Wahyono expects that economic growth will be slightly lower at 5.7 percent compared to the period after the elections when growth is expected to hit 6 percent. Growth in the first half of 2014 will be less strong as investors are waiting for the election results.

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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 November 2013 edition, a number of important issues that are monitored include Indonesia's inflation rate, the trade balance, the current account deficit, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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Currently, one of Indonesia's main financial issues (and one which puts serious pressures on the Indonesian rupiah exchange rate) is the country's wide current account deficit. According to data from Statistics Indonesia, Indonesia's current account deficit totaled USD $8.4 billion in the third quarter of 2013. This figure is equivalent to a whopping 3.8 percent of Indonesia's gross domestic product (GDP). Generally, a current account deficit that exceeds 2.5 percent of GDP is considered unsustainable.

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With having more than 10,000 islands, Indonesia offers an unique natural scenery. The country contains all sorts of attractive options for tourism, including seas, beaches, mountains and much more. Not surprisingly, tourist arrivals in Indonesia continue to grow. Based on data from Statistics Indonesia (BPS), released in early November 2013, the number of foreign tourist arrivals between January and September 2013 reached 6.41 million, an increase of 8.8 percent from the same period last year.

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