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.

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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?

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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.

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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.

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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.

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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.

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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.

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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).

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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).

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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.

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On Wednesday 5 February 2014, Statistics Indonesia (BPS, a non-departmental government institute) is expected to release Indonesia's official GDP growth figure for the year 2013. It is estimated that the outcome will be the lowest GDP growth figure since 2009 when Southeast Asia's largest economy grew 4.6 percent after feeling the impact of the global financial crisis. In 2013, again, Indonesia felt the negative influence of external troubles. And in combination with domestic factors, Indonesia's economic growth is expected to be around 5.7 percent in 2013.

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The Jakarta Globe reported that Schroders Indonesia will increase its Indonesian assets by 5 to 10 percent in 2014 as the company expects the country's benchmark stock index (IHSG) to rise amid the legislative and presidential elections that are scheduled for April and July 2014. Schroders is optimistic that growth in Southeast Asia's largest economy will accelerate after the hiccup in 2013 when large capital outflows emerged amid international and domestic troubles. Indonesia's GDP growth is estimated to have slowed to 5.7 percent in 2013.

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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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