On Wednesday (05/02), Indonesia's official gross domestic product (GDP) growth rate for 2013 was released. According to Statistics Indonesia, Indonesia's economy expanded 5.78 percent in 2013, thus slowing - for the third consecutive year - from the 6.2 percentage growth in 2012 and 6.5 percentage growth in 2011. All sectors of the Indonesian economy posted growth in 2013: highest was the transport and communications sector (+10.2 percent) and lowest was mining and extracting (+1.3 percent).

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On 2 February 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 an analysis of economic growth in 2013, a forecast for GDP growth in 2014, an update on floods in Jakarta, Gita Wirjawan's resignation as Trade Minister, and more.

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On 19 January 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 impact of international factors on Indonesia's financial stability, five newly listed companies, January 2014 inflation update, GDP growth forecast, widening inequality in Indonesia, and more.

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Forecasts for economic growth in Indonesia in 2014 are still optimistic. The government of Indonesia targets a 6 percent growth rate, while the country's central bank (Bank Indonesia) expects GDP growth in the range of 5.8 to 6.2 percent. Although these forecasts clearly fall short of the target set in the country's National Medium Term Development Plan (RPJMN) - which mentions annual GDP growth of between 6.3 and 6.8 percent - the forecasts are still rather positive given the global uncertain and volatile economic context in recent years.

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On 12 January 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 implementation of Mining Law No.4/ 2009, Bank Indonesia’s interest rate policy, the expected GDP growth result of 2013, growth of retail sales, newly added company profiles, and more. 

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Chatib Basri, the Finance Minister of Indonesia, expects Indonesia's economy to expand 5.6 percent in the fourth quarter of 2013. As such, total gross domestic product (GDP) growth of Southeast Asia's largest economy in 2013 will total between 5.6 to 5.7 percent in 2013. This result will imply that Indonesia's economic expansion in 2013 has slowed down for the second straight year, mainly due to global economic turmoil. In 2011 and 2012, the country's economy expanded by 6.5 percent and 6.2 percent respectively.

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Supported by legislative and presidential elections, car sales in Indonesia are expected to grow between five and ten percent to 1.30 million total vehicles in 2014. These elections are estimated to boost the domestic money flow due to increased economic activity in Southeast Asia's largest economy. Consumption goods such as cars and food & beverage products are expected to feel the impact of this development and may offset the negative impact brought on by the weak rupiah, high inflation and the high interest rate environment.

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The government of Indonesia announced on Tuesday (24/12) that increased levels of foreign direct investments will be allowed in the country’s airports, pharmaceutical industries, power plants, and toll roads. The revision of Indonesia's Negative Investment List (Daftar Negatif Investasi), the list which stipulates which sectors are closed (or partly closed) to foreign investment, is conducted in order to attract more foreign investments from abroad as a means to combat slowing economic growth in Southeast Asia's largest economy.

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On Sunday 22 December 2013, Indonesia Investments released its latest 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 during the last seven days on our website. Most of the topics involve economic matters such as a forecast of the performance of the Jakarta Composite Index, the government's fuel subsidy spending, crude palm oil exports, the initial public listing of Sido Muncul Herbal, and more.

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Deputy Trade Minister Bayu Krisnamurthi said that the Indonesian government is preparing two strategic steps to anticipate the negative impact of the winding down of the Federal Reserve's quantitative easing program. In January 2014, the Fed's bond-buying program will be reduced from USD $85 billion to USD $75 billion per month. The two strategic steps, which will enhance financial stability in Southeast Asia's largest economy, involve the curtailing of Indonesia's current account deficit and high inflation.

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Although Indonesia is one of the victims of the reversal of investment flows from emerging markets to developed markets, it is still far from a crisis. Global uncertainty regarding the possible ending of the Federal Reserve's monthly USD $85 billion bond-buying program (QE3) and, to a lesser extent, the possible invasion of the US in Syria have worried investors and resulted in the withdrawal of funds from emerging markets. Funds are flowing back to western developed countries that have recently been showing signs of continued economic recovery.

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Indonesia's current account deficit, which caused much alarm among the investor community, is expected to ease to about 2.5 percent of gross domestic product (GDP) in the second half of 2013. This assumption is supported by Indonesia's central bank and various analysts. The country's current account deficit reached USD $9.8 billion or 4.4 percent of GDP in Q2-2013. In combination with the weakening rupiah, higher inflation and the possible end to the Federal Reserve's quantitative easing program, investors have been pulling money out of Indonesia.

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As had been announced previously, today (23/08) the government of Indonesia released an 'emergency plan' that aims to improve the financial sector while restoring confidence in the country's fundamentals as turmoil emerged on Indonesia's stock exchange, bonds market and the rupiah. Economic minister Hatta Rajasa said that this plan consists of four packages. These four packages cover the current account deficit, rupiah performance, economic growth, purchasing power, inflation and investments.

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The government of Indonesia proposes to allocate IDR 336.24 trillion (USD $32.6 billion) for subsidy spending in the 2014 state budget draft: IDR 284.7 trillion (USD $27.6 billion) for energy subsidies and IDR 51.6 trillion (USD $5.0 billion) for non-energy subsidies. The proposed amount implies a 3.41 percent fall in total subsidy allocation compared to Indonesia's state budget in 2013. However, despite a reduction, subsidy expenditure is still large at 18.5 percent of total government spending (IDR 1,816.7 trillion).

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Analysts expect that Indonesia's benchmark stock index (IHSG) will end mixed today (20/08) after yesterday's large plunge amid heavy market concerns. Yesterday, the index dropped 5.58 percent to 4,313.52 points, the lowest since October 2011. Indonesia posted a current account deficit in the second quarter of 2013, while Thailand entered into a recession. The MSCI Emerging Market index¹, which includes both countries, fell 1.4 percent to a six-week low. Below a short overview of factors that caused negative sentiments on Indonesia's market.

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For several weeks now, Indonesia's main stock index (IHSG) has been experiencing a sharp correction. As I wrote in my previous columns, market participants have been waiting for several important macro economic data, to wit Indonesia's economic growth figure for the second quarter of 2013, the July 2013 inflation rate, and the country's trade balance statistics for the first six months of this year. Now all above results have been released, we can analyze further the impact of these macroeconomic results as well as investors' reaction to it.

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The government of Indonesia has the ambition to reduce Indonesia's unemployment rate to about 5.7 percent in 2014. This ambition was pronounced by Armida Alisjahbana, the minister of National Development Planning. According to the latest data released by Statistics Indonesia, the country's unemployment rate currently stands at 5.92 percent. The minister stressed that the unemployment target of 6 percent that was set in Indonesia's National Medium Term Development Plan to be reached in 2014, has already been achieved.

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The foreign exchange reserves of Indonesia keep on falling from its historical peak of USD $124.64 billion in August 2011 to USD $92.67 billion at the end of July 2013. This development seems to highlight long-standing weaknesses in Indonesia's sovereign's external finances, as credit agency Fitch Ratings detected on several occasions before. The republic of Indonesia is currently characterized by four deficits, to wit a current account deficit, a balance of payments deficit, a trade balance deficit and a fiscal deficit.

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Cement sales in Indonesia grew by seven percent to 32.9 million tons in the period January to July 2013. This pace of growth is significantly lower compared to the double-digit cement growth rate last year and thus forms another sign of cooling economic growth in Southeast Asia's largest economy (cement sales are a good indicator to measure the state of economic growth of a country). A slowdown in domestic cement sales is likely to continue in the second half of 2013, partly due to a decline in infrastructure projects.

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Although the holy fasting month of Ramadan and subsequent Idul Fitri celebrations always provide a boost for national economic growth in Indonesia as domestic consumption tends to peak, analysts believe that it will not contribute significantly to the government's 6.3 percent GDP growth target this year. During Ramadan and Idul Fitri (known as Lebaran), Indonesian consumers generally spend more on food products, clothes, shoes, tickets for transport and hotels than in other months, and thus lead to increased economic activity.

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