Indonesia again led losses among Asian stock markets on Friday (04/05). The benchmark Jakarta Composite Index fell 1.13 percent to close at 5,792.35 points, its lowest position since August 2017. Most stocks in the Asia-Pacific region were in the red zone today as investors lack risk appetite ahead of the release of US payrolls data (due later today). Analysts expect to see a strong figure. Meanwhile, US unemployment is also expected to have eased slightly.

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In its latest East Asia and Pacific Economic Update, the World Bank is optimistic about Indonesia's recent economic performance as well as its future prospects. The country's FY-2017 gross domestic product (GDP) expanded at the fastest pace in four years, led by stronger investment and net exports. Meanwhile, its current account deficit narrowed to a six-year low, while the central government's budget deficit reached the lowest since 2014, on the back of stronger global trade and strengthening commodity prices.

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The Asian Development Bank (ADB) stated in its Asian Development Outlook (ADO) report, which was released on Wednesday (11/04), that it expects the Indonesian economy to expand by 5.3 percent year-on-year (y/y) in 2018 and 2019 on the back of rising investment and an improvement in household consumption.

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Entering the second quarter of 2018 chief executive officers (CEOs) have become less optimistic about the Indonesian economy and politics. This should be no surprise considering there have emerged significant concerns about a looming global trade war (with the USA and China as main actors), while further monetary tightening in the USA has been putting pressure on the Indonesian rupiah.

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Despite (modestly) accelerating economic growth since 2016, concerns about Indonesia's gross domestic product (GDP) expansion persist. Indonesian Coordinating Minister for Economic Affairs Darmin Nasution said he expects Indonesia's economic growth to slow in the first quarter of 2018 (compared to Q1-2017) as the peak of the nation's big harvest is expected to occur in the second quarter this year (while last year it fell in the March/April period). Meanwhile, credit growth has remained bleak in Indonesia.

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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 government of Indonesia is busy preparing seven tax incentives to boost investment flows in 2014. Investments currently account for approximately 32 percent of the country's gross domestic product (GDP). Only domestic consumption owns a larger stake towards the economy with 55 percent. The regulatory framework related to the seven incentives is expected to be finalized by the end of this year. The incentives consist of five new ones and the relaxation of two older incentives, namely the tax holiday and tax allowance.

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Indonesia’s inflation rate in July 2013 was significantly higher than analysts had previously estimated. The country’s July inflation figure accelerated to 3.29 percent. On year-on-year basis, it now stands at 8.61 percent, the highest inflation rate since many years. Particularly food commodity and transportation prices rose steeply. The main reason for Indonesia's high inflation is the reduction in fuel subsidies. In late June, the government increased the prices of subsidized fuels in order to relieve the ballooning budget deficit.

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Indonesia's main stock index (IHSG) increased 3.98 points to close at 4,724.41 on the last trading day (19/07). During last week, the index rose a limited 1.97 percent amid the context of a weakening IDR rupiah (Indonesia's currency even fell below the psychological boundary of IDR 10,000 against the US dollar). The IHSG's performance last week was mainly supported by rising shares in the country's finance, property, construction and metal mining sectors, while the cement and plantation sectors were corrected.

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Although the main stock index of Indonesia (IHSG) ended on a positive note last Friday (05/07) by rising 0.46 percent to 4,602.81, foreign investors still sold a net IDR 262 billion (USD $26.5 million) worth of shares, while the value of transactions in the regular market was only IDR 3.17 trillion (USD $320.2 million). The rise of the IHSG at the end of last week was more due to support from Asian indices that were up after the European Central Bank and Bank of England kept interest rates at 0.5 percent.

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Realization of Indonesia's budget deficit in the first half of 2013 reached IDR 54.5 trillion (USD $5.5 billion) or 0.58 percent of the country's gross domestic product (GDP). The figure is still well below the target that is set in the revised state budget of 2013, namely IDR 224.2 trillion (USD $22.6 billion) or 2.38 percent of GDP. As a percentage of GDP, the outcome of the deficit in the first half of 2013 was lower than that in the first half of 2012. However, if we compare it with the years 2010 and 2011, the budget deficit in the first half of 2013 is high.

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Indonesia's central bank (Bank Indonesia) expects that economic growth of Indonesia in 2013 will not meet the government's target as has been set in the revised State Budget (APNB-P). Last month, both government and parliament of Indonesia agreed on a revised GDP growth assumption of 6.3 percent. However, Bank Indonesia believes that, due to slowing domestic consumption and investments in the current global economic context, the growth is more likely to fall between 5.8 and 6.2 percent.

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Weakening American and European stock indices on Tuesday (02/07), as investors mostly refrained from trading ahead of Wednesday when a number of important US economic data are released, caused negative market sentiments in Asia today (03/07). Moreover, the market responded negative towards the World Bank's July report in which the outlook for economic growth of Indonesia in 2013 was cut to 5.9 percent (from 6.2 percent). Lastly, a gap at 4,620 - 4,644 still needed to be closed.

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The World Bank has revised down its forecast for economic growth in Indonesia in 2013 to 5.9 percent from its original estimate of 6.2 percent. Similarly, the institution has altered its forecast for economic growth in 2014 from 6.5 percent to 6.2 percent. The revised figures were published in July's edition of the Indonesia Economic Quarterly (IEQ), titled 'Adjusting to Pressures'. The World Bank's forecast is also in sharp contrast with the GDP assumption of the Indonesian government, which puts economic growth in 2013 at 6.3 percent.

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Last week, Indonesia's main index (IHSG) rebounded 303 points to 4,818.90. After weeks of foreign outflows, Indonesia finally experienced capital inflows again during the last two days of the week. For example, on Friday (28/06) foreigners bought IDR 960 billion (USD $97.0 million) more Indonesian shares than they sold. However, considering the full week, foreigners still recorded net selling amounting to IDR 1.02 trillion (USD $103 million). Do these last couple of days tell us that the bearish market is over? Lets take a closer look.

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After several years of significant foreign capital inflows into Indonesia, a sharp contrast has been visible in recent weeks. Global panic that followed in the days after Ben Bernanke announced that the Federal Reserve intends to withdraw its quantitative easing program in 2014 (if economic recovery of the USA continues), hit Indonesia hard. It triggered a massive capital outflow from the country's stock exchange (IDX) as well as from government securities (Surat Berharga Negara, or SBN).

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