In the draft for the State Budget of 2014 (RAPBN 2014), the government of Indonesia projects economic growth of between 6.4 and 6.9 percent. Continued global recovery is expected to result in higher GDP growth compared to 2012 (6.23 percent) as it will result in better demand for Indonesian products, such as commodities. The main pillar of Indonesia's GDP growth - domestic consumption - is expected to grow due to the population's higher purchasing power and the upcoming legislative and presidential elections.

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Market capitalization of the Indonesia Stock Exchange (IDX) has surpassed its psychological boundary of IDR 5,000 trillion (USD $512.82 billion) last week, supported by the new record high level position of the Indonesia Stock Index (IHSG) on Friday at 5,145.68 points. Up to 17 May 2013, the IHSG gained 18.41 percent this year, thus outperforming all other major stock indices in Asia except for the Philippines and Japan's Nikkei, which gained 41.64 percent this year amid an aggressive stimulus plan of the central bank of Japan.

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The central bank of Indonesia (Bank Indonesia, or BI) kept its benchmark interest rate at 5.75 percent and its overnight deposit facility rate (FASBI) at four percent as the country's core inflation figure is still within the target range of the central bank (3.5-5.5 percent). Core inflation currently stands at 4.12 percent (YoY). However, as the price of subsidized fuel is expected to rise in June, inflation may increase and could trigger a policy response by Bank Indonesia later this year.

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Today, Statistics Indonesia released Indonesia's economic growth figure for the first quarter of 2013. Compared to Q1-2012, Indonesia's gross domestic product (GDP) grew 6.02 percent. This growth was supported by almost every sector except for Mining and Extracting, which fell 0.43 percent (YoY), indicating that natural resources are still not back on track. The largest contributor to Indonesia's Q1-2013 growth is Transportation and Communication, which grew 9.98 percent.

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According to data from Statistics Indonesia (Badan Pusat Statistik), Indonesia was visited by over 725 thousand foreign visitors in March 2013, up 10.1 percent compared to the same month last year. The Indonesian government has set the ambitious target of welcoming a total of nine million foreign tourists in 2013. In 2014, it wants at least 10 million foreigners to visit Indonesia. The government expects these increases to originate mainly from the Asia-Pacific region itself.

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This morning (30/04/13), president Susilo Bambang Yudhoyono delivered a speech in which he announced that the price of subsidized fuel will increase to relieve mounting pressures on the government budget deficit. Yudhoyono refrained from mentioning a new price level nor did he announce when the new measure will be implemented. He said that cash compensation programs for the poor need to be prepared first before adjustment of the country's subsidized fuel price can be executed.

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Indonesia's largest listed property developer, PT Lippo Karawaci, will distribute IDR 270 billion (USD $27.8 million) in dividends to its shareholders (IDR 11,86 per share). This amount is equivalent to 25.5 percent of the company's net profit in 2012. The developer posted a 49.7 percent increase in net profit last year to IDR 1.06 trillion (USD $109.3 million). The company is convinced that it will increase its net profit to IDR 1.9 trillion (USD $195.9) in 2013.

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Indonesia's demand for cars stayed strong as the first quarter of 2013 saw double-digit growth in car sales compared to the same period last year. According to Gaikindo (the Indonesian Automotive Industry Association), Indonesia posted an 18 percent growth in car sales in Q1-2013, which translates to 297,785 car units sold in this year's first quarter. However, Gaikindo believes that growth for full-year 2013 will be limited or equal to last year's record sales performance.

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Indonesia's central bank (Bank Indonesia) expects the Indonesian economy to grow between 6.3 and 6.8 percent in 2013, supported by strong domestic consumption and foreign investment, with inflation rising by about 4.5 percent. Indonesian exports are expected to increase due to better global demand for Indonesia's commodities such as coal and palm oil, with commodity prices rising accordingly. But some problems in Indonesia's financial system remain to be solved.

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Although Indonesia's January cement sales showed robust growth of 15 percent to 4.65 million metric tons (year-on-year), the country's cement sales in February slowed to 8.2 percent (4.39 million metric tons) compared to a year earlier; The slowest pace of growth in six months. Strong annual GDP growth has caused a rise in property and infrastructure projects but a delay in some government projects might be behind the slower cement sales growth in February.

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The central bank of Indonesia (Bank Indonesia, or BI) decided to maintain its record low policy rate for the 15th straight month at 5.75 percent as it is considered consistent with its inflation target range of 3.5-5.5 percent in 2013 and 2014. The central bank also stated that the global economic recovery is accompanied by many uncertainties which result in a lower forecast for Indonesia's economic growth. The full press release of Bank Indonesia can be read below.

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In its most recent report, the Asian Development Bank (ADB) forecasts Indonesia to continue its robust economic growth. Last year, the economy of Indonesia expanded 6.23 percent, and according to the ADB this figure will rise to 6.4 percent in 2013 and 6.6 percent in 2014. However, since the start of April there have been some issues that are causing Indonesia's stock indices to go down. Although believed to be only temporary, it is worth taking a closer look.

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Various high government officials, including president Susilo Bambang Yudhoyono, Finance minister Agus Martowardojo and National Development Planning minister Armida Alisjahbana stated that Indonesia's economy is estimated to grow between 6.3 and 6.8 percent in 2014. Its main economic pillars of support are thought to be (foreign and domestic) investments, domestic consumption, and government expenditure. Poverty is targeted to be reduced to ten percent of the population.

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Last week, I provided a basic introduction to investments in Indonesia's capital markets. Now, I will devote my column to the ten largest Indonesian companies by market capitalization. But first let me explain why I take the ten largest companies? Well, simply because these ten companies account for 43.71 percent of Indonesia's total market capitalization. In other words, they reflect almost half of the current condition of the country's capital markets.

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Whenever the topic of tourism in Indonesia is touched upon, most people will instantly think of Bali. This small but famous island harbors all sorts of entertainment that will appeal to various segments of international tourism: beautiful landscapes, Balinese Hinduism, lively nightclubs, beaches and more. But apart from Bali - and despite the fact that Indonesia has much to offer on other islands - the country has disappointed in attracting a large amount of foreign tourists so far.

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Last February, the Indonesian government, through its Ministry of Trade, issued new rules with regard to Indonesia's franchise sector. This new regulatory framework - formulated in Ministry of Trade Regulation No. 7 Year 2013 on Partnership Development in Franchise Business Services for Food and Beverages (Permendag Nomor 7) - will have an impact on Indonesia's food and beverage services as limitations are set on the amount of outlets.

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This week, the World Bank published its Indonesia Economic Quarterly (IEQ, edition March 2013) titled 'Pressures Mounting'. It reports on key developments over the past three months in Indonesia’s economy, and places these in a longer-term and global context. To read the whole report, please visit the World Bank's website at www.worldbank.org or download this edition directly through this link. Below we present the executive summary.

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Despite the fact that Indonesia reported the world's third-highest GDP growth in 2012 (behind China's 7.4 percent and Saudi Arabia's 7.1 percent), supported by rising consumption by a burgeoning middle class and significant increased foreign direct investment, the country's performance in terms of competitiveness is disappointing. It is cheaper to import products from countries that contain competitive businesses than to produce them in Indonesia.

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Apparently, market participants were eagerly waiting for positive news regarding stimulus packages that various central banks will apply to boost local economies. Once the news spread, investors hunted for stocks that previously weakened. Moreover, increased manufacturing data from the USA and Europe contributed to positive market sentiments. Lastly, China indicated to maintain its economic pace of 7.5 percent GDP growth this year.

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Rising Asian stock markets, particularly a strong Hang Seng (Hong Kong) that opened today after the Chinese new year celebrations, had a positive impact on the Indonesia Stock Exchange (IHSG). As had happened in previous years, the IHSG has the tendency to gain ahead of Valentine's day. Today, market participants received their special Valentine's gift: a new record-high IHSG level of 4601.95, although in the end it had to close a bit lower.

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