Credit rating agency Standards & Poor's (S&P) says Indonesia (and Malaysia) need to increase efforts to build a good track record of timely and reasonable power tariffs adjustments in order to ensure decent returns for investors and recover their costs. Delays in energy price revisions, which are sometimes the result of political strategy, are the key risk that jeopardize the financial stability (and credit profile) of state-owned utility company Perusahaan Listrik Negara (PLN). S&P therefore advises the Indonesian government to enhance efforts to ensure a sound regulatory framework (i.e. a transparent tariff rate-setting mechanism).

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The population of Indonesia, which numbers over 255 million people in 2015 (unofficial data), grows at a worrying pace according to Surya Chandra Surapaty, Head of the National Population and Family Planning Agency (BKKBN). Currently, Indonesia's average annual population growth rate stands at 1.49 percent. This means that each year the Indonesian population expands by 4.5 million people (nearly the size of Singapore's total population).

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The United Nations Children's Fund (UNICEF) stated in a recently published report that Indonesia has made significant progress in reducing the country’s child mortality rate. According to the report, entitled “Committing to Child Survival: A Promise Renewed (Progress Report 2015)", Indonesia’s mortality rate for children below the age of five years currently stands at 27 deaths per 1,000 births, a significant improvement from the 85 deaths per 1,000 births that was recorded in 1990.

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As Indonesia’s economic growth continued to slow in the second quarter of 2015, the Indonesian Employers Association (Apindo) warned of increasing unemployment in Southeast Asia’s largest economy. Each 1 percent gross domestic product (GDP) growth can generate between 200,000 and 300,000 new jobs in Indonesia. As such, when economic growth slows, society misses out on new jobs and with around two million Indonesians entering the labor force each year, job generation is an important task of the government.

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On 7 June 2015, 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 subjects such as Indonesia’s May inflation and manufacturing activity, updates on the rupiah & Indonesian stocks, new initial public offerings (IPOs) on the Indonesia Stock Exchange, poverty, consumer confidence, and more.

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Currently there are still 19.4 million Indonesians suffering from hunger each day, or, one-third of an estimated 60 million people that suffer from hunger in Southeast Asia. The figures are results of research conducted by the Food and Agriculture Organization (FAO) of the United Nations. Mark Smulders, FAO Representative in Indonesia, said that there remains much work to be done. The priority of the FAO is to create ‘Generation Zero Hunger’ and to ensure that Indonesians get enough nutrition to live a productive and healthy life.

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One month ahead of the holy fasting month of Ramadan, food prices in Indonesia have already began to rise. It is a traditional phenomenon that ahead of the Ramadan (and during this month as well as the subsequent Idul Fitri celebrations) inflation peaks as Indonesians spend more money on food products (for dinner parties in the evening after the daily fasting has ended) and other consumer products such as clothes and shoes. However, some concerns have arisen as a presidential regulation on price controls is yet to come out.

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The price of rice in several Indonesian regions has risen by between 17 to 23 percent to IDR 8,500-9,000 per kilogram as rice production at the start of the year has not been able to meet rice demand. In January 2015, Indonesian rice production stood at 2 million tons, whereas demand reached 2.5 million tons. Inflation of rice is a sensitive issue in Indonesia because it jeopardizes declining poverty rates as poorer segments of Indonesian society spend over half of their total disposable income on food items, primarily rice.

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On 4 January 2015, 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 updates on inflation, the trade balance, manufacturing, the rupiah exchange rate, poverty, an assessment of the IMF on Indonesia’s economic fundamentals, and more.

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Relative and absolute poverty in Indonesia have declined according to the latest data from Statistics Indonesia (BPS) released on Friday (02/01). In September 2014, there were a total of 27.73 million Indonesians categorized as poor, or 10.96 percent of the total population. Both figures were down from 28.6 million people, or 11.46 percent in September last year (BPS releases data on Indonesian poverty twice per year covering the state of poverty in the months of March and September).

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Today (20/10), Central Jakarta seems to have changed into one big party as Joko Widodo was inaugurated as Indonesia’s seventh president earlier this morning. For the remainder of the day celebrations will be held at Monas (National Monument) and surrounding areas. However, it is of vital importance that Widodo (popularly known as Jokowi) will start to focus on this presidential duties tomorrow as the country is facing a number of economic challenges. What are these challenges?

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Speculation has emerged that Indonesian President-elect Joko Widodo (Jokowi) plans to raise prices of subsidized fuels immediately after taking office in late October 2014. On Tuesday (02 /09), Jokowi said that he sees no other option than to raise these prices in an effort to relieve the budget deficit, curb the wide current account deficit and make more funds available for long-term productive public investments (such as on infrastructure, healthcare and education). The government has set aside IDR 291.1 trillion (USD $25 billion) for fuel subsidies in 2015.

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When campaigning, presidential candidates will always promise a bright future in order to gain votes. It is particularly easy for a new presidential candidate to promise golden mountains as opposed to the incumbent president who needs to be more cautious making promises as people can point to the (failed) results of his promises during the presidential term. The 2014 Indonesian presidential election was particularly interesting as we saw two new presidential candidates and, thus, the ‘inflation of promises’.

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Head of Statistics Indonesia (BPS) Suryamin announced on Tuesday (01/07) that the number of poor people in Indonesia declined slightly to 28.28 million people (or 11.25 percent of the total population) in March 2014, from 28.60 million (11.46 percent of the total population) in September 2013. However, compared to March last year, poverty has increased by 110,000 people due to high inflation and a slowing economy; economic growth slowed to 5.78 percent in 2013 and this decline continued to 5.21 percent in the first quarter of 2014.

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Senior economist at the Institute for Development of Economics and Finance (INDEF), Didier Damanhuri, believes that Indonesia’s two presidential candidates - Joko Widodo (popularly known as Jokowi) and Prabowo Subianto - are both similar in economic approach as both men are primarily focused on high gross domestic product (GDP) growth as the measurement for economic development, while, in fact, many countries that only focus on GDP growth show a high degree of economic inequality.

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On Monday (23/06), the World Bank released its latest analysis regarding the Indonesian economy. In its report, titled ‘Indonesia: Avoiding the Trap’, the World Bank states that Indonesia needs to implement a six reforms in priority areas in order to avoid the so-called middle income trap (referring to the situation where a country gets stuck at a certain income level). Without these critical reforms, the country’s economic growth will slow and may not be able to escape the middle income trap.

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Indonesian Finance Minister Chatib Basri said that the country's economic growth in 2015 is targeted in the range of 5.5 to 6.3 percent. Amid further Federal Reserve tapering and possible interest rate hikes in the world's largest economy, chances of capital outflows from emerging markets (including Indonesia) are becoming larger. Basri said that these global conditions impact on GDP growth, the Indonesian rupiah exchange rate and inflation. Therefore, 2015 is a transition year, reflected by tighter economic projections and state spending.

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Chairman of Indonesia's Chamber of Commerce and Industry (Kadin) Suryo Bambang Sulisto stated that the most crucial problem which Indonesia is facing currently as well as in the foreseeable future is unemployment. Sulisto said that while the population of Indonesia has grown continuously in the past decade, unaffected by family planning programs, employment opportunities have not grown accordingly. In fact, they have declined. At end-2013, Indonesia's unemployment rate stood at 6.3 percent (of the total labor force).

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After Indonesia's outlook for economic growth in 2014 was revised down from 6 percent to between 5.8 and 6 percent, the government also revised targets of poverty and unemployment reduction. In the 2014 State Budget (APBN 2014), the government set the targeted poverty rate at 9.0 to 10.5 percent of Indonesia's total population. However, the government revised down this poverty rate to between 10.54 and 10.75 percent, which is also far below the target that was set in the National Medium Term Development Plan (RPJMN) at 8 to 10 percent.

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Despite rising concerns about the slowing pace of the Indonesian economy, the deputy minister of Finance Bambang Brodjonegoro reminded investors that Indonesia's economic growth in the third quarter of 2013 still constitutes one of the highest growth rates around the globe. Economic expansion in Q3-2013 slid to 5.6% in Southeast Asia's largest economy. With the exception of China (7.8% GDP growth in Q3-2013), Indonesia's growth continues to outpace growth in other emerging markets, such as Brazil (3.3%) and Turkey (4%).

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