The central bank of Indonesia projects non-performing loans (NPL) to rise to 2.4 percent of the country’s total outstanding loans by the end of the year, significantly up from 1.8 percent at the end of last year. Despite the acceleration of bad loans in Indonesia, the institution stated that it is still manageable. Meanwhile, loan growth in Indonesia is estimated to slow to 11 or 12 percent (y/y) by the end of 2014 (the slowest pace since 2010), down from 21.4 percent (y/y) in 2013 primarily due to the central bank’s monetary tightening policy.

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The central bank of Indonesia announced that the country’s foreign exchange reserves declined USD $900 million to USD $111.1 billion at the end of November 2014. The decline was primarily due to government debt repayments and the central bank’s use of foreign exchange to engage in monetary management. Meanwhile, the Indonesian rupiah exchange rate - which had touched six year lows in recent days - appreciated 0.08 percent to IDR 12,299 per US dollar on Friday (05/12) based on the Bloomberg Dollar Index.

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The latest survey of Indonesia’s central bank showed that consumer confidence fell slightly in November 2014 amid concern that the recent subsidized fuel price hike will lead to decreased business activity as well as reduced job availability in the next six months in Southeast Asia’s largest economy. Bank Indonesia’s consumer confidence index fell to 120.1 points from 120.6 points in October. The institution interviewed 4,600 households in 18 major Indonesian cities for this survey.

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Indonesia’s Central Statistics Agency (BPS) announced on Monday (01/12) that the country’s inflation figure accelerated to 6.23 percent year-on-year (y/y) in November 2014 (from 6.23 percent y/y in the previous month) due to the impact of higher subsidized fuel prices implemented by the Indonesian government. On 18 November, prices for subsidized fuels (low-octane gasoline and diesel) were raised by more than 30 percent in a bid to reallocate public spending from fuel consumption to productive long-term development.

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According to the central bank of Indonesia, inflation may reach around 8 percent (year-on-year) by the end of 2014 as a result of the higher subsidized fuel prices. In the early hours of Tuesday (18/11), subsidized fuel prices (gasoline and diesel) were raised by more than 30 percent in an attempt to reallocate government funds to more productive sectors as well as to curb the country’s wide current account deficit. Peaks in Indonesia’s inflation usually correlate with administered price adjustments.

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International credit rating agency Moody's Investors Service is positive about the subsidized fuel price hike that was conducted by the government of Indonesia on Monday (17/11) as it shows commitment of the government to implement reforms that support the strengthening of the economy, such as curbing Indonesia’s fiscal and current account deficits. Moody’s estimates that these developments are positive for the country’s sovereign rating (now at Baa3/stable) as well as for state-owned energy firm Pertamina (Baa3/stable).

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Main news headlines in Indonesia still cover the higher subsidized fuel prices implemented starting from the early hours of Tuesday (18/11). The previous evening, Indonesian President Joko Widodo had announced that prices of subsidized gasoline and diesel were to be raised by over 30 percent, immediately leading to long queues at local gas stations as well as public outcry as people’s purchasing power will diminish. Analysts and economists, however, agree that this move is correct and can lead to structurally higher GDP growth.

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The central bank of Indonesia decided to raise its key interest rate (BI rate) by 25 basis points from 7.50 percent to 7.75 percent on Tuesday (18/11) in a response to the subsidized fuel price hike. One day earlier, Indonesian President Joko Widodo had announced that prices of subsidized gasoline and diesel were to be raised by more than 30 percent starting from midnight in an effort to create more fiscal space for economic and social development. This move is expected to result in accelerated inflation in Southeast Asia’s largest economy.

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Indonesian President Joko Widodo announced yesterday evening (17/11) that prices of subsidized fuels will be raised by over 30 percent starting from midnight in an effort to reduce state expenses on non-productive matters. Low-octane gasoline (premium) will now cost IDR 8,500 (USD $0.70) per liter, while diesel now costs IDR 7,500 (USD $0.62) per liter. This sudden announcement immediately led to long queues at local gas stations as people still had three hours to enjoy cheaper fuel rates.

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Global rating agency Fitch Ratings affirmed Indonesia’s Sovereign Credit Rating at BBB-/stable outlook (investment grade status) on Thursday (13/11). This rating affirmation by the credit rating agency can be regarded as international recognition of prudent fiscal policy in Southeast Asia’s largest economy amid global uncertain times. Policy responses pursued by both the government and central bank of Indonesia have been well received by Fitch Ratings and managed to safeguard economic stability.

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Although the Indonesian rupiah has been strengthening against the US dollar since mid-December 2017, the rupiah may encounter serious pressures in the year 2018 amid US tax reforms, the US Federal Reserve's further monetary tightening, and unstable geopolitics. Meanwhile, Indonesian exports are expected to grow, but only in the range of 5-6 percent year-on-year (unlike 2017 when the nation's exports rebounded 17 percent).

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At the monthly policy meeting on 13-14 December 2017, Bank Indonesia decided to hold the benchmark BI 7-day Reverse Repo Rate at 4.25 percent, while it maintained the deposit facility and lending facility rates at 3.50 percent and 5.00 percent, respectively, effective per 15 December 2017.

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In line with expectations, the central bank of Indonesia (Bank Indonesia) left its benchmark interest rate unchanged on Thursday (16/11). The seven-day reverse repurchase rate (BI 7-day Reverse Repo Rate) was kept at 4.25 percent for a second straight month. Meanwhile, the deposit facility and lending facility rates were kept at 3.50 percent and 5.00 percent respectively.

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The central bank of Indonesia (Bank Indonesia) said it will revise its outlook for Indonesia's economic growth in full-year 2017 after the Q3-2017 GDP growth figure - released at the start of the week - was well below expectations. Previously, Bank Indonesia set its economic growth target for Indonesia in 2017 in the range of 5.0 - 5.4 percent year-on-year (y/y).

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The Bank Indonesia (BI) Board of Governors agreed to hold the BI 7-day Reverse Repo Rate at 4.25 percent, while maintaining the deposit facility and lending facility rates at 3.50 percent and 5.00 percent, respectively, effective per 20 October 2017. The decision was in line with efforts to maintain macroeconomic and financial system stability, while stimulating the domestic economic recovery.

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The central bank of Indonesia (Bank Indonesia) made another surprise move by cutting its benchmark BI 7-day Reverse Repo Rate 25 basis points (bps) from 4.50 percent to 4.25 percent at the September 2017 policy meeting. Meanwhile, Bank Indonesia also lowered the deposit and lending facility rates by 25 bps to 3.50 percent and 5.00 percent, respectively, effective per 25th September.

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For the first time since October 2016, the central bank of Indonesia (Bank Indonesia) altered its benchmark BI 7-day (Reverse) Repo Rate. After a nine-month hiatus the lender of last resort resumed monetary easing through cutting the benchmark by 25 basis points to 4.50 percent at the August 2017 policy meeting. Meanwhile, while the deposit and lending facility rates were also cut by 25 bps to 3.75 percent and 5.25 percent, respectively, effective 23rd August 2017.

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Bank Indonesia is content seeing Indonesia's inflation pace at a rather mild rate of 0.22 percent month-on-month (m/m) in July 2017. Dody Budi Waluyo, Executive Director of Economic and Monetary Policy at the central bank, said low and stable inflation is a positive asset for the economy as it supports the rupiah exchange rate as well as the investment climate and safeguards people's purchasing power.

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After concluding its monthly two-day policy meeting on Thursday (20/07) the central bank of Indonesia (Bank Indonesia) decided to leave its interest rate environment unchanged. The BI 7-day (Reverse) Repo Rate (BI-7 day RR Rate) was kept at 4.75 percent, while the deposit facility and lending facility rates were kept at 4.00 percent and 5.50 percent, respectively.

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The central bank of Indonesia (Bank Indonesia) decided to leave its monetary policy unchanged at the two-day policy meeting in June 2017 that was concluded on Thursday (15/06). As widely expected it kept the benchmark 7-day reverse repurchase rate at 4.75 percent, as well as the deposit facility and lending facility at 4.00 percent and 5.50 percent, respectively. These existing levels are regarded to keep financial markets and the economy stable.

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