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As if the external environment wasn’t already challenging enough, a new geopolitical crisis broke out when military organization Hamas attacked Israel in the morning of 7 October 2023 (from the Gaza Strip), killing over 1,400 Israelis while taking hostage more than 200 people.
Indonesia’s Statistical Office (Badan Pusat Statistik, or BPS) shared some great news on 7 August 2023. The agency announced that Indonesia’s gross domestic product (GDP) expanded by 5.17 percent year-on-year (y/y) in the second quarter of 2023. This was better than most forecasts, including our projection of 4.9 percent (y/y).
In this article we take a look at the strength of the Indonesian economy by assessing a variety of macroeconomic indicators such as retail sales, consumer confidence, and credit growth.
In December 2022 the Asian Development Bank (ADB) cut its forecast for economic growth of Indonesia in full 2023 from 5.0 percent year-on-year (y/y) to 4.8 percent (y/y). In its Asian Development Outlook Supplement (the December 2022 edition), the institution noted that weak economic growth in developed countries will impact negatively on Indonesia’s export performance.
Despite the challenging international conditions (aggressive monetary tightening in the United States, the Russo-Ukrainian war, stagflation, a looming recession across the West, and weak growth in China) and a significant rise in the prices of subsidized fuels on 3 September 2022, Indonesia posted another solid economic growth rate.
In our July 2022 report we asked ourselves the question: ‘should we become more optimistic about Indonesia’s economic growth?’ since our outlook for the Indonesian economy in Q2-2022 fell out of tune with the general consensus held by a selection of international and domestic institutions. While our pessimistic stance served us well in 2020 and 2021 (when our projections also fell out of tune with the general consensus), this time it is our side that needs to revise its stance
At the start of June 2022, the World Bank decided to cut its forecast for Indonesia’s economic growth in full-year 2022 from the level of 5.2 percent year-on-year (y/y) to 5.1 percent (y/y). Do we need to be concerned?
The Statistical Agency of Indonesia (Badan Pusat Statistik, BPS) released Indonesia’s Q1-2022 gross domestic product (GDP) data on 9 May 2022. Based on its calculation the Indonesian economy expanded 5.01 percent year-on-year (y/y), which is in fact better –albeit very modestly– than our projection that was set at 5.0 percent (y/y).
While the Indonesian economy has been recovering ever since the second quarter of 2021, there is some concern that Indonesia will experience a small hiccup in Q1-2022 as the Indonesian government felt the need to tighten its social and business restrictions (to PPKM Level 3) in February 2022 due to the rapid spread of Omicron in society. It is a decision that should somewhat limit economic activity.
On Tuesday (08.03.2022) Indonesia Investments released the February 2022 edition of its monthly report. This report discusses a range of subjects - related to political developments, the economy and social matters - that were important and influential issues in Indonesia in the month of February 2022.
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Indonesia's economic performance in the third quarter of 2015 was a bit disappointing as the 4.73 percent year-on-year (y/y) growth pace in Q3-2015 was slightly below market expectations at 4.8 percent (y/y). On a positive note, however, Indonesia's gross domestic product (GDP) growth accelerated from the six-year low of 4.67 percent (y/y) in the preceding quarter. A look at the table below shows that Indonesia's third quarter GDP growth rarely outpaces growth in the second quarter. This is a hopeful sign indeed.
Both Morgan Stanley and Moody's Investors Service have cast some negative perceptions on the condition of the Indonesian economy. First, American multinational financial services corporation Morgan Stanley released a report in which it stated that the recent rupiah rally will not last (Morgan Stanley maintains its year-end target of IDR 14,000 per US dollar). Then, global credit ratings agency Moody's criticized Indonesia's recently unveiled third policy package in which the government lowers energy prices for local manufacturers in a bid to support the industry.
Global credit rating agency Moody’s Investors Service cut its forecast for economic growth in Indonesia this year from five percent (y/y) to 4.7 percent (y/y) due to the perceived hard landing of China’s economy in combination with sluggish conditions in Japan and the Eurozone. Weak demand from China, the world’s second-largest economy and the top trading partner of Indonesia, is expected to continue to plague Indonesian exports and earnings.
Hariyadi Sukamdani, Chairman of the Indonesian Employers Association (Apindo), expressed his concern about unemployment in Indonesia, particularly unemployment among the younger generation of Indonesians (aged between 15 and 29). Amid slowing economic growth over the past six years, various industries have been cutting employment. With roughly half of the total population below 30 years of age, Indonesia’s demographic bonus can turn into disaster if this potential workforce fails to obtain employment opportunities.
Amid continued slowing economic growth unemployment in Indonesia increased in February 2015. On Tuesday (05/05), Statistics Indonesia announced that the country’s unemployment rate rose to 5.81 percent, up from 5.70 percent in February last year. However, compared to August 2014 - when unemployment was recorded at 5.94 percent - relative unemployment in Indonesia actually declined. Statistics Indonesia releases data on unemployment twice per year covering the unemployment rate in the months February and August.
Ahead of the release of Indonesia’s official first quarter GDP growth figure (scheduled to be released in the first week of May), Indonesian stocks fell and the rupiah depreciated (slightly) against the US dollar on the back of weak market sentiments that have plagued Indonesian markets over the past week. Most importantly, weaker-than-expected Q1-2015 corporate earnings reports of listed Indonesian blue chips have made market participants concerned that Indonesia’s economic slowdown has continued into the first quarter of 2015.
Within a couple of days Statistics Indonesia (BPS) is scheduled to release Indonesia’s GDP growth figure for the first quarter of 2015. Despite economic growth forecasts for full-year 2015 - both of the Indonesian government and international institutions such as the World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB) - signalling a rebound from the five-year low of 5.02 percent (y/y) in 2014, various analysts expect to see further slowing economic growth in Q1-2015.
The Asian Development Bank (ADB) released a report today (24/03) in which it discusses recent economic developments in Indonesia. According to the report, Indonesia’s economic growth is projected to accelerate over the two years ahead provided that the Indonesian government continues to implement structural policy reforms. Such reforms - which include the acceleration of infrastructure development, reduction of logistical costs, and enhancing budget implementation - should lead to an improvement of the investment climate.
In a World Bank blog, World Bank economist Alex Sienaert posted an update on the economy of Indonesia. After Statistics Indonesia (BPS) released the country’s latest GDP growth figures in early February, two important revisions regarding Indonesia’s GDP statistics have been made: (1) BPS has shifted the basis of the computation from the year 2000 to 2010, and (2) it adopted a significantly updated methodology and presentation of the statistics (updating national accounts from the 1993 System of National Accounts [SNA] to SNA 2008).
Although Indonesia’s economic growth slowed further in 2014, there is optimism that growth will accelerate in 2015 despite sluggish global economic conditions (curbing Indonesia’s export performance) and Bank Indonesia’s relatively high interest rate environment. Indonesia’s central bank has raised its BI rate several times over the past one and a half years in an effort to combat high inflation (caused by fuel price hikes), curb capital outflows ahead of US monetary tightening, limit the current account deficit and support the rupiah.
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