New York-based Moody's Investors Service kept Indonesia's sovereign credit rating at Baa3 (stable outlook), the lowest level within the investment grade rating. Although the rating agency is positive about the strong nature of Indonesia's economy and the prudent fiscal policy that is safeguarded by the Indonesian government and central bank, it sees few room for an upgrade soon (to Baa2) as government revenue is not expected to rise significantly in the period ahead. Moody's released this statement on Thursday (28/01).

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Although oil prices somewhat recovered from 12-year lows on Friday (08/01) on China's rebounding stock market there is concern that Indonesia will not achieve its 2016 oil lifting target as the country's oil producers become less eager to boost production rates amid unattractive oil prices. Yesterday, Brent oil fell to USD $32.16 per barrel - the lowest level since 2004 - after China devalued its yuan and Chinese stocks plunged over 7 percent causing the circuit-breaking mechanism to kick in and even causing a global stock selloff.

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Economic turmoil that has pushed China’s growth to a 25-year low has a direct effect on Indonesia as China is the key trading partner of Indonesia. Concern about China’s economic slowdown (and the impact of this slowdown on the world economy) persist in 2016 as the country's Caixin/Markit manufacturing purchasing managers' index (PMI) contracted for the 10th straight month in December 2015 (at 48.2), while the services reading for December fell to a 17-month low (50.2).

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Last year the benchmark stock index of Indonesia (Jakarta Composite Index) fell 12.13 percent to finish at 4,593.01 points on 30 December 2015 amid severe global uncertainty due to looming tighter monetary policy in the USA and the rapid economic slowdown of China. Today, the Indonesia Stock Exchange will have its first trading day of the new year. What do we expect from the performance of Indonesian stocks in January 2016?

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The Finance Ministry of Indonesia released a statement on Sunday (03/01) saying that Indonesia failed to meet the majority of economic targets that were set in the (revised) 2015 State Budget. Primary reasons for the weaker-than-targeted performance are low commodity prices, sluggish global economic growth, China's economic slowdown, and capital outflows triggered by the tighter monetary policy of the US Federal Reserve. Only realization of inflation and the treasury yield were in line with the government's targets.

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With the year 2015 coming to an end, it is worthwhile to take a look at the challenges that Indonesia faced this year and whether these challenges will remain in 2016. In short, we believe that the current external challenges persist into the new year. Although the country's economic growth is projected to accelerate to 5.3 percent year-on-year (y/y) in 2016 from an estimated 4.7 percent (y/y) in 2015 (the fifth consecutive year of slowing gross domestic growth expansion), this growth is primarily caused by improved government spending.

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Indonesian inflation may reach 2.9 percent year-on-year (y/y) only in full-year 2015, the lowest level since 2009 when inflation in Southeast Asia's largest economy was recorded at 2.78 percent (y/y). In recent years Indonesia's inflation has been volatile with peaks correlating with administered price adjustments (primarily fuel and electricity price hikes as the government is keen on limiting spending on subsidies). Another characteristic of Indonesia is that inflation is generally high (compared to advanced economies), which is in line with the higher economic growth pace (than that of advanced economies).

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Bank Indonesia, the central bank of Indonesia, expects banks' credit growth realization to reach 9-10 percent (y/y) in 2015, below its target of 11-13 percent (y/y). Up to October 2015 Indonesian banks' credit growth stood at 10.4 percent, slowing from 11.1 percent in the preceding month. Juda Agung, Executive Director of Economic and Monetary Policy Department Bank Indonesia, said slowing credit growth is in line with the economic slowdown.

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In line with expectations and the general trend so far this year, Indonesian car sales fell 4.4 percent to 87,311 units in November 2015. In the January-November 2015 period, the country's total car sales reached 940,317 units, down 16.7 percent from car sales in the same period last year. The main cause of this weak performance is Indonesians' weakened purchasing power amid the country's economic slowdown, high inflation (in the first three quarters of the year), and low commodity prices.

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The Asian Development Bank (ADB) lowered its forecast for economic growth in Indonesia to 4.8 percent year-on-year (y/y) in 2015 and to 5.3 percent (y/y) in 2016 from previously 4.9 percent (y/y) and 5.4 percent (y/y), respectively. In its latest report on Indonesia, the ADB cited that problems related to budget disbursement and the nation’s weak export performance were the main factors to cut its growth projection for Indonesia - for both 2015 and 2016 - by 0.1 percentage point. In September 2015, the ADB had already cut its growth forecast for Indonesia on the back of negative effects of China’s economic slowdown.

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In mid-April 2020 the International Monetary Fund (IMF) released its latest ‘World Economic Outlook’ report. It is in fact not a complete report. Considering the global economy has changed dramatically over the past months, the IMF’s previous update of the World Economic Outlook (released in January 2020) simply had no validity anymore, and therefore the IMF released one new chapter in mid-April 2020 (with the full report set to follow in May 2020).

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The number of confirmed novel coronavirus (COVID-19) infections and fatalities have been growing steadily across Indonesia in recent weeks, especially in the capital city of Jakarta where around half of the country's total COVID-19 cases originate from. And the alarming matter is that this could very well be the beginning of the real storm.

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As expected, Indonesia’s full-year 2019 economic growth came in well below the central government’s 5.3 percent year-on-year (y/y) growth target. Based on the data that were released by Statistics Indonesia (Badan Pusat Statistik, BPS) in early February 2020, the Indonesian economy expanded at a pace of 5.02 percent (y/y) in 2019.

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What marked the year 2019 for Indonesia was national politics. Although in these present times each year feels like a ‘political year’ for Indonesia – as the country’s local elections are spread out across years (and in 2020 it will be the turn of voters in various parts of the Archipelago to elect nine governors, 224 regents and 37 mayors) – the year 2019 was in fact a particularly ‘huge political year’ for Indonesia because of the (general) presidential and legislative elections that were held on 17 April 2019.

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Given a variety of recent events, Indonesia has seemingly entered a liminal phase in its development trajectory, suggesting that its economic vulnerability will be tested in new ways. The present circumstances should be understood as a particular test for the ability of policy initiatives to temper the effects of perturbing exogenous factors and demand shocks to the overall economy.

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In early May 2019 Indonesia’s statistics agency (in Indonesian: Badan Pusat Statistik, or BPS) announced that the nation’s economic growth pace was recorded at 5.07 percent year-on-year (y/y) in the first quarter of 2019.

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Indonesia’s stock market continues to struggle in attempts to find a bottom, as recent declines have been propelled by lower-than-expected GDP figures. For the first quarter, annualized growth of rates of 5.07 percent indicated a slight miss relative to the consensus estimates for the period (5.18 percent). Primary weaknesses were seen in export markets, where slowing demand for key commodities (such as coal and palm oil) indicated contraction for the first time since 2016.

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Credit rating agency Fitch Ratings announced on 14 March 2019 that it has affirmed Indonesia's long-term foreign-currency issuer default rating at 'BBB' with a stable outlook (investment grade level). This decision was particularly based on Indonesia’s favorable gross domestic product (GDP) growth outlook and the nation’s small government debt burden (government debt is low at an estimated 29.8 percent of GDP in 2018).

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In early November 2018 the Central Statistics Bureau (BPS) announced that Indonesia’s gross domestic product (GDP) growth reached 5.17 percent year-on-year (y/y) in the third quarter of 2018. Although it means a slowdown from the 5.27 percent (y/y) growth pace in the preceding quarter, the Q3-2018 GDP growth rate actually slightly exceeded our expectations.

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In the second half of September 2018 the World Bank released its latest Indonesia Economic Quarterly (abbreviated IEQ), titled “Urbanization for All”. The IEQ, a flagship publication of the Washington-based institution which (at least in our view) is among the most interesting reports that are on a regular basis published about the Indonesian economy, has two main aims. Firstly, it informs about the key developments that occurred in Indonesia’s economy over the past three months, and places these developments in a longer-term and global context. Secondly, the IEQ provides an in-depth examination of selected economic and policy issues and an analysis of Indonesia’s medium-term development challenges.

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