Per 1 January 2016 the ASEAN Economic Community (AEC) came into effect. This community implies stronger cooperation and integration among the ten member countries in Southeast Asia. According to its blue print the AEC involves the launch of a single market and production base among its member nations, hence allowing the free flow of goods, services, investment, and skilled labor as well as the freer flow of capital. Indonesia is one of the member countries.

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Indonesia posted a trade deficit of USD $230 million in December 2015 as imports (USD $12.12 billion) exceeded exports (USD $11.89 billion), the second monthly trade deficit in 2015. Overall, the country's trade balance shows a surplus of USD $7.51 billion in 2015, significantly improving from the USD $2.2 billion trade deficit in the preceding year. But despite posting a good trade surplus in full-year 2015, a closer look at the data still reveals weak global and domestic conditions.

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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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Indonesia posted an unexpected USD $346.4 million trade deficit in November 2015 according to the latest data from Statistics Indonesia (BPS) released on Tuesday (15/12). It was the country's first trade deficit so far in 2015 as exports fell faster - while imports declined slower - than initially estimated. Indonesian exports fell 17.6 percent year-on-year (y/y) to USD $11.16 billion in November, while imports declined by 18.0 percent (y/y) to USD $11.51 billion. Both the oil & gas and the non-oil & gas balances were in deficit.

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The terrorist attacks in Paris last week are not expected to jeopardize Indonesia's trade with France or the European Union. France is expected to tighten the flow of people, but not the flow of goods after the terrorist attacks on Friday (13/11) that led to the deaths of at least 129 people as well as hundreds of injured people. In 2014 trade between Indonesia and France totaled USD $2.35 billion, down 11 percent from the preceding year. Indonesian exports to France stood at USD $1.02 billion (exports only involved non-oil & gas products), while Indonesia's imports from France stood at USD $1.33 billion in 2014.

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For the eleventh consecutive month Indonesia posted a trade surplus. With exports reaching a total of USD $12.08 billion, while imports were USD $11.07 billion, the country posted a USD $1.01 billion trade surplus in October, the country's statistics agency (BPS) stated on Monday (16/11). The surplus was larger than expected due to a sharp drop in imports. Although the trade surplus is good news as it supports the value of the rupiah and helps to curtail the country's current account balance, there remain concerns about rapidly plunging exports and imports.

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The current account balance of Indonesia improved due to the stronger non-oil & gas trade balance. Indonesia's current account deficit eased to USD $4.0 billion, or 1.86 percent of the country's gross domestic product (GDP), in the third quarter of 2015. This performance was much better than the USD $7.0 billion deficit (3.02 percent of GDP) recorded in Q3-2014 or USD $4.2 billion (1.95 percent of GDP) in Q2-2015. Meanwhile, the balance of payments showed a deficit of USD $4.6 billion, up from the deficit of USD $2.93 billion in the preceding quarter.

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US-based bond credit rating agency Moody's Investors Service said it would be credit-positive for Indonesia's sovereign credit rating to join the Trans-Pacific Partnership (TPP) trade deal as participation would mitigate the negative effects of sluggish commodity prices on Indonesia's export performance. Through the TPP, which is one of the world's most ambitious trade deals covering an area that accounts for about 40 percent of world trade, Indonesia will expand its export base, Moody's wrote in a recent report.

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During his state visit to the USA, Indonesian President Joko Widodo told US President Barack Obama that Indonesia intends to join the Trans-Pacific Partnership (TPP) trade deal. Currently, 12 countries have joined the TPP, including the USA and Japan, thus creating the world's largest free trade area (an area that covers about 40 percent of world trade). By many analysts the TPP is regarded a counterbalance to the big economic influence of China.

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Indonesia posted the ninth consecutive monthly trade surplus. Today, Statistics Indonesia (BPS) announced that Indonesia posted a USD $433.8 million trade surplus in August 2015, slightly below analysts’ forecasts and well below the (revised) USD $1.38 billion trade surplus Southeast Asia’s largest economy had posted in the preceding month.

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The economic stabilisation policies launched by Indonesia's central bank (Bank Indonesia) and the Indonesian government in recent months have brought a steady improvement in the country's current account balance. The current account deficit moderated from the previous quarter’s record USD $9.9 billion (equivalent to 4.4 percent of the country's GDP) to USD $8.4 billion (3.8 percent of GDP) in the third quarter of 2013. A shrinking current account deficit is highly awaited by investors. The text below is the official press release of Bank Indonesia.

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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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Indonesia's October inflation rate was well-received by investors. On Friday (01/11), Statistics Indonesia (BPS) announced that the country's inflation in October 2013 grew 0.09 percent. Easing inflation was mainly due to falling prices of raw foods and clothes. Year-on-year (yoy), however, Indonesia's inflation is still high at 8.32 percent, although showing a moderating trend from 8.40 percent (yoy) in September 2013 and 8.79 percent (yoy) in August 2013. Inflation had skyrocketed after subsidized fuel prices were raised by an average 33 percent in June.

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On 12 October 2013 Finance Minister and Central Bank Governors from Korea and Indonesia agreed to establish a bilateral KRW/IDR swap arrangement in the near future. The size of the swap arrangement is up to KRW 10.7 trillion/IDR 115 trillion (equivalent to USD $10 billion). The effective period of the facility will be three years, and could be extended by agreement by both sides. This Bilateral Currency Swap Arrangement (BCSA) aims to promote bilateral trade and further strengthen financial cooperation, an objective of mutual interest to both countries.

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The World Bank has revised down its forecast for economic growth in Indonesia in 2013 to 5.9 percent from its original estimate of 6.2 percent. Similarly, the institution has altered its forecast for economic growth in 2014 from 6.5 percent to 6.2 percent. The revised figures were published in July's edition of the Indonesia Economic Quarterly (IEQ), titled 'Adjusting to Pressures'. The World Bank's forecast is also in sharp contrast with the GDP assumption of the Indonesian government, which puts economic growth in 2013 at 6.3 percent.

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Indonesia and Sweden intend to increase business relations between both countries. Last month, Indonesia's president Susilo Bambang Yudhoyono made a state visit to Sweden, while in 2012 Sweden prime minister Fredrik Reinfeldt visited Indonesia. A number of topics were discussed during these visits, including trade and investment. After the discussions, both countries agreed that trade and investment between the countries should be expanded. Up to early 2013, 77 Swedish companies are in operation in Indonesia.

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Indonesia already is a strong trade partner to a number of countries in Europe. Based on data released by Indonesia's Ministry of Trade, the Netherlands and Spain are two European countries that import a considerable amount of Indonesian products and thus are important contributors to Indonesia's trade surplus in the non oil & gas sector. But other European nations, such as Germany and Russia, pressure Indonesia's trade surplus. It indicates that, despite the wide distance, Indonesia and Europe have a close and valuable trade relationship.

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Although the United States continues its traditional focus on direct investments in developed countries, primarily in Western Europe, there has been a significant rise in US investments in Indonesia in recent years. Whereas US investments in the developed economies of Western Europe is mostly found in the financial sector and through holding companies, in developing Asia, the US is more focused on the manufacturing sector due to lower production costs. In the last two years, the US emerged as the second-largest investor in Indonesia after Japan.

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Indonesia's central bank (Bank Indonesia or BI) announced on Wednesday (15/05/13) that the country's external balance has improved during Q1-2013 as non-oil and gas trade were up. Indonesia's current account deficit stood at USD $5.3 billion (2.4 percent of GDP) in Q1-2013, compared to the previous quarter's deficit of USD $7.6 billion (3.5 percent of GDP). Indonesia has experienced a widening trade deficit, although it recorded a trade surplus of USD $304.90 in March, the first trade surplus since September 2012.

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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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