The latest survey of Bank Indonesia shows that consumer confidence in Indonesia has fallen in June 2015 on fears of shrinking job availability as well as declining income and business activity. Last month, the central bank’s Consumer Confidence Index fell 1.5 points to 111.3. This year so far, Indonesian consumer confidence only rose in May. In other months the index fell. Bank Indonesia’s Consumer Confidence Index is based on samples of 4,600 households in 18 major cities in Indonesia (100 separates optimism from pessimism).

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On 1 July 2015, Bank Indonesia’s BI Regulation No. 17/3/PBI/2015 regarding the Mandatory Use of the Rupiah in Indonesia came into effect. This BI Regulation, signed on 31 March 2015, restricts the use of foreign currencies in transactions conducted in Indonesia with the aim to deepen the domestic rupiah market, stabilize the rupiah (which has been depreciating against the US dollar), and foster economic expansion. A previous law (Law No. 7/2011) allowed for involved contract parties to agree using another currency (than the rupiah) for payments.

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Eric Sugandi, Chief Economist at the Standard Chartered Bank, expects Indonesia’s rupiah to have depreciated to IDR 13,900 per US dollar by the end of the year from IDR 13,339 currently (29/06) due to the impact of the bullish US dollar ahead of monetary tightening in the USA and the looming Greek exit from the Eurozone. Actually, this is a conservative prognosis. In case Indonesia’s central bank does not raise its benchmark interest rate (BI rate), currently at 7.50 percent, pressures on the rupiah may increase in fact increase further.

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Although Indonesia is considered as one of the Asian economies that is particularly vulnerable to a Greek exit from the euro (‘Grexit’), Indonesian stocks and the rupiah did not decline as heavily as other emerging market assets on Monday’s trading day (29/06), the first trading day after the collapse of talks between debt-ridden Greece and its international creditors. Indonesia’s benchmark Jakarta Composite Index fell 0.82 percent to 4,882.59 points while the rupiah depreciated 0.24 percent to IDR 13,339 per US dollar (Bloomberg Dollar Index).

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Indonesian stocks are expected to feel heavy downward pressure on Monday (29/06) due to stalled talks between debt-ridden Greece and its international creditors. Indonesia’s benchmark stock index (Jakarta Composite Index) still needs to open but other Asian markets immediately plunged after opening. Japan’s Nikkei 225 was down 2.28 percent as the yen appreciates (investors are chasing safe haven assets), while South Korea’s KOSPI fell 1.5 percent. Meanwhile, the euro is depreciating heavily in Asian trading.

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Most stock indices across the world continued to fall on Friday (26/06) on heightened concern that debt-ridden Greece will fail to reach an agreement with its international creditors. The deal is necessary for Greece to obtain bailout funds in order to avoid a default on its debt to the International Monetary Fund (IMF) due on 30 June 2015. A default could mean a Greek exit (Grexit) from the Eurozone and jeopardizes stability of the whole financial system of the region. Talks between both sides will continue into the weekend.

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As Greece and its international creditors have failed to reach an agreement (yet) regarding the disbursement of crucial bailout funds for the debt payment of debt-ridden Greece to the International Monetary Fund (IMF) later this month, most Asian stocks fell on Thursday (25/06) in cautious trading. Indonesia’s benchmark stock index (Jakarta Composite Index) fell 0.68 percent to 4,920.04 points, while the rupiah depreciated 0.20 percent to IDR 13,328 per US dollar according to the Bloomberg Dollar Index.

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On Tuesday (23/06) Asian stock indices extended gains on optimism that debt-ridden Greece will not default and stays within the Eurozone. Although Eurozone leaders reminded that there is still work to be done before an agreement can be reached between Greece and its creditors, markets are confident that the deal is only a matter of time. However, similar to yesterday, Indonesia’s benchmark stock index did not follow this global positivity and instead declined 0.44 percent to 4,937.65 points.

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Contrary to the performance of most other Asian stock indices, Indonesia’s benchmark Jakarta Composite Index fell 0.52 percent to 4,959.25 points on Monday (22/06). Other Asian markets were supported by renewed hopes of averting a Greek exit (Grexit) from the Eurozone after the debt-ridden country gave new proposals to its creditors in the Eurozone over the past weekend. According to the Greek government these proposals are mutually beneficial. Ahead of the ‘emergency’ meeting today, the euro and European stocks tend to rise heavily.

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Indonesian stocks rebounded on Tuesday (16/06). The country’s benchmark Jakarta Composite Index rose 0.72 percent to 4,872.60 points supported by foreign net buying and rebounding from yesterday’s 13-month low position. Middle and longer term investors now have great opportunity to find stocks at bargain prices (particularly those stocks that are not too exposed to the weakening rupiah). However, trading volume was low at about 60 percent of the past 30-day average thus indicating that market participants remain wary.

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The structure of Indonesia's automotive industry remains weak as it is too dependent on imports of raw materials, making sales prices of cars highly vulnerable to the volatile Indonesian rupiah. The automotive industry has been one of the many local industries that has been plagued by Indonesia's economic slowdown and fragile rupiah (amid looming tighter monetary policy in the USA) as people's purchasing power has weakened. In the first ten months of 2015, Indonesian car sales stood at a total of 853,008 units, down 18 percent from car sales in the same period last year.

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Indonesian assets weakened on Friday (06/11) on expectation that US non-farm payrolls and US employment data would improve, suggesting that a Fed Fund Rate hike may occur in December 2015. Such expectations were correct. After Indonesian and other Asian markets had closed on Friday, the US Labor Department announced that October payrolls rose 271,000 (the largest increase this year), while the US unemployment rate touched a seven-year low at 5 percent. Furthermore, the average hourly earnings over the past 12 months climbed by the most since 2009.

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As Indonesia's inflation rate has eased to 6.25 percent (y/y) in October 2015 from 6.83 percent (y/y) in the previous month, and given that Indonesian inflation will ease more markedly in the last two months of 2015 as the impact of the subsidized fuel price hike in November 2014 will vanish, the central bank of Indonesia (Bank Indonesia) seems to have more scope to cut its current relatively high benchmark interest rate, hence giving rise to accelerated economic activity.

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Today (22/10), the World Bank released the October 2015 edition of its flagship Indonesia Economic Quarterly, titled "In Times of Global Volatility". In the report the World Bank states that despite current ongoing global uncertainties (caused by looming monetary tightening in the USA and China's economic slowdown), which make macroeconomic management difficult in the year ahead, pro-active government action could offset the negative impact and may help to boost growth.

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American financial services company Standard & Poor's warns that defaults by Indonesian companies are a serious threat over the next 18 months given their eroded balance sheets amid the country's current economic slowdown. The warning came after Indonesian mobile phone retailer Trikomsel Oke announced plans to restructure about USD $155 million worth of debt as it may not be capable to meet obligations indefinitely.

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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.

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The government of Indonesia unveiled the last installment of a series of three stimulus packages on Wednesday (07/10). The first two installments had been unveiled last month. In general, these stimulus packages aim to boost economic growth of Indonesia (which has slowed to a six-year low) and restore investors' confidence in the Indonesian rupiah and stocks. When markets believed that the Federal Reserve would soon raise its key interest rate, Indonesia was plagued by severe capital outflows pushing the rupiah to a 17-year low.

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The government of Indonesia unveiled the second installment of its September economic policy package on Tuesday (29/09). The package is introduced in an attempt to boost economic growth in Southeast Asia’s largest economy and defend the ailing rupiah. Indonesia’s GDP growth slowed to a six-year low of 4.67 percent (y/y) in Q2-2015, while the rupiah has depreciated to a 17-year low against the US dollar. Capital outflows from Indonesia are the result of monetary tightening in the USA, low commodity prices and sluggish global economic growth (particularly China’s hard landing).

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The central bank of Indonesia announced on Thursday (17/09) that it the country’s key interest rate (BI rate) at 7.50 percent, while maintaining the deposit facility rate at 5.50 percent and the lending facility rate at 8.00 percent. According to Bank Indonesia (BI) this decision is consistent with its efforts to push inflation towards the target corridor of 4±1 percent in both 2015 and 2016. In addition, the decision is also part of Bank Indonesia’s measures to anticipate possibilities of a Fed Fund Rate (FFR) hike.

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After a real roller coaster ride, Indonesia’s benchmark stock index (Jakarta Composite Index) climbed 0.35 percent to 4,446.20 points at the end of the trading week. The majority of key stock indices across the globe tended to strengthen on Friday after a week characterized by severe volatility amid concern about the economic situation in China.

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