The stock performance of Indonesian companies listed on the Indonesia Stock Exchange (IDX) in 2016 is expected to be better than last year's performance. One of the factors that supports this assumption is Indonesia's accelerating economic growth. Most - if not all - analysts expect GDP growth to rebound from its six-year low of 4.79 percent (y/y) in 2015. Indonesia's Q4-2015 GDP growth at 5.04 percent (y/y) was already promising (supported by government spending). In 2016 a growth pace in the range of 5.0 - 5.2 percent (y/y) should be possible. Although the link is not perfect, there is a correlation between a nation's stock market and its GDP growth.

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Credit disbursement in Indonesia's banking sector grew at its slowest pace in six years in the first quarter of 2016. This weak performance is attributed to the slowdown in the country's real sector. Muliaman D. Hadad, Chairman of Indonesia's Financial Services Authority (OJK), said credit expansion grew 10 percent (y/y) to IDR 4,084 billion (approx. USD $300 billion) in Q1-2016. However, Hadad remains optimistic that credit expansion will accelerate in the second half of the year in line with forecasts for accelerating GDP growth. This will be a better context for businesses to expand.

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On 17 April 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve hot topics and economic matters such as an update on GDP growth, Bank Indonesia's new benchmark monetary tool, the palm oil sector, the coal price, the trade balance, an excise tax on plastic items, and more.

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Darmin Nasution, the Chief Economics Minister of Indonesia, said economic growth of Indonesia in the first quarter of 2016 may be somewhat curtailed as the (food) harvest season has shifted from March to April and May. The harvest season is important for the economy because it causes a multiplier effect. However, government-led infrastructure investment may still be able to push Indonesia's gross domestic product (GDP) growth higher in Q1-2016 compared with the 5.04 percent (y/y) growth of Q4-2015. Nasution said he expects a Q1-2016 GDP growth rate around 5.1 - 5.2 percent (y/y).

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Despite last week's rallying oil prices, rising stocks on Wall Street and in Europe, as well as expectation of a more gradual increase in US interest rates, Indonesia's benchmark stock index (Jakarta Composite Index) plunged 1.23 percent on Monday (11/04). Overall, the performance of Asian stock markets was mixed reflected by stock trading in the two big economies of China and Japan. Whereas Japanese stocks fell due to the stronger yen (touching a new 17-month high against the US dollar), Chinese stocks climbed on easing worries about deflationary pressures (after China's March CPI inflation remained flat at 2.3 percent y/y).

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The banking sector of Indonesia is expected to rebound in 2016 due to the lower primary reserve requirement ratio for rupiah deposits (6.5 percent), lower cost of funds as well as operational costs, rising credit volume (due to the lower interest rate environment) and improving purchasing power. The banking sector is also expected to feel the positive impact of the stimulus packages unveiled by the Indonesian government aimed at strengthening domestic businesses and improve the investment climate. And lastly, banks are to benefit from the government's push for infrastructure development.

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In the first three monthly policy meetings this year (January-March) the central bank of Indonesia (Bank Indonesia) cut borrowing costs by a total of 75 basis points. Indonesia's benchmark interest rate (BI rate) was cut from 7.50 percent at the year-start to 6.75 percent at Thursday's Board of Governors' meeting. The overnight deposit facility rate and lending facility rate were also cut by 75 basis points, each, in the first three months. The lower interest rate environment in Indonesia signals that the financial fundamentals are strong. This is partly reason behind strong inflows of foreign capital into Southeast Asia's largest economy.

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In its March 2016 Indonesia Economic Quarterly, titled "Private Investment is Essential", the World Bank cut its forecast for Indonesia's economic growth in 2016 to 5.1 percent year-on-year (y/y) from an earlier estimate of 5.3 percent (y/y). This downward revision was made due to weaker-than-expected global economic conditions, further weakening commodity prices, and limitations to Indonesian government spending brought about by a looming shortfall in tax revenue.

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Indonesia's economic growth in the first quarter of 2016 could reach 5 percent (or more) year-on-year provided that the government manages to optimize spending on infrastructure projects and improve people's purchasing power. Large drops in domestic car and motorcycle sales so far this year show that Indonesia's purchasing power remains bleak. Other indicators - such as cement and retail sales - are also not too strong. Firmanzah, economist at the Paramadina University, said the 0.09 percent (m/m) deflation that occurred in February could be a sign of further weakening purchasing power.

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The Indonesian rupiah continues to appreciate sharply. By 13:15 pm local Jakarta time on Friday (04/03), Indonesia's currency had appreciated 0.96 percent to IDR 13,105 per US dollar (Bloomberg Dollar Index), its strongest level since May 2015. Meanwhile, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 0.76 percent to IDR 13,159 per US dollar. What explains this strong performance of the rupiah?

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Before we take a look at the latest macroeconomic data from Indonesia, first there is some good news to share as both the Organization for Economic Cooperation and Development (OECD) and Asian Development Bank (ADB) decided to revise up their projections for the Indonesian economy in 2023.

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As usual, we take a look at a number of macroeconomic indicators to assess the state of the Indonesian economy ahead of the release of Q2-2023 gross domestic product (GDP) data (we expect Indonesia’s Statistical Agency, or BPS, to release the data in the second week of August 2023).

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On 5 May 2023, Indonesia’s Statistical Agency (Badan Pusat Statistik, BPS) released the latest official Gross Domestic Product (GDP) data of Indonesia. BPS announced that the Indonesian economy expanded by 5.03 percent year-on-year (y/y) in Q1-2023, a good result that is in line with our expectations.

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The holy Islamic fasting month (Ramadan) and the weeklong celebrations that mark the end of the Ramadan (known as Idul Fitri or Lebaran in Indonesia) is important for the Indonesian economy as it is a period when people consume more than usual.

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On 06 February 2023, Indonesia’s Statistical Agency (Badan Pusat Statistik, or BPS) released the latest official gross domestic product (GDP) data of Indonesia. The data were in line with expectations.

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Indonesian Finance Minister Sri Mulyani Indrawati said she expects to see a sharper economic growth rate in the first quarter of 2023 (Q1-2023) than the 5.02 percent year-on-year (y/y) growth that was recorded in the same quarter one year earlier.

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For me, G20 summits were always interesting occasions as the leaders of the world’s strongest economies gather to discuss plans to move forward. This year, however, it was the first time that I was quite reluctant to follow the summit (despite the 2022 edition being organized on the Indonesian island of Bali).

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As usual, we devote our first article to the Indonesian economy. But before we zoom in on the latest macroeconomic data of Indonesia, we first provide some context by discussing the global economy.

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Before turning our attention to the economy of Indonesia, it is important to take a closer look at the global economy first. Fortunately, the Organization for Economic Cooperation and Development (OECD) just released a new update (called the OECD Economic Outlook, Interim Report September 2022) and so it’s certainly worthwhile to take a look at its conclusions.

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In the second half of September 2022 the Indonesian rupiah experienced some steep depreciating pressures, nearly touching IDR 15,300 per US dollar. It prompted Bank Indonesia to step and intervene in markets to limit the currency’s decline; a step that typically leads to a drop in the country’s foreign exchange reserves.

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