The Gini ratio of Indonesia - the coefficient that measures inequality in income distribution - is expected to improve slightly this year as commodity prices have a stable outlook. Based on data from Statistics Indonesia, the ratio increased significantly since the country's Reformasi period. Between 1999 and 2013, it rose from 0.31 percent to 0.41 percent (a coefficient of zero expresses perfect equality, while one implies perfect inequality). In the last three years (2011- 2013), however, the ratio remained stable at 0.41 percent.

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Today (03/02), Statistics Indonesia (BPS) will release a number of macroeconomic data which are eagerly awaited for by market participants. Most importantly, Indonesia's January 2014 inflation rate and the December 2013 trade balance. These data will have an impact on the performance of Indonesia's rupiah exchange rate and the country's benchmark stock index (IHSG). Monthly inflation in January is expected to range between 0.8 and 1.0 percent, while a trade surplus of about USD $800 million in December is forecast.

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Chatib Basri, the Finance Minister of Indonesia, expects Indonesia's economy to expand 5.6 percent in the fourth quarter of 2013. As such, total gross domestic product (GDP) growth of Southeast Asia's largest economy in 2013 will total between 5.6 to 5.7 percent in 2013. This result will imply that Indonesia's economic expansion in 2013 has slowed down for the second straight year, mainly due to global economic turmoil. In 2011 and 2012, the country's economy expanded by 6.5 percent and 6.2 percent respectively.

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Indonesia's Finance Minister Chatib Basri expects that Indonesia's economic growth in 2013 will reach 5.7 percent, significantly below the government's initial target of 6.3 percent. Basri announced his expectation at the government's economic evaluation and projection meeting. According to Basri, Indonesia's economic growth is stable, despite its slowing trend. Among the G20 member countries, only China will post higher GDP growth (7.8 percent up to the third quarter). Indonesia's inflation rate is expected to reach 8.5 percent (yoy) at the year-end.

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The Indonesian rupiah exchange rate maintained its downward trend on Wednesday (27/11). Bank Indonesia's mid rate depreciated 0.41 percent to IDR 11,813 per US dollar. Investors remain concerned about Indonesia's wide current account deficit. Today, Finance Minister Chatib Basri said that the current account deficit will be around USD $30 billion by the end of 2013, significantly up from USD $24 billion at the end of 2012. In the third quarter of 2013, the current account deficit was USD $8.4 billion (3.8 percent of Indonesia's GDP).

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In order to improve the country's trade balance (particularly to curb the large current account deficit), the government of Indonesia will raise income tax on imported products through the issuance of a new ministerial regulation (issued by the Finance Ministry). Currently, there are two income tax tariffs on imported goods (see below). According to Finance Minister Chatib Basri, goods that will fall under the new regulation are consumption goods (except for food products). The new income tax tariff is expected to be implemented next week.

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Although the Asia-Pacific Economic Cooperation (APEC) CEO Summit meetings have not finished yet, there are already some interesting results. As has been reported previously, the Indonesian government will release another economic policy package in October. One new policy involves the revision of Indonesia's negative investment list (which lists sectors that are either wholly or partially closed to private foreign and/or domestic investment). Another positive result involves the APEC Environmental Goods List (APEC EG List).

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Finance Ministers of the Asia-Pacific Economic Cooperation (APEC) economies convened its 20th annual meeting in Nusa Dua, Bali, Indonesia, on 19 and 20 September 2013 under the Chairmanship of Dr. Muhamad Chatib Basri, Indonesia's Finance Minister. The meeting was attended by various delegates, including the President of the Asian Development Bank (ADB), the Managing Director of the World Bank Group, and the Deputy Managing Director of the International Monetary Fund (IMF).

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Member countries of the Asia-Pacific Economic Cooperation (APEC) agreed to form a public-private partnership (PPP) center in order to enhance capacity of the APEC member countries to develop bankable PPP projects. It has been decided by the participating countries that Indonesia will become home to the pilot project. This decision was one of the results of the 2013 APEC Finance Ministers' Meeting (AFMM), which ended on 20 September 2013 in Nusa Dua on the island of Bali.

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Indonesia's central bank (Bank Indonesia) decided to raise its benchmark interest rate (BI rate) by 50 basis points to 7.0 percent on Thursday (29/08) in order to support the weakening rupiah amid slowing global economic growth. The rupiah has been on a long losing streak and has fallen to its lowest level against the US dollar in four years. The BI rate had already been raised in June and July from a historically low 5.75 percent to 6.50 percent. Today, an extra meeting was scheduled to discuss policy measures.

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Indonesian Finance Minister Chatib Basri said that the lower pace of economic growth in China, the world’s second-largest economy, is a major concern for Indonesia as it leads to declining demand for commodities (and thus places downward pressure on commodity prices). As Indonesia is a major commodity exporter - such as coal, crude palm oil, nickel ore and tin - the country feels the impact of weak global demand for commodities. About 60 percent of Indonesia’s exports are commodities, mostly raw ones.

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Bank Indonesia Governor Agus Martowardojo said that although the recent weakening trend of the Indonesian rupiah exchange rate is in line with the performance of other Asian currencies, the central bank is prepared to intervene in the market in an effort to support the currency and keep it in a comfortable range. On Monday (06/10), Bank Indonesia Executive Director Tirta Segara already stated that foreign exchange intervention was conducted in September 2014 in order to stabilize the rupiah exchange rate.

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In an attempt to strengthen the domestic investor base and to meet financing of the Revised 2014 State Budget (APBN-P 2014), the government offers Indonesian Retail Government Bonds (Obligasi Negara Ritel Indonesia, abbreviated ORI) again. This is the 11th time, the government issues ORI bonds since its first launch in 2006. The ORI series ORI011 is offered in the period 1-16 October 2014 with a coupon rate of 8.5 percent and a tenor of three years. The minimum allowed order is IDR 5 million and the maximum IDR 3 billion per individual.

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Indonesia’s House of Representatives (DPR) approved the 2015 State Budget on Monday (29/09) that was proposed by the outgoing President Susilo Bambang Yudhoyono administration. The budget deficit is now set at IDR 245.9 trillion (USD $20.5 billion), equivalent to 2.21 percent of gross domestic product (GDP), and lower than the 2.32 percent of GDP proposed by the government in both the Financial Memorandum and the Revised 2015 State Budget. However, the accepted budget deficit is still high compared to previous years.

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US Federal Reserve Chairwoman Janet Yellen reminded global investors to prepare for a sooner-than-expected US interest rate hike (Fed Funds Rate, FFR) provided that the economy of the USA - the world’s largest economy - continues its improving trend. In fact, speculation has emerged that the FFR will be raised before the end of 2014 although Yellen stated more than once that the ‘close-to-zero’ interest rate environment would be maintained for a considerable period after the US bond-buying program (quantitative easing) has ended.

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Emerging currencies in Asia, led by the Indonesian rupiah exchange rate, strengthened in the past week on positive economic data from the US and China, the world’s two largest economies. Companies in the US added more jobs than expected in June 2014, while manufacturing in China grew at its fastest pace in 2014. Improving economies of the US and China are important for Asian countries as it boosts Asian exports. Moreover, Indonesian inflation and trade data contributed to positive market sentiments.

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The Indonesian rupiah exchange rate appreciated slightly on Wednesday (11/06). According to the Bloomberg Dollar Index, the currency of Southeast Asia’s largest economy appreciated 0.04 percent to IDR 11,810 per US dollar. Reuters reported that the euro zone's monetary easing in combination with the recent improvement in China's economy offset the impact of higher US yields on Asia. However, investors are still waiting for several data, including the BI interest rate, the Eurozone’s industrial production, and US retail sales.

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The Indonesian rupiah exchange rate appreciated 0.25 percent to IDR 11,860 per US dollar according to the Bloomberg Dollar Index on Thursday (05/06). However, this is not expected to be the start of an appreciating trend for the currency as there are still various domestic and international factors that place pressure on the rupiah. Contrary to the Bloomberg Index, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.54 percent to IDR 11,874 against the US dollar today.

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Although Indonesian Finance Minister Chatib Basri provided positive news to the market by stating that the country's trade deficit (and co-related current account deficit) will probably not be as large in the second quarter of 2014 (as compared to the same quarter in 2013) as well as an expected increase in Indonesian banks' consumer credit, the benchmark stock index (known as Jakarta Composite Index or IHSG) was unable to rise on Wednesday's trading day (04/06). Particularly local investors were eager to sell their Indonesian shares.

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Based on Bank Indonesia's benchmark rupiah exchange rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR), the Indonesian rupiah exchange rate depreciated 0.44 percent this week. Although Asian currencies have been largely supported by renewed capital inflows as investors are optimistic that central banks across the globe continue to provide stimulus to boost local economies, the rupiah has been under pressure due to various domestic issues. These issues include politics as well as fuel subsidies.

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