In the past couple of days the US dollar regained its bullish momentum, strengthening against most other currencies including the Indonesian rupiah. The greenback had been under pressure after the Federal Reserve signalled - contrary to markets expectation - it would not raise the US interest rate environment too soon as the US economic growth outlook and US inflation were still not at the right level yet. This made emerging market assets more attractive for the short-term. However, this development seems to have been short-lived.

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The central bank of Indonesia (Bank Indonesia) announced on Friday (06/03) that the country’s official foreign exchange reserves stood at USD $115.5 billion at end-February 2015, up from USD $114.2 billion in the preceding month. The growth was primarily the consequence of improved oil & gas export revenues, and which exceed payments of the government’s external debts. The news caused positive sentiments on Indonesia’s markets and contributed to the record high closing of Jakarta Composite Index on Friday.

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On 25 January 2015, 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 in the last seven days. Most of the topics involve economic matters such as the impact of the Eurozone’s quantitative easing program on Indonesia’s stocks and currency, the global challenges that are being faced by Indonesia, an infrastructure update, international relations, and more.

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Despite having intervened to support the rupiah exchange rate, Indonesia’s central bank announced that the country’s foreign exchange reserves rose USD $800 million to USD $111.9 billion at the end of December 2014. The rise was primarily due to foreign exchange income from Indonesia’s oil and gas exports as well as the withdrawal of government’s foreign debt. Tirta Segara, Executive Director of Bank Indonesia, said that foreign exchange savings and banks swaps with Bank Indonesia had also increased at the end of 2014.

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Although Indonesia’s debt-to-GDP ratio is currently still at a safe level at roughly 32.8 percent, the country’s central bank (Bank Indonesia) expressed its concern about the high debt service ratio (DSR) and debt-to-export ratio. The DSR is the ratio of debt service payments (principal and interest) of a country to its export earnings. Generally, a healthy ratio is somewhere in the range of 0 and 20 percent. However, Indonesia’s DSR has risen from 20 percent in 2007 to 50 percent in 2014.

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The Governor of Indonesia’s central bank (Bank Indonesia), Agus Martowardojo, expects that the country’s trade balance will post a surplus of around USD $600 million in April 2014, roughly similar to the surplus that was recorded one month earlier (USD $673 million). The April 2014 surplus would be supported by an improvement in non-oil & gas exports, stable commodity prices (particularly coal and crude palm oil/CPO), as well as the waning influence of the Minerba Act.

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Foreign debt of Indonesia totaled USD $264 billion per December 2013. Based on data from Statistics Indonesia, 46.8 percent of this total debt was accounted for by the public sector, while the remaining 53.2 percent was private sector debt. On a year-on-year (yoy) basis, growth of Indonesia’s total debt slowed to 4.06 percent in the last month of 2013. One year earlier this growth was significantly higher at 12.0 percent. Indonesia’s level of foreign debt is still safe at 30.2 percent of GDP in the fourth quarter of 2013.

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Growth of Indonesia's foreign debt has slowed down in July 2013 according to data from Indonesia's central bank (Bank Indonesia). Total foreign debt in July 2013 stood at USD $259.54 billion, a 7.3 percent increase compared to the same month in 2012. In June 2013, the year on year growth had been 8 percent. Bank Indonesia stated that it considers Indonesia's current foreign debt situation - both in the private and public sector - as healthy. Growth has slowed down as a consequence of the slowing national economy.

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Credit rating agency Moody's Investors Service signaled in a new research report that it could upgrade Indonesia's current sovereign Baa3 (positive outlook) credit rating provided it detects an improvement in several macro-economic indicators. In 2012 Moody's granted the investment grade status back to Indonesia. Meanwhile, exactly one year ago (in February 2017) it upgraded Indonesia's sovereign credit rating outlook from stable to positive.

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Although Indonesian stocks managed to rebound, the rupiah continued to depreciate against the US dollar today (25/08). However, rupiah weakening was limited as Bank Indonesia was closely monitoring and intervening in markets to support the rupiah. Based on the Bloomberg Dollar Index, the Indonesian rupiah depreciated 0.03 percent to IDR 14,054 per US dollar. As significant further rupiah weakening is assumed to seriously undermine confidence in the rupiah, the central bank’s intervention efforts are well received by investors.

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Bank Indonesia announced today that the country’s total foreign debt rose 7.6 percent (y/y) to USD $298.1 billion in the first quarter of 2015. This figure means that the pace of the country’s foreign debt growth has slowed from the 10.2 percentage point growth (y/y) that was recorded in the preceding quarter. Both public and private sector foreign debt growth slowed as both sectors are more careful to take up loans amid a weakening rupiah while export revenues decline amid sluggish global (and domestic) economic growth.

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On Friday (17/04) Indonesia’s central bank (Bank Indonesia) announced that the country’s foreign debt grew 9.4 percent (y/y) to USD $298.9 billion in February 2015, thus slower than the 10.5 percent (y/y) growth rate in the preceding month. Indonesia’s external debt growth slowed as both public and private sectors refrained from taking more debt. Public sector foreign debt grew 4.4 percent (y/y) to USD 134.8 billion, while private sector foreign debt rose 13.8 percent (y/y) to USD $164.1 billion in February.

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In a World Bank blog, World Bank economist Alex Sienaert posted an update on the economy of Indonesia. After Statistics Indonesia (BPS) released the country’s latest GDP growth figures in early February, two important revisions regarding Indonesia’s GDP statistics have been made: (1) BPS has shifted the basis of the computation from the year 2000 to 2010, and (2) it adopted a significantly updated methodology and presentation of the statistics (updating national accounts from the 1993 System of National Accounts [SNA] to SNA 2008).

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Foreign debt of Indonesia accelerated 11.8 percent year-on-year (y/y) to USD $294.4 billion in November 2014. This total debt of USD $294.4 billion in November 2014 consists of public foreign debt of USD $133.9 billion and private foreign debt of USD $160.5 billion. The central bank of Indonesia (Bank Indonesia) stated that public foreign debt rose 8.6 percent (y/y) mainly on a rise in foreign holdings on government debt securities. Meanwhile, the growth pace of private foreign debt slightly eased.

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Moody's Investors Service, a global bond credit rating agency, assigned a definitive rating of Baa3 (stable outlook) to Indonesian government notes maturing in 2025 and 2045 (these notes are issued under the government’s global medium-term note program). Moody’s said in a press release on Tuesday (13/01) that the Baa3 government bond rating is supported by the country’s narrow fiscal deficits, low public indebtedness, healthy economic growth prospects, and the large size of Indonesia’s economy.

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This year, legislative and presidential elections will be held in Indonesia. Obviously, there is a strong relationship between the politics and economics of a country. Businessmen from various sectors of Indonesia's economy have already been voicing their views. As the umbrella organization of the Indonesian business chambers and associations, Kadin Indonesia recently shared its views about the elections as well. The institute believes that the 2014 elections will run smoothly because Indonesia's democracy has matured.

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Indonesia’s external debt growth continued to slow in October 2013. Debt grew 5.8 percent (yoy) to USD $262.4 billion compared to 8.6 percent (yoy) growth in the previous month. Slowing growth in external debt occurred both in the public and private sector. Public sector external debt position at the end of October 2013 grew 0.5 percent (yoy) to USD $125.8 billion compared to 2.1 percent (yoy) in September. Meanwhile, private sector external debt grew steadily at 11.1 percent (yoy) to USD $136.6 billion as compared to the previous month.

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International financial services company Standard & Poor's (S&P) downgraded its outlook on Indonesia’s BB+ rating from positive to stable as the agency assessed that Indonesia's reform momentum is fading and the external profile is weakening. The decision came as a surprise as Indonesia's government had just declared to reduce its massive spending on fuel subsidies starting from next month. These subsidies were the main reason why S&P had not upgraded Indonesia's credit rating to investment grade yet.

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