Analysts expect that Indonesia's central bank (Bank Indonesia) will maintain its benchmark interest rate at 5.75 percent in tomorrow's meeting (14/05/13). This rate, a historic low rate for Indonesia, has been in force since February 2012. The central bank's deposit facility (Fasbi) is also expected to be kept at 4 percent. The position of Governor of Bank Indonesia - currently held by Darmin Nasution - will be taken over at the end of this month by Agus Martowardojo.

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Similar to the International Monetary Fund (IMF), the Asia Development Bank has warned that Asia can become hit by an asset bubble as central banks are loosening monetary policy. Besides Japan's program to inject USD $1.4 trillion into the domestic economy, America's Federal Reserve and United Kingdom's Bank of England will increase their money supplies to spur economic growth. These measures can result in economic overheating as well as asset bubbles across the Asian region.

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In April 2013, Indonesia's inflation rate eased 0.10 percent month-on-month, or 5.57 percent year-on-year. According to Statistics Indonesia (Badan Pusat Statistik, abbreviated BPS) April's deflation was triggered by easing food and clothes prices. Food items that became cheaper last month included garlic, chili, and chicken meat. Particularly rice contributed to the country's deflation as the harvesting season in Indonesia has set in. Core inflation is 4.12 percent (YoY).

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Indonesian newspaper Investor Daily reported that stocks at the Indonesia Stock Exchange are still relatively cheap compared to regional stock indices. Currently, the price to earnings ratio (P/E ratio) of Indonesia's main index is about 18. In contrast, South Korea's Kospi index amounts to 34, Japan's Nikkei 28, Taiwan's Taiex 23, and Philippines' PSE stands at 23 times earnings. As the Indonesian economy as well as its companies' profit figures are projected to grow, the P/E is expected to fall to 16 this year.

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Today, Statistics Indonesia (Badan Pusat Statistik, abbreviated BPS) released Indonesia's inflation figures for the month March 2013. According to Suryamin, head of BPS, the country's inflation last month reached the level of 0.63 percent, the highest March inflation level in five years. Particularly food prices drove the inflation rate upwards. Year-on-year inflation now stands at 5.90 percent, while year-to-date inflation (January-March) is 2.41 percent.

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Indonesia's central bank (Bank Indonesia) expects the Indonesian economy to grow between 6.3 and 6.8 percent in 2013, supported by strong domestic consumption and foreign investment, with inflation rising by about 4.5 percent. Indonesian exports are expected to increase due to better global demand for Indonesia's commodities such as coal and palm oil, with commodity prices rising accordingly. But some problems in Indonesia's financial system remain to be solved.

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The Ministry of Energy and Resources stated that the Indonesian government will go ahead with the increase in electricity rates this year. Up to the end of this year, electricity rates will increase every quarter by about four percent to reach a total increase of 15 percent. In early January, the first rate increase was introduced by raising the tariff of electricity sold by state-owned Perusahaan Listrik Negara (PLN), the sole electricity provider in Indonesia. 

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Indonesia's trade deficit narrowed slightly in January as there has been better demand from developed countries. However, Indonesian exports remain under pressure with persistent weak global demand. Moreover, higher crude oil prices increase the country's import costs. In addition to Indonesia's trade deficit, annual inflation increased to 5.31 percent in February due to rising food prices and higher electricity tariffs.

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Bank Indonesia, the country's central bank, continued its key interest rate at the level of 5.75 percent. The interest rate has been at this historic low level for the 12th month in a row. The current policy rate is "considered consistent with the contained inflationary pressure in accordance with its target range of 4.5 percent ± 1 percent in 2013 and 2014," according to the website of Indonesia's central bank.

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Today, Statistics Indonesia (BPS), a non-departmental government institute, stated that the inflation rate of January increased due to the government's decision to raise electricity tariffs and due to massive floods in Jakarta and other cities. January's headline inflation is 1.03 percent. The year-on-year inflation rate now stands at 4.57 percent; still within Indonesia's Central Bank's target of 4.5 ±1 percent.

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As expected, the central bank of Indonesia (Bank Indonesia) decided to impose a 50 basis points (bps) interest rate hike after concluding its two-day monetary policy meeting on 16-17 November 2022.

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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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Indonesia’s central bank (Bank Indonesia) – finally – decided to raise its benchmark interest rate by 25 basis points to 3.75 percent after concluding its two-day policy meeting on 23 August 2022, thereby joining the global wave of rate hikes as central banks need to combat accelerated inflation, while –especially in emerging markets – higher rates also function to prevent too much capital outflows as US assets become more attractive amid aggressive US Federal Reserve tightening.

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What came as a surprise to us is that the Asian Development Bank (ADB) decided to raise its projection for Indonesia’s economic growth in full 2022 from 5.0 percent year-on-year (y/y) to 5.2 percent (y/y) in July 2022. This decision was substantiated in its Asian Development Outlook 2022 Supplement entitled Recovery Faces Diverse Challenges.

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We were surprised to learn that Indonesia’s central bank (Bank Indonesia) decided to leave its interest rates unchanged at the two-day monetary policy meeting on 23-24 May 2022. The benchmark BI 7-Day Reverse Repo Rate was kept at 3.50 percent, while the deposit facility and lending facility rates were maintained at 2.75 percent and 4.25 percent, respectively. We had expected Bank Indonesia to raise its key rate by 0.25 percent to 3.75 percent at this occasion.

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With the Ramadan month just having started, it is important to take a look at food prices in Indonesia. The Ramadan-Idul Fitri period is typically a period when prices rise amid a significant increase in demand.

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It came as a big surprise to us when the central bank of Indonesia (Bank Indonesia) announced on 19 November 2020 (the day it concluded its two-day monetary policy meeting) that it decided to cut its benchmark interest rate (the seven-day reverse repo rate) by 25 basis points to 3.75 percent. Bank Indonesia also cut its deposit facility and lending facility rates by 25 basis points to 3.00 percent and 4.50 percent, respectively.

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