By Maarten-Jan Bakkum, ING Investment Management
Few emerging economies have been under so much pressure lately as Indonesia. Since 2011, the terms of trade of the country have deteriorated sharply. This came as a result of the Chinese slowdown and the drop in coal, palm oil and rubber prices. After having enjoyed ten years of rising commodity prices, the Indonesian economy is now suffering from price declines of its main export products.
This has pushed local incomes down, with a negative impact on consumption and bank deposit growth. And it has led to a sharp correction in fixed investment growth, because of uncertain commodity demand and tighter financial conditions, partly linked to the widening current account deficit. Continue reading »
Japanese fast food lovers: Indonesian yakitori and chicken nuggets may be coming to a table near you soon as Southeast Asia’s biggest economy tries to take advantage of China’s latest food safety woes.
McDonald’s Japan stopped importing Chinese chicken in July, part of a broader backlash after a major Chinese supplier was accused of selling meat beyond its shelf-life. Continue reading »
Few, if any, Indonesians have heard of Gerald Ratner, the former British jewellery chain executive who became notorious for joking that his company’s products were “total crap” and then seeing sales nosedive.
But, in Ignasius Jonan, the head of the state-owned national rail company, Kereta Api Indonesia, they seem to have their own version of Ratner.
When asked why the trains are so crowded, he has a simple answer: you get what you pay for. Continue reading »
Investors have piled into Indonesia’s $1.5bn worth of Islamic bonds, making bids for over six times that amount. So is the strong demand for the sukuk another sign that Indonesia’s economy is becoming less fragile?
The 10-year sukuk, rated Baa3 by Moody’s, was marketed at the country’s lowest yield since 2012 on optimism over the incoming administration of president-elect Joko Widodo. Strong demand – order books were worth $10bn – pushed down the yield, which started at around 4.65 on Monday before being reduced to 4.35 per cent. Continue reading »
By Jonathan Fenby, Trusted Sources
There’s nothing like an acronym or a catchy label when it comes to emerging markets. The master alchemist, Jim O’Neill, set the pace with the formulation 13 years ago of the four-nation BRICs (with or without a final capital S for South Africa). Fidelity followed that with the MINT collection of Mexico, Indonesia Nigeria and Turkey constituting MINT.
Then Morgan Stanley chipped in with Fragile Five, which – such are the vagaries of nomenclature – includes five members of the previous two aggregations.
Now, a new and potentially more durable grouping is emerging – even if it does not lead itself to an acronym that trips off the tongue. The best I can come up with is CIMI – or, if you twist it to give Mexico rather than China first place, the marginally more memorable MICI, though that would invite too many columnists to compare them to Disney’s mouse. Continue reading »
If ever the phrase “it was the best of times, it was the worst of times” could be applied to Indonesia, it would be to President Yudhoyono’s ten years in power from 2004-2014. Arguably, his first term was the best five-year period of economic reform and revitalisation in the history of the country, while his second term was possibly the worst.
As Indonesia, Asia’s fifth-largest economy, speed-walks towards presidential elections on July 9, it’s probably time now to start looking beyond the elections. What kind of economic-reform program could the newly-elected president pursue to re-ignite our sharply slowing economy?
As it turns out, President Yudhoyono’s first term in 2004-2009 showcases what can be accomplished in Indonesia, given enough political will, and given enough desire to execute and implement. Here’s a sampling of bold, determined and successful reforms from 2004-2009. Continue reading »
The “fragile five” – Brazil, India, Indonesia, Turkey and South Africa – have had a torrid time since Morgan Stanley identified them last year as countries particularly vulnerable to the “tapering” of US monetary stimulus because of their large and rising current account deficits. Continue reading »
If your mental map of the global economy puts emerging markets on the periphery and developed markets at the core, then developments in the global travel industry are set to turn you inside out.
By 2023, according to a new study by Oxford Economics, the “emerging” world will dominate global air traffic, accounting for 51 per cent of total traffic, up from 44 per cent in 2013 (see chart). The main drivers of this trend will be a rapid upsurge in international travellers from China, Russia, Brazil, India and Indonesia who spend at a quicker pace than developed world counterparts. Continue reading »
While Joko Widodo, the wildly popular governor of Jakarta, just about managed to restrain his euphoria when he was finally named as his party’s presidential candidate on Friday, investors were not so coy.
The Jakarta stock exchange jumped by three percent on Friday, its biggest one-day gain for six months, to reach a nine-month high, while the once-troubled rupiah has strengthened by 1.3 per cent against the US dollar since then. Continue reading »
Indonesian GDP came in higher than expected in Q4, up 5.7 per cent year-on-year in the quarter, above the average forecast of 5.3 per cent, as improving exports reduced the impact of slowing growth in domestic consumption and investment.
The full FT story is here. Beyondbrics presents a rundown of the analysts’ viewpoints (with our emphasis in bold). Continue reading »
While speculation about the US Federal Reserve’s plans to curb its quantitative easing programme drags on, Indonesia’s currency continues to “taper” of its own volition.
On Thursday, the dollar rose to over 12,000 rupiah for the first time since 2009. Confidence in Indonesia’s currency is weak because of the country’s large current account deficit and slowing economic growth, which is at a four-year low. Continue reading »
Nothing lasts forever, not even the Federal Reserves’ QE programme. And when it ends, emerging markets will have a new normal to contend with. Time to get ready.
Indonesia is hoping robust investment and the completion of much-delayed infrastructure projects will enable it to contend with the new “basic economic parameters” that will be required once the Fed starts tapering its asset purchases, the country’s vice-president (pictured above) said in an interview on Thursday. Continue reading »
Indonesia’s central bank held its policy interest rate unchanged on Tuesday, ending an aggressive tightening cycle that saw the rate rise from 5.75 per cent a year in May to 7.25 per cent at the bank’s previous policy meeting last month.
The decision was widely expected: 17 out of 18 economists surveyed by Bloomberg predicted no change. But was the decision the right one? Several analysts say Bank Indonesia has left the job unfinished. Continue reading »
The World Bank has followed the International Monetary Fund’s lead by slashing its economic growth forecasts for Indonesia and urging the country to carry out “deep reforms” if it is to avoid a prolonged slump.
Just three months since it last updated its predictions, the development lender cuts its GDP projection for this year from 5.9 per cent to 5.6 per cent and for next year from 6.2 per cent to 5.3 per cent. Continue reading »
After several months in the eye of the global emerging markets storm, Indonesia received some respite on Tuesday when it reported an unexpected trade surplus and a slowdown in the inflation rate.
Annual consumer price inflation fell to 8.4 per cent in September from 8.8 per cent (a four-year high) in August, while Indonesia reported a positive trade balance of $132m for August in contrast to July’s record $2.3bn deficit. Continue reading »