Country Report Indonesia February 2009

Outlook for 2009-10

• Susilo Bambang Yudhoyono is expected to be re-elected in the second round of the presidential election in September 2009, but he will have to defend the performance of his government in the coming months.
• Should Mr Yudhoyono's Democratic Party (PD) perform well in the April 2009 legislative election, it may be able to nominate its own presidential candidate. Otherwise the PD is likely to continue its alliance with Golkar.
• Stabilising the currency and capital markets is the most pressing priority for the authorities. Beyond the need to restore market stability, the president will look to support economic growth and move forward with reforms.
• Indonesia’s real GDP growth will slow to a ten-year low of 1.9% in 2009, owing to the global economic recession. There will be only a small recovery in 2010, when real GDP will expand by 2.2%.
• The government's fiscal deficit will widen to an average 2.8% of GDP in 2009-10 following the introduction of a Rp71.3trn (US$6.1bn) stimulus package aimed at supporting domestic demand.
• The Economist Intelligence Unit expects the current-account surplus to narrow to US$141m (0.2% of GDP) in 2009, before widening to US$2.7bn (0.6% of GDP) in 2010.

Monthly review

• The General Election Commission has said that the presidential election will take place on July 8th. In the event that no candidate wins at least 50% of the vote, a second round will be held on September 8th.
• In 2008 Indonesia attained self-sufficiency in rice production. The State Logistics Agency (Bulog) is forecasting that the country will export rice for the first time in more than 30 years in 2009.
• The finance minister, Sri Mulyani Indrawati, has announced details of a Rp71.3trn fiscal stimulus, which officials believe will ensure real GDP growth of 4.5%-5.5% in 2009; they expect the fiscal deficit to widen to 2.5% of GDP.
• Bank Indonesia (BI, the central bank) has reduced interest rates for the third time in as many months. On February 4th the bank lowered its main policy rate, the BI rate, by 50 basis points to 8.25%, the lowest level since May.
• In December merchandise exports fell by 20.6% year on year, the sharpest rate of decline since November 2001. However, exports were up by 20% in 2008.
• Indonesia's trading partners, including the EU, Japan and South Korea, have accused the government of protectionism by imposing non-tariff barriers on the import of certain goods.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;53;49;60;2834;80;48;1;20;10
NAICS Code: 336;44;22;52;3254;62;517;11;311;212