Country Report Indonesia June 2009

Outlook for 2009-10

• Public opinion polls indicate that support for the president, Susilo Bambang Yudhoyono, is far higher than that for his rivals, and he is expected to be re-elected in the presidential election on July 8th 2009.
• In the April 9th election Mr Yudhoyono's Democratic Party (PD) emerged as the biggest party in the House of People's Representatives (DPR, the legislature), but holding together a coalition government could still be difficult.
• Fiscal and monetary policy will be used to stimulate domestic demand in 2009-10. The authorities have made moves towards financial and trade protectionism, and may look to go further down this path.
• The budget deficit will widen to an average of 2.8% of GDP in 2009-10, owing to falling tax revenue as economic growth slows and the introduction of a Rp71.3trn (US$6.9bn) stimulus package aimed at supporting domestic demand.
• The Economist Intelligence Unit expects real GDP to expand by 2.4% in 2009 and 3.1% in 2010 as robust private consumption growth helps the economy through a downturn in external demand.
• We expect the current account to record an average surplus equivalent to 1.1% of GDP in 2009-10.

Monthly review

• The General Elections Commission (KPU) announced a revision to the outcome of April's legislative election in late May, increasing the number of seats held by the victorious PD.
• Three candidatesMr Yudhoyono, the previous president, Megawati Soekarnoputri, and the vice-president, Jusuf Kallahave secured the requisite backing of political parties to contest the presidential election on July 8th.
• A rupture between Mr Yudhoyono and Mr Kalla has raised concerns regarding the viability of the current government, which will remain in office until October 20th.
• Mr Yudhoyono has said that if he wins a second term as president his agenda will focus on improving infrastructure, the business climate and management of natural resources.
• In early June, Bank Indonesia (BI, the central bank) announced a further cut of 25 basis points in its benchmark interest rate, taking the rate down to 7%.
• The current account recorded a surplus of US$1.8bn (equivalent to 1.6% of GDP) in the first quarter of 2009 as a result of a larger non-oil and gas trade surplus and a reduced deficit on trade in oil, according to BI.

This report covers the following industry codes:
SIC Code: 60;37;2834;80
NAICS Code: 52;336;3254;62