Country Report Indonesia September 2009

Outlook for 2009-10

• The president, Susilo Bambang Yudhoyono, has a strong mandate to pursue his reformist policy agenda after comfortably winning re-election on July 8th.
• Mr? Yudhoyono's Democratic Party will be the largest party in the House of People's Representatives (DPR, the legislature) from October 2009, but holding a coalition government together could still be difficult.
• Fiscal and monetary policy has been used to stimulate domestic demand in 2009. The authorities will look to withdraw these stimulus measures in 2010 to contain inflationary pressures.
• The budget deficit will widen to of 2.6% of GDP in 2009, before falling back to 1.6% in 2010, as revenue recovers.
• The Economist Intelligence Unit expects real GDP to expand by 4.2% in 2009 and 4.5% 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 1.4% of GDP in 2009-10.

Monthly review

• The Constitutional Court dismissed all challenges to the presidential election results in mid-August, confirming Mr? Yudhoyono as the victor.
• Investigations into the July 17th suicide bombings at the JW Marriot and Ritz-Carlton hotels in Jakarta have revealed a terrorist network that is wider and more sophisticated than had previously been assumed.
• The crisis facing the Corruption Eradication Commission (KPK) is intensifying, jeopardising the fight against graft. High-level political intervention is needed to protect the KPK, but Mr? Yudhoyono appears reluctant to lend his support.
• The El Nino Southern Oscillation, a weather pattern that brings a prolonged dry season to Indonesia, appears to be setting in and will curb agricultural production in 2009-10.
• Bank Indonesia (BI, the central bank) left its benchmark interest rate unchanged at 6.5% on September 3rd.
• The BI consumer confidence index rose to 115.4 in July, its highest level in nearly five years and up from 109.1 in June.
• Inflation rose to 2.8% year on year in August, compared with 2.7% in July, as a result of higher food prices.
• The current account recorded a surplus of US$3.1bn in the second quarter of 2009, slightly higher than the US$2.9bn surplus posted in the first quarter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11