Analysis about Economic Indicators in Indonesia Based on the data of Bank Indonesia, Statistics of Indonesia (Badan Pusat Statistik)

and other sources, there are some economic indicators of Indonesia: 1. Gross Domestic Product (GDP) is an important economic indicator to show the economic condition of a country at certain period in time. It is defined as the total value added of all production units in a certain country for a certain period (usually one year). The calculation of GDP involves variables representing government consumption, personal consumption, domestic investment and net exports. An increase in GDP generally signifies an increase in the overall wealth and health of the economy. One of the main economic indicators used to assess the performance of the construction of the GDP per capita. GDP per capita is GDP Divided by the total mid-year population. GDP per capita is an indicator through the World Bank classifies countries into categories, namely low-income economies, middle-income economies (lower-middle-income economies and upper-middle-income economies), high-income economies and highincome OECD (Organization for Economic Co-operation and Development) members. Indonesia is lower-middle-income economies. Case: Februari 21st, 2012. GDP can be quite eerie by being perceived as middle-class income. The numbers could be considered quite sacred and middle income levels. There are certainly happening at a family get into the middle-income level and above. For example, there will be changes in consumption such as lifestyle. The more people the better financial condition. Multiplier occurs, a very high economic growth. World Bank predicts growth in Indonesia in 2012 could reach 6.5%. This kind of growth (6.5%) could easily because the community itself to create wealth. Based on the record of BPS, Indonesia's GDP per capita at current prices in 2011 reached Rp30.8 million (USD3,542.9), meaning that there is an increase in GDP per capita amounting to 13.65% from the previous year amounted to Rp27.1 million (USD3,010.1). The industrial sector is ready to face the situation demanded. Indonesia's per capita income is now USD3,000 hit. National economic conditions which continue to accelerated since 2009 is rated as momentum to boost revenue growth of Indonesian society. Indonesia's per capita income growth from 2007 to 2010 continued to increase. 2. Inflation is an indicator that gives information about fluctuation of general price level of goods and services consumed by people. The development of prices for goods and services directly impact the level of purchasing power and cost of living, changes in the value of assets and liabilities and the value of the contract/business transactions. It is an indicator of movement between demand and supply in the real sector is also closely related to changes in interest rates, economic productivity, the exchange rate and 1

foreign currency, an index of macroeconomic budgetary and other parameters. Judging from the high inflation rate which fluctuates describe the magnitude of the uncertainty of the value of money, the level of production, distribution and direction of economic development that can lead to false expectations and manipulations that can harm the overall economy. Conversely a low inflation economy is also not favorable because it describes the low purchasing power and demand for goods and services which in turn slows economic growth. Indonesia's inflation rate measured by the Consumer Price Index (CPI) is calculated and made public every month by the Statistics of Indonesia (BPS). Case: February, 2012. There is an inflation of 0.05% by the Consumer Price Index (CPI) of 130.96. Of the 66 cities of CPI, 40 cities experienced inflation and 26 cities experienced deflation. The highest inflation occured in Mataram 1.73% by 145.51 CPI and the lowest occurred in Tangerang 0.03% by 131.59 CPI. While the highest inflation occured in Jambi 1.29% by 133.21 CPI and the lowest occured in Palu 0.04% by 135.00 CPI. Inflation occured due to price increases shown by the increasing of index on food, beverages, cigarette and tobacco 0.34%, housing, water, electricity, gas and fuel 0.27%, 1.22% clothes; 0.15% health, education, recreation and sport 0.08% and transport, communication and financial services 0.06%. While the food hit 0.73% deflation. Inflation rate calendar year (January-February) in 2012 is 0.81% and inflation rate year on year (February 2012 to February 2011) is 3.56%. Bank Indonesia monetary policy is intended to manage price pressures coming from the side of aggregate demand relative to the supply side. Monetary policy is not intended to respond to rising inflation caused by factors that are temporary shocks that will disappear by itself over time. While inflation can also be influenced by factors stemming from the nature or the supply side shocks such as rising oil prices and the disruption of harvest or the flood of weights in the CPI basket, inflation is influenced by the weight of a surprise factor is represented by the volatile food and administered prices that cover approximately 40% of the CPI weights. Thus, the ability to control inflation, Bank Indonesia is very limited if there are any shocks are very large such as fuel price increase in 2005 and 2008 that led to a surge in inflation. Considering that the inflation rate is also influenced by factors such surprise is the inflation target requires cooperation and coordination between the government and BI integrated through good macroeconomic policies of fiscal, monetary and sectoral. Furthermore, the

characteristics of inflation in Indonesia is quite vulnerable to shocks (shocks) from the supply side requires specific policies for these problems.

a.

Producer Price Index (PPI) is an index that measures the average change in prices received by domestic producers for each output produced in each level of the production process. PPI data were collected from various economic sectors, especially from the manufacturing, mining and agriculture.

b.

Consumer Price Index is is one of key macroeconomic indicators produced by BPS. CPI reveals price fluctuation of commodities and services that are generally consumed by most Indonesias household consumers. Price of some commodities and services are administered price because of changes in government policy such as rice, gasoline and public transportation tariff but the others reflect monthly movement of demand and supply of goods and services or market mechanism at retail trade. CPI change from time to time show the price movement of a package of goods and services consumed by the public.

CPI and PPI are used as an indicator to measure the inflation rate. We cannot expect that Central Bank will raise interest rates of each indicator to give a strong signal about the inflation and lowering interest rates. 3. Interest Rate (BI Rate) is the interest rate policies that reflect the attitude or stance of monetary policy set by the Bank Indonesia and announced to the public. Bank Indonesia will generally raise the BI Rate expected if inflation exceeds the target set, whereas Bank Indonesia will lower the BI Rate when inflation is estimated to be below the target set. Case: Februari 9th, 2012, BI rate moved to 5.75%. Based on Debuty Governor of Bank Indonesia, the movement of BI rate is to maintain the momentum of economic growth. By reducing interest rates will provide stimulus to growth. Rupiah exchange rate will also be relatively stable so that it will not much affect the stability of the exchange rate. Decline in interest rates is one step to the normalization of interest rates. According to him, Indonesia is facing a situation where liquidity in the banking system is too excessive. Therefore, necessary step in the sense that the interest rate term structure of interest rates for the better. Now SBI auction result last nine months alone was much decreased which was below 4.00%. While the BI Rate is 5.75%, it is still some distance away. 5.75% is near the long-term interest rates as reflected in the 20-year government bond yield. 4. Unemployment rate is an indicator that can give an idea about the real condition of the various economic sectors. Indicator of the unemployment rate can be used as a tool for analyzing health/absence of a country's economy. If the economy is in a state of full capacity it will be achieved full employment. If the state contrary, the unemployment rate will increase. Unemployment rate is a very important economic indicator for the financial markets in general and in particular the foreign exchange market and will also become 3

the benchmark of the poverty level of Indonesian society. Unemployment can be linked to indicators of economic growth because economic growth is the result of an increase in production capacity which is derived from increased investment. So it is clear that economic growth is closely linked to the increased use of labor, as well as investment. With the increased investment demand for labor would be increased, so that the existence of economic growth resulting from increased investment affect unemployment rates decrease, and vice versa. The higher the unemployment rate then the purchasing power of the resulting products will decline, which means the movement of the economy will have problems. Case: Indonesia's labor conditions require serious attention. Based on Statistics of Indonesia, November, 2011, total labor force of Indonesia in August reached 117.4 million people, while the number of unemployed as many as 7.7 million people. The open unemployment rate reached 6.56% because of discrepancy between the results achieved between education to employment, an imbalance of demand and supply and quality of Human Resources (HR) produced remains low. 5. Money Supply is money that circulates outside of the Central Bank, Deposit Money Banks, and Government Payment office. Theoritically, the inflation rate is influenced by the money supply. In quantity of money theory, it was shown that if the money supply increases, the result can be seen from the three other variables: the price should rise, the quantity of output must rise, or the turnover rate must come down. when the Central Bank change the money supply (M) and causing changes in proportional of the nominal output (PY), such changes will be reflected in the level price (P). Because the rate of inflation shown by the percentage change in price level, then increasing the money supply will cause inflation. Factors that affect the money supply are: Central Bank policy of autonomous rights and monetary policy (including: the political discount rate, open market politics, political, cash ratio, selective credit politics) in printing and circulating currency; Government policy through the finance ministers to increase the money supply by printing paper money and coins are small nominal; Commercial banks can create demand deposits through purchases of shares and securities; Income levels; Interest rate; Consumer appetite for a good (the higher the consumer appetite for a good price then the item will be driven up, so that would push the amount of money in circulation increased, and vice versa); Prices of goods; Credit policy of the government. 6. International Trade has been developed by BPS since long time ago. It measures Indonesias exports and imports of goods only, the international trade of services is compiled by Central Bank of Indonesia in line with the compilation of Balance of Payments. It is very useful in analyzing commodity and regional trading patterns and 4

directions, formulating and reviewing trade policy, undertaking trade negotiations, promoting domestic products for enlarging exports, and evaluating the domestic market implications of import and export activity. Since Indonesia facing on their economic crisis, trend of exports and imports become one of the important indicators for evaluation. International Trade covers export and imports activities. Export is defined as all commercial and non-commercial goods leaving the country. In contrast, import is defined as all goods which entering the country. Exports and imports of goods represent the value of all goods and other market services provided to or received from the rest of the world. They include the value of merchandise, freight, insurance, transport, travel, royalties, license fees, and other services, such as communication, construction, financial, information, business, personal, and government services. They exclude labor and property income (formerly called factor services) as well as transfer payments. 7. Balance of Payment is a balance sheet that consists of all activities of international economic transactions of a country, both commercially and financially, with other countries in a given period. Balance of Payment reflects all transactions between residents, government and employers of domestic and foreign parties, such as export and import transactions, portfolio investments, transactions between the Central Bank and others. A common indicator used is the trade balance/current account. Another factor affecting the balance of payments is the flow of foreign investment coming into the country in the form of Foreign Direct Investment and Portfolio Investment. a. Foreign Direct Investment is an important feature of an increasingly globalized economic system. He began as a company from one country to invest in the long run to a company in another country. In this way the home country can control the company in investment destination countries (host country) either partially or completely. Case: FDI comes into the domestic manufacturing sector in 2010-2011 has exceeded the total FDI in the sector for 10 years before. In 2010-2011, FDI into the manufacturing sector reached USD 10 billion. FDI will still be flowing into Indonesia. Foreign investors have long to assess Indonesia with a population of 240 million to 160 million reproductive age as a potential market. In fact, the International Monetary Fund (MF) dared to release GDP per capita of Indonesia reached USD 5,000 in 2015. Indonesia is much more attractive market than Malaysia or Thailand. However, foreign investors prefer the two countries as Indonesia is still tied a variety of structural problems, such as infrastructure, the issue of laws, legal uncertainty, and taxation issues. Investment rating granted because the government's fiscal health is good enough. It can be seen in the budget deficit low enough (below 2%) and the ratio of debt to GDP is only about 25%.

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