GAMA Leading Economic Indicator

Indonesian business cycles, which uses the quarterly GDP data for 2000-2012 shows a modestly fluctuating cycles.   The movement business GDP cycles is predicted using Leading Economic Indicator (LEI), which has the ability to predict the resumption point from the business economic cycles.

Gama LEI is able to predict the point at which the economy changes course during the 2008 global financial crisis, which was the third quarter of 2007, which was followed by the change for the worse in course of GDP in mid 2008. Subsequently, Gama LEI predicts with high accuracy the recovery of GDP at the start of 2009, which is followed by improvement in PDB cycles in late 2009.

Gama LEI in the third quarter 2011 started showing signs of changing course, presaging period of impending slow growth.   Gama LEI signals in the third quarter 2012 point to a change for the better, slower path of decreasing. This shows that GDP cycles will avoid sharp contraction and it regains stability. In light of that, economic practitioners must be ready to determine the right strategy and policy needed to support the economy in future.

Economic Outlook

The Indonesian economy will continue to show resilience amidst the repercussions of the European economic crisis on the global economy in 2013. However, economic uncertainty in Europe which is showing signs of intensifying have in 2012 led to a decrease in economic growth of China and India, economies which were virtually unaffected by the 2008 global financial crisis. Such a development will eventually have negative repercussions on Indonesian economy. Financial markets, which are the main transmission through which global economy uncertainty affects the Indonesian economy, will continue to be an important source of vulnerability in 2013. Large volume of portfolio inflow in 2012, will continue in 2013, along with its attendant uncertainty, would become source of vulnerability. The same applies to international trade, which showed weaknesses in 2012, will follow the same pattern in 2013. In light of that, the Indonesian economy in 2013 will continue to rely on the domestic economy such consumption. Growth in investment, though initially posted robust performance in 2012, is predicted to become sluggish in 2013. Developments in the non tradable sector such as Transportation and Communications, Construction, and Financial Services, Real Estate and Company Services are expected to face pressure and difficulties. To that end, Gama LEI in its previous chapter predicted that Indonesian economy growth in 2013 will not much different to the growth in 2012 within the range of 6-6.5%. To that end, the expectation in 2013 the economic authority will have to implement policies that will ensure that macroeconomic and financial markets stability, which conditions are needed to ensure investment and business climate remains sound. In addition, economic stimulus policies will be needed to stave off the adverse impact of global economic uncertainty on the Indonesian economy. Gradual reducing of fuel subsidies is one of the options that can be taken, and funds saved in the process transferred to developing infrastructure which will go a long way in enhancing the competitiveness of Indonesian products on the international market.