1. GAMA Leading Economic Indicator (GAMA LEI)

GAMA Leading Economic Indicator (GAMA LEI) is a model, which was developed by Macroeconomic Dashboard team, of FEB, UGM, which has the ability to undertake state of the art forecasting. Prediction results generated by GAMA LEI model have the ability to predict the direction of movements of Indonesian economy in future long before the event. The prediction of the direction of movement of Indonesian economy is done by observing the movement or change in direction, which is produced by the GAMA LEI model for a certain period of time. GAMA LEI is compiled on the basis of stringent quantitative and qualitative tests and using a selection of certain variables, deemed to have the ability to produce the best prediction.

 

GAMA LEI has the ability to predict the economic cycle of Indonesian economy (GDP) with impeccable accuracy long before the event. This far, GAMA LEI model has already shown its accuracy in predicting the direction of that the economy cycle takes. In this time, GAMA LEI predicts improvement in the performance of several key indicators in Indonesia which in turn will continue to feed into better improvement of the economy as a whole. In this edition, GAMA LEI predicts the direction of the economy cycle as the year of politics, 2014, takes shape.

GAMA LEI is compiled from various indicators which must pass through stringent statistics tests. An indication of improvement in the performance of certain variables such as exports to economic regions (China and Europe), international reserves position (from the vantage point of macroeconomic), market capitalization and IHSG (in relation to capital markets), are quite influencial in macroeconomic conditions. Nonetheless, it is worth noting that other macroeconomic indicators can change quickly in just a couple of weeks in future.

The uniformity with respect to the pattern of economic growth trajectory of Indonesian economy, coupled with results of the projection of the direction of cycle of Indonesian economy produced by GAMA LEI model, generate comprehensive prediction. The prediction of the business cycle focuses on determining whether, the movement of the economic cycle falls within an expansion phase or contraction in several weeks in future. GAMA LEI 2013:Q4 cycle stands in the expansion phase (above the point of origin) although there is a tendency toward declining. An example: economic growth in Indonesia in 2013:Q4 based on year-on-year, is showed to increase. However, GDP cycle that is generated by the model shows a downward trend, albeit during the expansion phase.

Figure 22: GAMA Leading Economic Indicator
GAMA LEI predicts a downward trend in the Indonesia economy cycle

GAMA LEI in this fifth edition predicts a downward trend in Indonesian economic cycle (GDP). Nonetheless, based on the movement and pattern of the movement of the economy both year-on-year and quarter-to-quarter, portends possibility of slight increase in economic growth in 2014:Q1. In other words, if the government does not take full advantage of the potential for economic growth which is shown to increase year-on-year in 2013:Q4, such a momentum to improve the performance of the economy is likely to be lost.

GAMA LEI in this fifth edition, predicts a downward trend in Indonesian economy (GDP). Nonetheless, based on the movement and pattern of the movement of the economy both year-on-year and quarter-to-quarter, portends possibility of slight increase in economic growth in 2014:Q1. In other words, if the government does not take full advantage of the potential for economic growth which is shown to increase year-on-year in 2013:Q4, such a momentum to improve the performance of the economy is likely to be lost.

2. Consensus on Macroeconomic Indicator Projections

 

Outcome of consensus shows that the value of three key Indicators for Indonesia, interalia: economic growth, inflation, and exchange rate are moving toward improvement from 2014 to 2015. The consensus was achieved based on results of a survey conducted by the Macroeconomic Dashboard team with respondents who were drawn from lecturers and researchers in the Faculty of Economics and Business, Universitas Gadjah Mada.

In general, real GDP growth in 2014 will not differ markedly from 2013. Real GDP (y-o-y) is predicted to growth within the range of 5.85% ± 0.14% in quarter I-2014 and 5.86% ± 0.14% in quarter II-2014. On a year basis, real GDP for 2014 and 2015, is predicted to growth within the range 5.91% ± 0.14% and 6.3% ± 0.3%, respectively.

The Rupiah exchange rate is predicted to improve and become more stable in 2014. In quarter I-2014, Rupiah exchange rate is predicted within the range IDR/USD 11,680 ± IDR/USD 363. In the following quarter, rupiah exchange rate is predicted to experience slight appreciation to the level IDR/USD 11,510 ± IDR/USD 404. On a yearly basis, rupiah exchange rate in 2014 is predicted to be IDR/USD 11,550 ± IDR/USD 447 and will appreciate in 2015 to IDR/USD 11,130 ± IDR/USD 589.

Inflation in Indonesia in 2014-2015 is predicted above 5 percent. In 2014, prediction outcomes of Indonesian inflation show that it will be within the range of 5.58% ± 3.19%, while in 2015, inflation will be tamed somewhat reaching the range of 5.22% ± 3.17%. Meanwhile, on quarterly basis, Indonesian inflation in predicted within the range of 4.33% ± 3.46% and 4.25% ± 3.26%, in quarter I-2014 and II-2014, respectively.

 

Table 4: Estimation of real GDP Growth (y-o-y, in %)

 

 

 

Source: Primary Data, calculated (2014)

 

Table 5: Estimation of Inflation (y-o-y, in %)

 

 

 

Source: Primary Data, calculated (2014)

 

Table 6: Estimation of Rupiah Exchange Rate (IDR/USD)

 

 

 

Source: Primary Data, calculated (2014)