Outlook for 2011-15

• The president, Susilo Bambang Yudhoyono, has a strong mandate to pursue his reformist policy agenda, having won re-election comfortably in July 2009, but his reforms are encountering resistance from vested interests.
• Indonesia will elect a new president to succeed Mr Yudhoyono in 2014. A requirement of the election law means that the next president is likely to be the nominee of one of the country's three main political parties.
• Bank Indonesia (BI, the central bank) will raise interest rates in early 2011. There is a possibility that it will expand recently imposed capital controls aimed at slowing the appreciation of the rupiah.
• The fiscal deficit will narrow to the equivalent of 0.1% of GDP by 2015, from 1.2% in 2011, owing partly to the inability of the civil service to utilise fully the sums allocated to it for capital expenditure.
• The Economist Intelligence Unit forecasts that real GDP growth will accelerate to an average of 6.3% a year in the forecast period, driven mainly by private consumption and fixed investment.
• We expect the current account to record an average surplus equivalent to just under 1% of GDP in the forecast period. The income account will remain in deficit, owing to the repatriation of earnings by foreign-owned companies.

Monthly review

• Mr Yudhoyono's popularity remained stable in an opinion poll conducted in December. In the poll, 63% of respondents approved of his performance, compared with 62% in the previous survey, which was conducted in October.
• Indonesia has assumed the chair of the Association of South-East Asian Nations. The foreign minister, Marty Natalegawa, said that the government would move the group towards greater economic integration.
• The government's fiscal deficit is estimated to have narrowed to the equivalent of 0.6% of GDP in 2010, much smaller than the deficit of 2.1% of GDP assumed in the revised budget, mainly owing to underspending.
• BI's board of governors left interest rates on hold for the 17th month in a row in January, at 6.5%, despite an acceleration in inflation in December to 7%, the fastest rise in prices since April 2009.
• In an attempt to rein in money-supply growth in the face of strong inflows of foreign capital, BI has said that it will raise the commercial banking sector's US dollar reserve requirement to 5% from March 1st and to 8% from June 1st.
• Production of a number of commodities, including coal, crude oil and palm oil, is expected to increase in 2011.