Better performance albeit higher cost pressures
In the August-September survey, the Business Sentiment Index (BSI) rose for the seventh straight survey, up 9.6 percent to 135.3. Both components of the BSI showed gains: the component measuring sentiment toward current situations, the Present Situations Index (PSI), jumping 15.8 percent to 127.3 and the component of the BSI measuring expectations over the next six months, the Expectations Index (EI), rising by 4.5 percent to 143.2.
More CEOs expressed positive views on current business conditions in the latest survey. All in all, CEOs have much to cheer. Most importantly, the government has continued to ensure macroeconomic stability, pushing interest rates down to low levels and pursuing policies that have helped to restore faith in the rupiah. Moreover, some businesses would have experienced a significant pick-up in activities at this time of the year due to the more profligate purchasing behavior of consumers since Ramadan fell in September.
The US sub-prime crisis in the States has had only a minimal impact on the business environment in Indonesia.
Looking forward, CEOs remain upbeat. Yet there are some clouds on the horizon. In particular, CEOs are increasingly worried over inflation.
Business confidence toward the government declined again in the latest survey: the business confidence in the government index (BCGI) slipped 1.78 percent to 97.78, after falling 3.4 percent in the earlier survey.