Indonesia has been ‘the favorite investment destination’ among global investors which is reflected by capital inflows into Southeast Asia's biggest economy due to abundant natural resources and a fast growing middle class. In fact, in the last five years, Indonesia's GDP has grown averagely about 6% yoy and the country has recorded trade surpluses due to strong demand from China and India. However, since January 2012, the trade balance began to worsen and this has been exacerbated by recent falls in commodity prices. Concern about overheating economy has been rising in Indonesia since trade balance deficit has widened the current account deficit. Does Indonesia’s economy show signs of overheating?
