Indonesia Economic and Market Outlook 2016 - ekon · PDF fileIndonesia Economic and Market Outlook 2016 ... d) 2016 plan (full year); n.a. data not ... Indonesian Banking Statistics,

© PT Bank Mandiri (Persero) Tbk.

Indonesia Economic and Market Outlook 2016

Anton H. Gunawan ~ Chief Economist of PT Bank Mandiri (Persero), Tbk.

Mobile: +62 (817) 988-8884 |E-mail: [email protected]

1

Jakarta, CMEA: July 25th, 2016

mailto:[email protected]




Where will the global economy heading?

• The global economic recovery is still fragile; volatility remains • Brexit putting more pressures, amid China continues to decelerate • Any rebound on commodity prices?


Area 2015 2016F 2017F

World 3.1 3.2 3.5

US 2.4 2.6 2.6

Euro Area 1.6 1.5 1.6

UK 2.2 1.9 2.2

Japan 0.5 0.5 -0.1

China 6.9 6.5 6.2

India 7.3 7.5 7.5

Russia -3.7 -1.8 0.8

Brazil -3.8 -3.8 0

ASEAN-5 4.7 4.8 5.1

The global economic recovery is still fragile, both IMF and World Bank cut their global growth projection again in 2016 driver is still unseen yet

Source : IMF, World Economic Outlook April 2016, World Bank, Global Economic Prospects June 2016

Area 2015 2016F 2017F

World 2.4 2.4 2.8

US 2.4 1.9 2.2

Euro Area 1.6 1.6 1.6

Japan 0.6 0.5 0.5

China 6.9 6.7 6.5

India 7.6 7.6 7.7

Russia -3.7 -1.2 1.4

Brazil -3.8 -4.0 -0.2

Indonesia 4.8 5.1 5.3

East Asia and Pacific 4.7 4.8 5.1

IMF cut 2016 global growth forecast to 3.2% from 3.4%

World bank cut 2016 global growth forecast to 2.4% from 2.9%

3


Source: Bloomberg, World Bank (as of 11 July 2016, %YTD) * Rotterdam Price

2014: -24%

2015: -34%

2014: -18%

2015: -29%

2014: -20%

2015: -13% 2014: -38%

2015: -26%

2014: -27%

2015: -39%

Brent Crude Oil

USD 46.6/bbl

WTI Crude Oil

USD 45/bbl

Coal

USD 56.4/MT

CPO

USD 625/MT* Rubber

USD 1.6/Kg

2016: +7% 2016: +10% 2016 : +19%

2016: +33%

2016: -2%

Commodity Price Forecast 2016 2017 2018 2019 2020

Oil : Nymex WTI Crude Oil (USD/BBL) 47.75 50.45 53.03 54.64 55.87

Oil : ICE Brent Crude Oil (USD/BBL) 48.74 51.62 54.87 57.28 59.32

CPO (USD/MT)* 630 647 664 682 701

Coal CIF (USD/MT) 58.41 56.60 56.29 56.50 56.60

Rubber (USD/kg) 1.35 1.43 1.52 1.61 1.71

Limited improvements of Global Commodity Prices as no other countries can replace China’s demand

4


28,8%

12,0% 13,5%

14,9%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

UK China India US

Exports to EU

Trade to EU and UK From Big Country Big countries will be affected with EU and UK’s economies slowdown

Source: Trademap

3,4%

2,6%

3,7%

1,7%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

India China US Japan

Exports to UK


Sources of Gains & Losses from Brexit (for UK)


Will Indonesian economy keep growing?

• The consumption is still relatively flat interest rate will decrease • Economy is expected to somewhat rebound in 2H16 seasonality factors • Main risks: tax shortfall, thus widening deficit; and policy mishaps • Need more focus industrial policy direction


Sumber: BPS

Indonesia may also experience a stagnant economic growth in 2016, with sub 5.0% growth lack of a driver


9

Aceh 3.66

Sumut 5.02

Riau 2.34

Kepri 4.58

Sumbar 5.48

Jambi 3.42

Bengkulu 4.99

Sumsel 4.94

Babel 3.3

Lampung 5.05 DKI

5.62

Banten 5.15

Jabar 5.08

Jateng 5.12

DIY

5.04

Jatim 5.34

Bali 6.04

NTB 9.97

NTT 5.06

Kalbar 5.93

Kalteng 5.17

Kaltim -1.29

Kalsel 3.97

Sulut 5.96 Gorontalo

6.61

Sulteng 11.81

Sulbar 6.14

Sulsel 7.41

Sultra 5.21

Malut 5.09

Maluku 5.46

Pabar 5.52

Papua -2.03

> 7

5.5 - 7

4 - 5.49

<4

More provinces have lower than national economic growth in 1Q16

Regional Economic Growth 1Q-2016 (%)


4,0%

4,5%

5,0%

5,5%

6,0%

6,5%

-20%

-10%

0%

10%

20%

30%

40%

Ma

r-12

Ju

n-1

2

Sep

-12

Dec-1

2

Ma

r-13

Ju

n-1

3

Sep

-13

Dec-1

3

Ma

r-14

Ju

n-1

4

Sep

-14

Dec-1

4

Ma

r-15

Ju

n-1

5

Sep

-15

Dec-1

5

Ma

r-16

VAT growth y-y (LHS) GDP growth y-y (RHS)

GDP growth and value added tax growth

Signs of relatively stagnant economic growth domestically

May16 growth of VAT still in the negative territory, despite some improvement in government spending realization → sign of improvement in 2Q16? Spending cut is imminent this year.

213

273

317

375 330

357

2011 2012 2013 2014 2015 2016

Government spending realization (IDR tn)

5M accumulation of government spending

5M accumulation of material and capital expenditure

37,9

53,4 58,0 59,9

52,7

91,7

2011 2012 2013 2014 2015 2016

Source : CEIC, Ministry of Finance


-15

-10

-5

0

5

10

15

Jan-1

5F

eb

-15

Ma

r-1

5A

pr-

15

Me

i-15

Jun-1

5Jul-1

5A

gu-1

5S

ep-1

5O

kt-

15

No

v-1

5D

es-1

5Jan-1

6F

eb

-16

Ma

r-1

6A

pr-

16

Me

i-16

Jun-1

6

National JakartaJava ex. Jakarta Ex. Java

-5

0

5

10

15

20

25

30

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

National JakartaJava ex. Jakarta Ex. Java

-50

0

50

100

150

Jan-1

5F

eb

-15

Ma

r-1

5A

pr-

15

Me

i-15

Jun-1

5Jul-1

5A

gu-1

5S

ep-1

5O

kt-

15

No

v-1

5D

es-1

5Jan-1

6F

eb

-16

Ma

r-1

6A

pr-

16

Me

i-16

Jun-1

6National Greater JakartaRest of Java Ex. Java

Cement sales growth (% YoY) Vehicle and motorcycle sales

growth (% YoY) Retail sales index

Ramayana SSSG (% MoM)

SSSG : same store sales growth

Aces Hardware SSSG (% MoM) Matahari Dept. Store SSSG (% YoY)

Source : Companies, CEIC as of July 2016

Mixed performances in some benchmark indicators. Seasonal pick up?

Greater Jakarta : +122.9

National : +99.8 Jakarta : +13.0

National: +10.9 National: +9.4

16,9 6,3 5,5

4,2

Ju

n-1

4

Sep

-14

De

c-1

4

Ma

r-15

Ju

n-1

5

Sep

-15

De

c-1

5

Ma

r-16

Ju

n-1

6

11,5

-8,9 -1,7

Ju

n-1

4

Au

g-1

4

Oct-

14

De

c-1

4

Feb

-15

Ap

r-1

5

Ju

n-1

5

Au

g-1

5

Oct-

15

De

c-1

5

Feb

-16

Ap

r-1

6

Ju

n-1

6

Vehicle sales Motorcycle sales

177,50

190,10

213,40

Ju

n-1

4

Au

g-1

4

Oct-

14

De

c-1

4

Feb

-15

Ap

r-1

5

Ju

n-1

5

Au

g-1

5

Oct-

15

De

c-1

5

Feb

-16

Ap

r-1

6

Ju

n-1

6


Sector Current Market

Demand Assessment c)

Indicator Growth (%, yoy)

Notes Jan-May 2015

2015 Jan-May

2016

Retail Positive Ramayana sales -1.0 b) -2.0 27.0 b)

Consumer confidence is flat Ace Hardware sales 2.7 b) 4.7 6.4 b)

Automotive Neutral

Total car sales -16.6 -16.1 -0.6

Consumer confidence is flat Commercial vehicle -14.0 -16.6 -29.1

Passenger vehicle -17.5 -16.0 9.9

Total motorcycle sales -24.7 -17.6 -6.0

Property Negative Total Marketing Sales of eight companies

24.4 b) -4.3 -39.8 b) Consumer confidence is flat and interest rates are still high

Cement Positive Total sales -2.8 b) 0.9 3.7 b) Sales growth is supported by

government infrastructure projects

Heavy Equipment

Negative

Total sales -38.3 -39.5 -26.0 Demand from commodity sector has not yet fully recovered even

though commodity prices increased

Forestry segment -15.5 -9.3 -51.8

Agro segment -56.9 -63.2 -45.2

Mining segment -43.2 -49.9 -52.0

Construction segment -31.0 -22.3 26.1

Sea Transport Negative Loading and unloading activities in the 5 main ports

-7.9 -8.2 -10.5 Volume of trade has not yet

increased, especially in

commodities sector

Oil Negative CAPEX (Investments) n.a. -2.6 -14.9 d) Oil price is still low

CPO Negative Volume of exports 27.7 a) 15.6 -8.0 a) CPO price has consistently increased but still needs time to impact the export performance Value of exports -0.6 a) -11.9 -18.3 a)

Coal Negative Volume of exports -3.4 -7.8 -10.6 Coal price remains low

Value of exports -15.9 -21.2 -28.2 Notes : a) January-April b) January-June c) the status is not OCE Industry Rating; d) 2016 plan (full year); n.a. data not available

Industrial sales performance in 5M16: many still in the red territory


2012 2013 2014 2015 May-162012 2013 2014 2015 May-16

2012 2013 2014 2015 May-162012 2013 2014 2015 May-16

Sector (% of total loans)

Wholesale (19.6%)

Processing ( 18.2%)

% (YoY)

Agricultures ( 6.4%)

Transportation (4.3%)

Real Estate ( 4.6%)

Most sectors with large proportion of total loans have been slowing down significantly since 2012

Source : Indonesian banking statistic, as of May 2016

33.2

28.9

10.6 11.3

29.4 29.6

15.1 14.3

29.7

24.4

20.0 19.9 24.8

29.6 28.3

11.7

-14.3

20.4

7.4 8.2

33.7

3.3 5.1

-0.7

12.5

2012 2013 2014 2015 May-16

13


Deteriorating banking sector’s asset quality: NPL rose in May 2016 to 3.11% from 2.93% (Apr16). Rising special mention loans due to restructuring and weak economy

14

NPL (%) Credit quality (IDR tn)

Source : Indonesian banking statistics, May 2016

NPL by types and earnings

asset by categories(IDR tn)

Earnings Asset Dec-14 Dec-15 May-16

Current 4,309 4,720 4,931

Special mention 143 184 216

Sub standard 13 18 23

Doubtful 14 13 17

Loss 52 68 82

Types of Credit Dec-14 Dec-15 May-16

Working Capital 43.8 57.3 72.6

Investment 21.2 27.0 33.7

Consumption 14.3 16.6 20.1

2.37

2.49

2.872.83

2.93

3.11

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar

-16

May

-16

100

150

200

250

300

350

400

Feb

-15

Ma

r-15

Ap

r-1

5

Me

i-15

Ju

n-1

5

Ju

l-1

5

Ag

u-1

5

Sep

-15

Okt-

15

No

v-1

5

De

s-1

5

Ja

n-1

6

Feb

-16

Ma

r-16

Ap

r-1

6

Me

i-16

Special mention Sub-standard

Doubtful Loss


-20%

-10%

0%

10%

20%

30%

40%

-1,00% 0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00%

With a largest size of loan and relatively higher percentage of NPL, wholesale

and retail trade and manufacturing sector has larger risk to the whole banking

system

Mining, NPL 5.6%,

loan growth -13.0,

size IDR118 tn

Procesing Industry,

NPL 3.6%, loan growth

8.2%, size IDR740 tn

Construction,

NPL 4.8%, loan

growth 15%, size

IDR175 tn

Real estate, NPL 2.9%, loan

growth 12.5%, size IDR186tn

Education NPL

1.7%, loan

growth 15.7%,

size IDR8,312 tn

Bubble size :

nominal size of

credit

Source : Indonesian Banking Statistics, Bank Mandiri calculation as of May 2016

NPL

Agriculture, NPL 2%, loan

growth 20%, size IDR261

tn

21%

2%

0%

1%

Growth of NPL (% YoY)

1%

Size of loan, loan growth, and NPL by sector

27%

6%

1%

1%

7%

4%

2%

0%

Proportion to total NPL

5%

4%

Community,

NPL 4.65%, loan

growth -7.5%,

size IDR55 tn

8,2%

13,9%

13,9%

14,1%

17,6%

18,3%

22,0%

23,3%

24,2%

27,4%

34,1%

44,1%

46,7%

49,5%

75,2%

76,0%

Community,…

For Apartement…

Real Estate,…

Non Industrial Origin…

Agricultures, Hunting…

For Home Ownership

For Vehicles Ownership

Financial intermediaries

Transportation,…

Wholesale and Retail…

For Shop House…

Electricity, Gas and…

Mining and Quarrying

Education Services

Provision of…

Procesing Industry

2%

Electricity, Gas

and Water NPL

1.7%, loan growth

15& size IDR101tn

Wholesale, NPL

4.4%, loan growth

7.4%, size IDR796

tn

Transportation,

NPL 4.5%, loan

growth -0.7%, size

IDR1756tn

15


0%

1%

2%

3%

4%

5%

6%

0% 20% 40% 60% 80% 100%

0%

1%

2%

3%

4%

5%

6%

0% 20% 40% 60% 80% 100%

Fisheries

NPL by sector in May 2015

NPL growth

Provision of eating and

drinking

Financial

Real

estate

Electricity

Construction

Fisheries

Processing

Transportation

Wholesale

Mining

Agriculture Industry :

2.5%

Industry : 30.7%

NPL by sector in May 2016

NPL growth

Construction

Industry :

3.1%

Industry : 30.4%

Real Estate

Agriculture

Transportation

Financial

Electricity

Mining

Provision of

eating and

drinking

Procesing

Industy

Wholesale

It has more spread out, not just commodity related sector only

Source : Indonesian Banking Statistics, Bank Mandiri calculation as of May 2016


Production capacity utilization (%) Corporate capital expenditures*

Source : CEIC, Mandiri Sekuritas

Production capacity utilization and corporate capital expenditures are also still relatively weak

79,8

77,8

75,8

66

68

70

72

74

76

78

80

82

Ma

r-1

1

Jun-1

1

Sep-1

1

De

c-1

1

Ma

r-1

2

Jun-1

2

Sep-1

2

De

c-1

2

Ma

r-1

3

Jun-1

3

Sep-1

3

De

c-1

3

Ma

r-1

4

Jun-1

4

Sep-1

4

De

c-1

4

Ma

r-1

5

Jun-1

5

Sep-1

5

De

c-1

5

Ma

r-1

6

50,86

23,57

-11.5% -4.8%

-30%

-10%

10%

30%

50%

70%

90%

-

10

20

30

40

50

60

Mar

-11

Jun

-11

Sep

-11

De

c-1

1

Mar

-12

Jun

-12

Sep

-12

De

c-1

2

Mar

-13

Jun

-13

Sep

-13

Dec

-13

Mar

-14

Jun

-14

Sep

-14

De

c-1

4

Mar

-15

Jun

-15

Sep

-15

De

c-1

5

Mar

-16

Capex (IDR tn) - LHS Capex growth y-y -RHS

* Consists of 78 companies that covered by Mandiri Sekuritas Equity Research

© PT Bank Mandiri (Persero) Tbk. 18

Aceh

2,05 jt; 8,13%

Sumut

6,17jt; 6,49%

Riau

2,84jt; 5,94%

Kepri

0,83jt; 9,03%

Sumbar

2,43jt; 5,41%

Jambi

1,62jt, 4,66%

Bengkulu

0,96jt; 3,84%

Sumsel

3,89jt; 3,94%

Babel

0,65jt; 6,17%

Lampung

3,85jt; 4,54%

DKI

5jt; 5,77%

Banten

5,23jt; 7,95% Jabar

20,28jt; 8,57%

Jateng

17,16jt; 4,2%

DIY

2,04jt; 2,81%

Jatim

19,65jt; 4,14%

Bali

2,33jt; 2,12%

NTB

2,3jt; 3,66% NTT

2,36jt; 3,59%

Kalbar

2,31jt; 4,58%

Kalteng

1,24jt; 3,67%

Kaltim

1,5jt; 8,86%

Kalsel

1,98jt; 3,63%

Sulut

1,09jt; 7,82% Gorontalo

0,54jt; 3,88%

Sulteng

1,44jt; 3,46%

Sulbar

0,62jt; 2,72%

Sulsel

3,58jt; 5,11%

Sultra

1,17jt; 3,78%

Malut

0,51jt;

3,43%

Maluku

0,68jt; 6,98%

Pabar

0,41jt; 5,73%

Papua

1,69jt; 2,97%

Peta Kontribusi Industri Manufaktur, JumlahTenaga Kerja

dan Tingkat Pengangguran Terbuka (2015)

Formulating industrial policy (1) Map of manufacturing and

employment

Sumber: BPS,

Keterangan:

(i) Share industri manufaktur per provinsi

> 20% (9 provinsi)

>10% – ≤ 20% (13 provinsi)

≤10 (12 provinsi)

(ii) Angka di tiap provinsi menunjukkan jumlah

tenaga kerja (juta) dan tingkat pengangguran

terbuka (%),


33,4 29,9

3,51

Tenaga ListrikYang

Dibangkitkan

Listrik yangDidistribusikan

Defisit/ Surplus

Sumatera

173.37 145.54

27.84

Tenaga ListrikYang

Dibangkitkan


Defisit/ Surplus

Jawa

4,89 6,24

-1,35 Tenaga Listrik

YangDibangkitkan


Defisit/ Surplus

Balnusra

2,26 2,04

0,22

Tenaga ListrikYang

Dibangkitkan


Defisit/ Surplus

Maluku Papua

7,67 7,83

-0,15

Tenaga ListrikYang

Dibangkitkan


Defisit/ Surplus

Sulawesi 10,22

8,35

1,88 Tenaga Listrik

YangDibangkitkan


Defisit/ Surplus

Kalimantan

Peta Nilai Proyek Infrastruktur per Provinsi Sampai Dengan Tahun 2016 (Rp. Trilyun)

dan Produksi Listrik per Pulau (Ribu MWH)

Sumber: BCI 2016, BPS dan PLN.

>20 triliun (1 provinsi)

10 − ≤20 triliun (4 provinsi)

1 − 10 triliun (15 provinsi)

≤ 1 triliun (14 provinsi)

Keterangan:

Nilai Proyek Infrastruktur 2016

Formulating industrial policy (2) Map of manufacturing and

infrastructures / electricity


2010

2011

2012

2013 2014

2015

Jan – May 2016 : IDR

403 tn (-7% compared

to Jan – Apr 2015)

Tax rev accumulation (Rp trillion) Excise (Rp trillion)

2010

2011

2012

2014

2015

2013

Jan – May 2016 : IDR

28 tn (-36% compared

to Jan – Apr 2015)

Monthly government tax revenue realization 2010 - 2016

Nov - Dec 2015 : +IDR248

tn Nov - Dec 2014 : +IDR147

tn

Nov - Dec 2015 : +IDR38 tn

Nov - Dec 2014 : +IDR17 tn

Source : ministry of finance, CEIC

0

200

400

600

800

1000

1200

1400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0

20

40

60

80

100

120

140

160

Jan Feb Mar Apr MayJun Jul AugSep Oct NovDec

“Ijon” and tax on asset revaluation saved the cash flow problems in late 2015


2015 2016

2015 20162015 2016

Rp1240 tn

Without

“ijon”:

Rp1,170 tn

Estimated

“ijon”: Rp70

tn

Rp 1,546 tn Tax revenue

target 2016

Scenario I : tax revenue growth 7%

Tax revenue

growth 7%

= Rp1,252 tn

Shortfall :

Rp294 tn

Scenario II : tax revenue growth 5%

Rp1240 tn

Without

“ijon”:

Rp1,170 tn

Estimated

“ijon”: Rp70

tn

Rp 1,546 tn Tax revenue

target 2016

Tax

revenue

growth 5%

= Rp1,228

tn

Shortfall :

Rp318 tn

= Rp1000 tn = Rp1000 tn

7% growth of tax revenue = Rp1,252 tn

Shortfall Rp294 tn from Rp1,546 tn

target



target

Source : ministry of finance, Bank Mandiri’s calculation

Fiscal risks due to shortfall in tax revenue more spending cuts needed

Tax

revenue

2015

Tax revenue

2015

Scenario III : tax revenue growth 0%



target

Rp1240tn

Estimated

“ijon”: Rp70

tn

Rp 1,546 tn Tax

revenue

target

2016

Tax

revenue

growth 0%

=

Rp1170tn

Shortfall :

Rp376 tn

= Rp1000 tn

Tax revenue

2015


Different estimates of Tax Amnesty’s revenues, but still we think they are not enough to fill in the budget gap

Estimation on Tax Amnesty Implementation

Item Bank Indonesia Government Mandiri Sekuritas

Potential offshore assets (Rp tn) 3,147 11,400 3,850

Potential onshore assets (Rp tn) 2,400

Estimated Declared offshore assets (Rp tn) 1,888 3,500 - 4,000 2,117

Estimated Declared onshore assets (Rp tn) 1,440

Potential repatriation asset (Rp tn) 560 1000 200 - 300

Tax revenue generation (Rp tn) 53 165 80 - 90

Impact exchange rate appreciation (Rp/USD) 150

Impact to economic growth (ppt) 0.3

Explanation on tax revenue creation from tax amnesty

Bank Indonesia: Only 60% of the offshore assets will declare under the tax amnesty law as the other 40% are related to crime activities

Government : Rp3500tn - Rp4000tn offshore declared assets that is not repatriated * 4% and Rp1000 offshore declared assets that are repatriated *2%

22


23 Source: CEIC

Indonesia’s real interest rate will likely remain competitive at 2%

Year end inflation is expected to pick up at manageable pace while average inflation is expected to go down

We expect BI to cut its benchmark rate further amid lower inflation and relatively more stable Rupiah. But, policy flip flop have reduced BI’s credibility

0

4

8

12

16

20

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Inflation (%)

eop (%)

average (%)

1.12.4

-4

0

4

8

12

16

20

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

BI rate and Inflation Real interest rate (%) Average inflation (%)Average BI rate


24

Loan to Deposit Ratio (%) Open market operation Instruments Outstanding

(IDR tn)

209

Outstanding banking liquidity = Open market operation instrument –

Swap BI

The industry LDR was relatively stable at relatively high level of 90.3% Placement at BI’s instrument had decreased since March, esp. at deposit facility

88,4

88,7

89,4

88,5

88,3

87,6

87,9

88,7

88,5

88,5

88,8

88,5

89,7

90,5

92,1

91,0

89,5

89,6

89,5

90,3

Oct-

14

No

v-1

4

De

c-1

4

Jan-1

5

Feb

-15

Ma

r-1

5

Apr-

15

Ma

y-1

5

Jun-1

5

Jul-1

5

Aug-1

5

Sep-1

5

Oct-

15

No

v-1

5

De

c-1

5

Jan-1

6

Feb

-16

Ma

r-1

6

Apr-

16

Ma

y-1

6

(200)

(100)

-

100

200

300

400

500

600

Dec

-12

Jan

-13

Feb

-13

Mar

-13

Ap

r-13

May

-13

Jun

-13

Jul-1

3A

ug-

13Se

p-1

3O

ct-1

3N

ov-

13D

ec-1

3Ja

n-1

4Fe

b-1

4M

ar-1

4A

pr-

14M

ay-1

4Ju

n-1

4Ju

l-14

Au

g-14

Sep

-14

Oct

-14

No

v-14

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Ap

r-15

May

-15

Jun

-15

Jul-1

5A

ug-

15Se

p-1

5O

ct-1

5N

ov-

15D

ec-1

5Ja

n-1

6Fe

b-1

6M

ar-1

6A

pr-

16M

ay-1

6Ju

n-1

6

Deposit Facility Term Deposit

Swap BI Reverse Repo SBN

SBI 9M+SDBI Outstanding Banking Liquidity

Source : BI and OJK, CEIC


But liquidity ratio fell as the banks’ holding on liquid instrument decreased in April

Liquidity ratio (Liquid

instrument/NCD)

Updated : May 2016

Liquidity ratio (Liquid

instrument/third party fund)

Liquid instrument = cash + placement at BI+ Excess Liquidity

NCD = Non core deposit = 30% demand deposit + 30% saving deposit +

10% time deposit

Source : Indonesian Banking Statistics, Bank Mandiri calculation

75

,48

8

6,0

4

85

,40

8

7,7

0

98

,89

8

8,2

6 9

4,8

6

99

,04

9

3,5

9

93

,34

9

2,4

7

92

,76

9

9,6

8

94

,55

8

9,9

5 9

5,4

3

94

,92

9

0,1

6 94

,71

8

7,0

2 9

2,5

0

10

1,2

7

87

,46

91

,77

8

1,7

9

71

,59

7

5,5

0

50

60

70

80

90

100

110

Mar

-14

Ap

r-1

4M

ay-1

4Ju

n-1

4Ju

l-1

4A

ug-

14

Sep

-14

Oct

-14

No

v-1

4D

ec-1

4Ja

n-1

5Fe

b-1

5M

ar-1

5A

pr-

15

May

-15

Jun

-15

Jul-

15

Au

g-1

5Se

p-1

5O

ct-1

5N

ov-

15

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Ap

r-1

6M

ay-1

6

15

,7

18

,0

17

,8

18

,3

20

,4

18

,1

19

,6 20

,4

19

,3

19

,2

18

,8

18

,8

20

,2

19

,1

18

,2

19

,6

19

,4

18

,4 1

9,6

1

7,9

1

9,1

2

1,1

1

8,1

18

,9

16

,8

14

,8 1

5,6

10

12

14

16

18

20

22

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

No

v-1

5

Jan

-16

Mar

-16

May

-16


4,3

1,1

1,2

2,5

4,0

2,3

2,2

0,6

2,1

2,2

3,2

2,3

1,2

3,4

3,9

2,8

1,5

1,0

1,9

3,1

BTN

Bank Pan

BankPermata

BII

CIMB Niaga

Danamon

BRI

BCA

BNI

Bank Mandiri

Mar-16Mar-15

109,7

98,8

89,8

103,1

97,3

119,1

83,0

77,9

89,1

86,8

109,0

99,7

92,6

98,3

99,0

114,9

89,8

81,7

90,3

89,8

BTN

Bank Pan

BankPermata

BII

CIMB Niaga

Danamon

BRI

BCA

BNI

BankMandiri

NPL (%) LDR (%)

Source : Bloomberg

Asset quality and liquidity of top 10 banks


4,5

5,0

5,5

6,0

6,5

Jan-16 Feb-16 Mar-16 Apr-16 May-16

1M 3M

5,0

5,5

6,0

6,5

7,0

7,5

8,0

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16

1M 3M

5,0

5,5

6,0

6,5

7,0

7,5

8,0


1M 3M5,0

5,5

6,0

6,5

7,0

7,5

8,0


1M 3M

27

-100

bps

-50 bps

7.75

6.75

6.375

5.875

-50 bps

-100

bps

7.75

7.25

6.87

5

5.87

5

-62.5 bps

7.50

6.875 6.50

5.87

5

-62.5 bps

-137.5 bps -112.5 bps

Banks had lowered deposit rates following cuts in BI rate this year


Deposit rates : Banks lowered their deposit rates in

May. 1M lowered by 9.8bps, 3M lowered by 23.6 bps

and 6M lowered by 17.1 bps

Lending rates : Rates for working capital loans in May

lowered by 16.9 bps, investment loans rates lowered by

12.0 bps, and rates for consumption loans lowered by

4.4 bps

Declines in time deposit rates were lagging vis a vis lending rates

Source : Indonesian Banking Statistics, as of May 2016

3

4

5

6

7

8

9

10

Jan

-11

Ma

y-1

1

Se

p-1

1

Jan

-12

Ma

y-1

2

Se

p-1

2

Jan

-13

Ma

y-1

3

Se

p-1

3

Jan

-14

Ma

y-1

4

Se

p-1

4

Jan

-15

Ma

y-1

5

Se

p-1

5

Jan

-16

Ma

y-1

6

Deposit Rates : 1 M

Deposit Rates : 3 M

Deposit Rates : 6 M

6.88

8.02

7.34

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

May

-16

Consumption

Investment

Working Capital

11.98

13.86

11.60

28


Some EM’s financial markets improved in 2016 amid reduced global uncertainty

Sumber: Bloomberg

Stock Indices Growth (ytd) Government Bond Yield (bps change)

Updated 16 Juni 2016

-17.6%

-9.5%

-3.9%

1.1%

2.1%

2.1%

4.4%

7.8%

6.5%

10.6%

11.8%

-19.3%

-16.1%

-3.9%

0.6%

1.1%

1.4%

4.4%

7.1%

8.0%

10.9%

12.2%

China

Japan

Malaysia

Korsel

India

US

Indonesia

Russia

Filipina

Singapore

Brazil

Jun 16 YTD

May 16 YTD

-28.9

-23.6

-39.0

-19.9

-39.8

-42.4

-75.0

-87.1

-352.5

-24.2

-28.6

-44.0

-46.5

-60.4

-65.8

-90.0

-108.5

-376.5

India

Malaysia

Japan

Thailand

South Africa

US

Russia

Indonesia

Brazil

Jun 16 YTD

May 16 YTD


-2.9%

-3.2%

-1.7%

-0.9%

-1.3%

-2.5%

-0.6%

0.9%

0.9%

2.4%

10.3%

6.7%8.8%

-4.6%

-4.6%

-3.4%

-3.3%

-2.3%

-1.7%

-1.1%

0.0%

0.8%

1.5%

6.3%

10.2%

10.3%

China

India

Hong Kong

USD

Philippines

Australia

Thailand

Euro

Singapore

Malaysia

Russia

Japan

Brazil

Jun 16 YTD

May 16 YTD

1.4%

1.7%

0.9%

1.2%

-0.3%

-1.0%

-0.9%

-2.4%

-3.9%

-10.7%

-7.7%

-10.0%

1.5%

1.4%

0.1%

-0.4%

-1.1%

-2.3%

-3.3%

-4.3%

-4.7%

-11.4%

-12.2%

-12.3%

China

India

Turki

Korea

Philippines

Thailand

Indonesia

Singapore

Malaysia

Rusia

Japan

Brazil

Jun 16 YTD

May 16 YTD

More stable Rupiah as authorities getting more serious in addressing the economic slowdown problems

Sumber: Bloomberg

Currencies against USD(% ytd)

depreciate appreciate

Updated 16 Juni 2016

depreciate appreciate

IDR against others (% ytd)

© PT Bank Mandiri (Persero) Tbk. Source: BIS, last updated in July 2016

appreciate

depreciate

REER, 2010 = 100

125.0

76.077.0

90.0

103.0

82.2

106.7

82.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0

Jan-

10

Apr

-10

Jul-

10

Oct

-10

Jan-

11

Apr

-11

Jul-

11

Oct

-11

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

Jan-

15

Apr

-15

Jul-

15

Oct

-15

Jan-

16

Apr

-16

China Russia Brazil

Indonesia ASEAN-5 excl. Indonesia Turkey

Korea Fragile 5 excl. Indonesia

The Rupiah is still undervalued (based on REER calculation), but BI is reluctant to let the Rupiah stronger while accumulating reserves

31


Returns on Indonesia Bonds are still the highest YTD 2016 (as of 18-Jul) FY2015

Source: Bloomberg and Mandiri Sekuritas, as of 18-July-2016

-3,3%

-1,6%

2,7%

3,3%

3,0%

0,4%

7,4%

5,6%

4,3%

2,4%

7,5%

3,3%

5,8%

6,7%

10,9%

5,2%

15,7%

-5,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0%

BBG ASIA Local Sov

BBG China Local Sov

BBG India Local Sov

BBG Taiwan Local Sov

BBG S Korea Local Sov

BBG Thailand Local Sov

BBG Philippine Local Sov

BBG Malaysia Local Sov

BBG Indonesia Local Sov

FX gained/(loss) againstUSD

Total return LCGB

-4,6%

-4,9%

-3,8%

-7,7%

-9,5%

-4,9%

-22,8%

-11,4%

0,9%

8,1%

8,1%

6,8%

6,2%

5,9%

0,9%

4,2%

2,9%

-30,0% -20,0% -10,0% 0,0% 10,0%

BBG ASIA Local Sov

BBG China Local Sov

BBG India Local Sov

BBG Taiwan Local Sov

BBG S Korea Local Sov

BBG Thailand Local Sov

BBG Philippine Local Sov

BBG Malaysia Local Sov

BBG Indonesia Local Sov

FX gained/(loss) againstUSD

Total return LCGB

32

© PT Mandiri Sekuritas

Still Positive expected total returns in Indonesia bond market

Different times, different drivers

Long term average return investing in IDR LCY GB is 12% with standard deviation of 12%.

We expect this year total return will +16%

(0,6)

29,5

10,1

3,2

22,4 21,1 21,5

13,1

(13,2)

13,6

3,2

(30)

(20)

(10)

-

10

20

30

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Coupon Capital gain/(loss)

Total return

Variable

Significance Weight

Before

investment

grade

After

investmen

t grade

US 10Y (%) 5.6% 43.2%

BI Rate (%) 18.2% 39.0%

CDS-5yr (%) 25.0% 9.9%

Core Inflation

(%yoy) 36.5% 4.2%

Change IDR/USD

(%yoy) 14.7% 3.8%

33


Update on IDR bond fund flow data (Rp tn) Foreign flows still supporting the recent rally

Source: DMO, Bloomberg and Mandiri Sekuritas

31-Dec-15

% of

outstanding 12-Jul-16 % of outstanding

Net buy/(sell) - Rp tn

mtd ytd 2015

Bank 348.9 23.9% 355.7 23.5% (6.9) 6.8 63.1

Central Bank 150.1 10.3% 148.1 7.2% (1.0) (2.0) 18.7

Mutual Fund 61.60 4.2% 76.6 4.7% 0.2 15.0 15.8

Insurance 171.62 11.7% 213.8 13.0% (0.6) 42.2 21.0

Foreign 558.52 38.2% 650.4 39.6% 6.4 91.9 97.2

Pension Fund 49.83 3.4% 64.38 3.9% (0.3) 14.6 6.5

Individual 42.53 2.9% 48.9 3.0% 0.0 6.4 12.1

Others 78.50 5.37% 85.5 5.2% (1.3) 7.0 17.2

Total 1,461.85 100.0% 1,643.4 100.0% (3.4) 181.5 251.9

34

© PT Bank Mandiri (Persero) Tbk. Source: Bloomberg, as of 12 July 2016

(%)

5-yr US Govt. Bond Yield vs. 5-yr ID USD Govt. Bond Yield

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

Oct-1

0

Ja

n-1

1

Ap

r-1

1

Ju

l-1

1

Oct-1

1

Ja

n-1

2

Ap

r-1

2

Ju

l-1

2

Oct-1

2

Ja

n-1

3

Ap

r-1

3

Ju

l-1

3

Oct-1

3

Ja

n-1

4

Ap

r-1

4

Ju

l-1

4

Oct-1

4

Ja

n-1

5

Ap

r-1

5

Ju

l-1

5

Oct-1

5

Ja

n-1

6

Ap

r-1

6

Ju

l-1

6

US Govt. Bond Yield 5-yr ID USD Govt. Bond Yield 5-yr

spread 5-yr US vs. 5-yr ID USD Govt. Bond Yield

Long term spread : 1.99

Current spread : 1.66

Lower UST will bring positive impact on Indonesia’s FCY Sovereign Bonds…

(%)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

Oct-1

0

Ja

n-1

1

Ap

r-1

1

Ju

l-1

1

Oct-1

1

Ja

n-1

2

Ap

r-1

2

Ju

l-1

2

Oct-1

2

Ja

n-1

3

Ap

r-1

3

Ju

l-1

3

Oct-1

3

Ja

n-1

4

Ap

r-1

4

Ju

l-1

4

Oct-1

4

Ja

n-1

5

Ap

r-1

5

Ju

l-1

5

Oct-1

5

Ja

n-1

6

Ap

r-1

6

Ju

l-1

6

US Govt. Bond Yield 10-yr ID USD Govt. Bond Yield 10-yr

spread 10-yr US vs. 10-yr ID USD Govt. Bond Yield



10-yr US Govt. Bond Yield vs. 10-yr ID USD Govt. Bond Yield

35


5-yr US Govt. Bond Yield vs. 5-yr ID IDR Govt. Bond Yield

Source: Bloomberg, as of 12 July 2016

(%)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

Oct-1

0

Ja

n-1

1

Ap

r-1

1

Ju

l-1

1

Oct-1

1

Ja

n-1

2

Ap

r-1

2

Ju

l-1

2

Oct-1

2

Ja

n-1

3

Ap

r-1

3

Ju

l-1

3

Oct-1

3

Ja

n-1

4

Ap

r-1

4

Ju

l-1

4

Oct-1

4

Ja

n-1

5

Ap

r-1

5

Ju

l-1

5

Oct-1

5

Ja

n-1

6

Ap

r-1

6

Ju

l-1

6

US Govt. Bond Yield 5-yr ID IDR Govt. Bond Yield 5-yr

spread 5-yr US vs. 5-yr ID IDR Govt. Bond Yield



(%)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Ja

n-1

0

Ap

r-1

0

Ju

l-1

0

Oct-1

0

Ja

n-1

1

Ap

r-1

1

Ju

l-1

1

Oct-1

1

Ja

n-1

2

Ap

r-1

2

Ju

l-1

2

Oct-1

2

Ja

n-1

3

Ap

r-1

3

Ju

l-1

3

Oct-1

3

Ja

n-1

4

Ap

r-1

4

Ju

l-1

4

Oct-1

4

Ja

n-1

5

Ap

r-1

5

Ju

l-1

5

Oct-1

5

Ja

n-1

6

Ap

r-1

6

Ju

l-1

6

US Govt. Bond Yield 10-yr ID IDR Govt. Bond Yield 10-yr

spread 10-yr US vs. 10-yr ID IDR Govt. Bond Yield



10-yr US Govt. Bond Yield vs. 10-yr ID IDR Govt. Bond Yield

…and on Indonesia’s LCY Sovereign Bonds

36


10-yr US Govt. Bond Yield, 10-yr ID USD Govt. Bond Yield & Fed Funds Rate Forecast

Period 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

10-yr US Govt. Bond Yield (%) 1.77 1.47 1.56 1.72 1.90 2.03 2.23 2.45

Period 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

10-yr ID USD Govt. Bond Yield

(%) 4.14 3.64 3.99 4.09 4.38 4.60 4.88 5.31

Source: Bloomberg, OCE Calculation

Period 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

Fed Funds Rate (%) 0.5 0.5 0.55 0.65 0.80 1.00 1.10 1.25

37


There are still some positive catalysts in the Indonesia bond market

Positive catalyst Result Outlook

• FFR hike will be very gradual

and different from the previous

periods' hikes

FOMC meeting June-2016: More

dovish outlook.

Positive. The 10-yr UST yield still

lower than our forecast i.e. 2.5%

YE2016 (vs. 1.64% as of 9-Jun).

Market consensus lowering 10-yr

UST yield forecast to 2.11%

• Foreign fund inflows remained

encouraging

Foreigners became the biggest net

buyers ytd totaling Rp63.7tn as of

15-Apr (vs. Rp45tn same period last

year and Rp97.2tn)

Negative. 5-yr CDS still higher than

our forecast, i.e. 175 (vs. 197). We

still expect S&P will upgrade our

rating to BBB- next 6 months.

• Bank Indonesia and domestic

buyers should be supportive

for bond market

• Insurances and pension funds

reported net buyers of Rp52.2tn

as of 6-Jun or already higher than

their net buys of full year 2015,

i.e.27.5tn

• Bank Indonesia reported net

seller ytd

Neutral

• Already achieve to fulfill the new

regulation from OJK. New draft

regulation OJK might decrease

demand of government bond.

• On average BI bought Rp23.3tn of

government bonds per year in the

last three years with average yield

of buying at 8%

• Supply/Demand for

government bond still

manageable

The government did front loading

and was successful. YTD issuances

of Rp296.9tn –gross issuances or

54.3% of issuance target this year

Negative

There will be additional Rp57tn of

bond issuances assuming budget

deficit widened to 2.5% of GDP 38

© PT Bank Mandiri (Persero) Tbk. Source: BIS, last updated in July 2016

appreciate

depreciate

REER, 2010 = 100

125.0

76.077.0

90.0

103.0

82.2

106.7

82.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0

Jan-

10

Apr

-10

Jul-

10

Oct

-10

Jan-

11

Apr

-11

Jul-

11

Oct

-11

Jan-

12

Apr

-12

Jul-

12

Oct

-12

Jan-

13

Apr

-13

Jul-

13

Oct

-13

Jan-

14

Apr

-14

Jul-

14

Oct

-14

Jan-

15

Apr

-15

Jul-

15

Oct

-15

Jan-

16

Apr

-16

China Russia Brazil

Indonesia ASEAN-5 excl. Indonesia Turkey

Korea Fragile 5 excl. Indonesia

The Rupiah is still undervalued (based on REER calculation), but BI is reluctant to let the Rupiah stronger while accumulating reserves

39


2012 2013 2014 2015F

2016F

2017F

Real GDP (%, yoy) 6.0 5.6 5.0 4.7 5.0 5.4

Rp/US$ (avg) 9,380 10,452 11,878 13,470 13,348 13,950

Rp/US$ (eop) 9,670 12,189 12,440 14,000 13,400 13,100

BI rate (%, eop) 5.80 7.50 7.80 7.50 6.25 -

7-day repo rate 5.00 5.00

CPI inflation (%, yoy, eop) 3.7 8.1 8.4 3.2 4.5 5.0

CAD (% of GDP) -2.8 -3.2 -3 -2.0 -2.4 -2.8

PT Bank Mandiri (Persero), Tbk. Forecast Indikator ekonomi 2016 - 2017


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Documents

Indonesia Economic and Market Outlook 2016 - ekon · PDF fileIndonesia Economic and Market Outlook 2016 ... d) 2016 plan (full year); n.a. data not ... Indonesian Banking Statistics,