Jl.MH. Thamrin No.2 Jakarta 10110 - Indonesia … · economic conditions in trading partner nations and upward movement in global commodity prices. Growth in imports, however, remains

Jl.MH. Thamrin No.2 Jakarta 10110 - Indonesiahttp://www.bi.go.id

BANK INDONESIAFor further information, please contact:Economic Outlook & Policy DisseminationBureau of Monetary Policy Directorate of Economic Research and Monetary Policy

Telephone : +62 61 3818163 +62 21 3818206Fax. : +62 21 3452489E-mail : [email protected] : http://www.bi.go.id

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MONETARY POLICY REPORTBANk INdONEsIA

The Monetary Policy Report is published quarterly by Bank Indonesia after the Board

of Governors’ Meetings in January, April, July, and October. In addition to fulfilling the

mandate of article 58 of Act Number 23 of 1999 concerning Bank Indonesia, amended

by Act No. 3 of 2004, the report has two main purposes: (i) to function as a tangible

product of a forward-looking working framework in which formulation of monetary

policy is based on economic and inflation forecasts; and (ii) as a medium for the Board

of Governors of Bank Indonesia to present to the public the various policy considerations

underlying its monetary policy decisions.

The Board of Governors

Darmin Nasution Senior Deputy Governor

Hartadi A. Sarwono Deputy Governor

Siti Ch. Fadjrijah Deputy Governor

S. Budi Rochadi Deputy Governor

Muliaman D. Hadad Deputy Governor

Ardhayadi Mitroatmodjo Deputy Governor

Budi Mulya Deputy Governor

MONETARY POLICY REPORTQUARTER III-2009

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Monetary Policy Strategy

Underlying Principles

Under the ITF, the inflation target is established as the overriding objective and nominal anchor for monetary policy. In this regard, Bank Indonesia has adopted a forward looking strategy by guiding the present monetary policy response for achievement of a medium-term inflation target.

The application of the ITF does not mean that monetary policy disregards economic growth. The basic monetary policy paradigm of striking the optimum balance between inflation and economic growth is retained in both setting the inflation target and in the monetary policy response by focusing on achievement of low, stable inflation in the medium to long-term.

The Inflation Target

After consultations with Bank Indonesia, the Government has determined and announced the CPI inflation target at 5%+1%, 4.5%+1% and 4%+1% for 2008, 2009 and 2010. The inflation target is consistent with the process of disinflation aimed at medium to long-term inflation competitive with other nations at about 3%.

Monetary Instruments and Operations

The BI Rate is the published policy rate reflecting the monetary policy stance adopted by Bank Indonesia. The BI Rate is a signal for achieving the medium to long-term inflation target and is announced periodically by Bank Indonesia for a specific period. To strengthen the operational framework for monetary policy, Bank Indonesia changed from use of the 1-month SBI rate as the operational target to the overnight interbank rate with effect from 9 June 2008. In monetary operations, the BI Rate is implemented through liquidity management on the money market to achieve the monetary policy operational target, reflected in movement in the overnight interbank money market rate. To enhance the effectiveness of liquidity management on the market, a set of standing facilities in combination with an interest rate corridor is employed in day-to-day monetary operations.

Policymaking Process

The BI Rate is determined by the Board of Governors in the Monthly Board of Governors’ Meeting. In unforeseen circumstances, the monetary policy stance may be adjusted in advance of the Monthly Board of Governors’ Meeting in a weekly Board of Governors’ Meeting. Changes in the BI Rate essentially depict the Bank Indonesia monetary policy response for guiding the forecasted level of inflation within the limits of the established inflation target.

Transparency

Monetary policy is regularly communicated to the public through customary media for communication, such as statements to the press and market actors, website postings and publication of the Monetary Policy Report (MPR). This transparency is aimed at building improved understanding and shaping public expectations of the economic and inflation outlook and the monetary response taken by Bank Indonesia.

Coordination with the Government

For the purpose of coordination in inflation targeting, monitoring and control, the Government and Bank Indonesia have established a team of officials representing the various relevant agencies. The task of the Team is to deliberate and recommend the necessary policy actions for the Government and Bank Indonesia in managing inflationary pressures for achievement of the established inflation target.

Steps for Reinforcing Monetary Policy with the Overriding Objective of Price Stability (Inflation Targeting Framework)

In July 2005, Bank Indonesia launched a reinforced monetary policy framework consistent with the Inflation Targeting Framework (ITF), encompassing four key elements: (1) use of the BI Rate as the policy reference rate, (2) anticipatory monetary policymaking process, (3) more transparent communications strategy and (4) closer policy coordination with the Government. These measures are intended to strengthen monetary policy effectiveness and governance in order to achieve the overriding objective of price stability in support of sustainable economic growth and greater public prosperity.

Enhanced Monetary Policy Measures Under Inflation Targeting Framework

In July 2005, Bank Indonesia implemented and enhanced monetary policy measures within the Inflation Targeting Framework (ITF) which encompasses four main areas: the use of the BI rate as an operational target, enhanced decision making process, more transparent communications strategy, and strengthened policy coordination with the Government. The measures is intended to strengthen the effectiveness and to provide good governance to its monetary policy making to achieve the price stability needed to support suistainable economic growth and attain social welfare.

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Foreword

The ongoing recovery in the global economy showed indications of renewed strength during Q3/2009,

while taking hold in more countries. The most dramatic gains were visible in Asia’s emerging markets, led by

China. In developed economies, the rate of economic contraction has begun to ease. Various global macroeconomic

indicators point to strengthening optimism for global economic recovery. Despite this, risks continue to daunt the

process of world economic recovery, due to high levels of unemployment.

Recovery in the world economy is also reflected in the upswing on global financial markets. During Q3/2009,

risks began to ease in developed and developing economies alike, as reflected in the steady decline the Currency

Default Swap (CDS) risk indicator. Global stock markets maintained an upward trend in Q3/2009, despite sustaining

price correction.

At home, the Indonesian economy is moving forward in tandem with the progressive improvement in the

global economy. Estimated GDP growth in Q3/2009 came to 4.2%, ahead of the previous 3.9% forecast. On the

demand side, rising consumption was driven by growing export revenues, more robust consumer confidence and

seasonal factors with the onset of the Eid-ul-Fitr festive season. Modest improvement is also reported in investment,

although growth remains slim. Externally, initial estimates point to invigorated export growth in line with the improving

economic conditions in trading partner nations and upward movement in global commodity prices. Growth in imports,

however, remains minimal. On the supply side, manufacturing and the trade, hotels and restaurants sector reported

higher growth in Q3/2009 in line with the Eid-ul-Fitr religious festivities. Regional economic assessments by Bank

Indonesia also offer confirmation of strengthening trend in the domestic economy. Various regions in Indonesia, each

marked by specific characteristics in the local economy, provided key support for domestic economic growth.

Regarding prices, the downward inflation trend continued in Q3/2009, with inflation easing to 2.83%

(yoy). The modest inflationary pressure during the quarter is explained by improvement in inflation expectations and

appreciation in the rupiah. At the same time, demand-side pressure remains minimal, despite indications of renewed

expansion. In regard to non-fundamentals, the plentiful availability of food stuffs during Q3/2009 helped contain

upward pressure on prices.

The Governor of Bank Indonesia

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The improvement in the global economy, most importantly in trading partner nations, augurs for positive

impact on Indonesia’s balance of payments in Q3/2009. The recovery in the global economy and particularly

in trading partners, coupled with the upward trend in commodity prices, offers potential for even stronger export

performance. At the same time, imports are forecasted to maintain modest growth due to the slow pace of growth

in investment. Initial figures suggest potential for a current account surplus in Q3/2009. Similarly, in the capital and

financial account, foreign capital inflows and portfolio investments charted another surplus despite the effect of

temporary portfolio rebalancing during August 2009.

In other developments, the decision by Moody’s to upgrade Indonesia’s sovereign credit rating from

Ba3 to Ba2 has had a positive effect on capital inflows and cost of financing. Added to this, Indonesia, like

other IMF members, received an allocation of SDR1.74 billion, equivalent to USD2.7 billion. In response to these

developments, international reserves reached USD62.3 billion at end-September 2009, equivalent to 6.2 months of

imports and servicing of official debt.

The improvement in Indonesia’s balance of payments and positive sentiment on global financial markets

has given added stability to the rupiah. Despite a temporary downturn at end-August 2009, the exchange rate

has gained value while charting reduced volatility. The appreciation in the rupiah is bolstered by the continued strength

of domestic economic fundamentals reflected in the balance of payments surplus, attractive investment yields and

improving perceptions of risk, all representing key attractions for foreign investors. Added to this, positive global

economic sentiment has contributed to the high volume of capital inflows in Indonesia.

Conditions in the domestic financial sector have improved in response to the recent developments outlined

above. Overall financial sector performance is on the rise, accompanied by steady improvement in monetary policy

transmission. On the stock market, developments in Q3/2009 were marked by share price gains. The strengthening

fundamentals in the domestic economy alongside escalating global commodity prices have fuelled buying in mining

stocks, with significant positions taken by foreign and domestic investors. On the bond market, yield on Indonesian

government securities has narrowed in response to downward movement in the BI Rate and growing investor interest

in these instruments. However, yield on longer-term government securities (above 15 years) remains high due to

lingering perceptions of high risk.

In the banking sector, conditions are relatively stable with Indonesia’s banks beginning to show improved

response to monetary policy signals. At the micro level, banks remain in stable condition as indicated by the

comfortably high level of the Capital Adequacy Ratio (CAR) in August 2009 alongside subdued, low levels of Non-

Performing Loans gross and net. On the other hand, banks continue to show better response in their interest rates,

as indicated by the decline in deposit rates that will ultimately lead to further reductions in loan interest rates. The

response in lower rates for credit is expected to pave the way for more optimum volume of lending by the banking

system. Alongside this, the banking system reports adequate levels of liquidity.

Looking forward, the Indonesian economy shows potential to outperform earlier growth forecasts for

2009 and 2010. Key to this is continued robust expansion in household consumption, better than predicted export

performance and the Government stimulus. Export performance is improving in response to the strengthening

recovery in the global economy and mounting prices for oil, natural gas and non-oil and gas commodities. Investment

is predicted to maintain limited growth due to the present low levels of capacity utilisation. The Government fiscal

stimulus also has capacity to boost domestic economic performance, as reflected in the high levels of Government

consumption and investment. On the supply side, estimations suggest that growth in various sectors has embarked

on an accelerating trend, consistent with rising domestic and external demand in tradable sectors. In response to

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these developments, the Indonesian economy is forecasted to chart 4.5%-4.5% growth in 2009, ahead of the earlier

3.5%-4.0% prediction. Regarding 2010, Bank Indonesia projects economic growth to reach 5.0%-5.5%. Risks

that call for vigilance include the uncertainty looming over recovery in world trade, given the unmistakeable signs

of protectionist motives and domestic economic orientation in developed nations and a renewed surge in world oil

prices fuelled by speculation.

Indonesia’s balance of payments is forecasted to chart an improved surplus in 2009 and 2010. Exports are

set to maintain growth on the back of world economic recovery and mounting commodity prices. On the domestic

front, imports are expected to maintain slim growth as a result of flagging investment activity. In 2010, the current

account is forecasted to post another surplus. In other areas, the capital and financial account will be bolstered by

more conducive domestic and external conditions compared to earlier periods. The secure condition of domestic

fundamentals, improving perceptions of risk and continued keen investor interest in domestic assets are expected to

boost capital inflows into Indonesia through portfolio channels and foreign direct investment.

Concerning the inflation outlook, the downward trend in 2009 is forecasted to continue, but with potential

for normal conditions to return in 2010. In 2009, CPI inflation is predicted to come within the inflation targeting

range set at 4.5%+ 1%. Looking ahead to 2010, the outlook is for CPI inflation to return to normal at 5%+ 1% in

response to resurgent domestic economic activity, rising imported inflation driven by escalating commodity prices

and renewed inflation expectations.

After factoring in these developments, the Bank Indonesia Board of Governors Meeting convened on 5

October 2009 decided to hold the BI Rate at 6.5%. The decision to leave the BI Rate unchanged was taken after

the Board of Governors’ Meeting concluded that the rate at this level would be consistent with achievement of the

5%±1% inflation target for 2010. The present policy stance is also regarded as still conducive to the economic recovery

and banking intermediation processes.

Jakarta, October 2009

On behalf of

THE GOVERNOR OF BANK INDONESIA

Darmin Nasution

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Monetary Policy Report - Quarter III-2009Contents


Contents

1. General Review ............................................................................ 1

2. Latest Macroeconomic Indicators ................................................ 5

Deveopments In The World Economy ............................................. 5

Economic Growth ........................................................................... 6

Balance of Payments ...................................................................... 15

3. Monetary Indicators and Policy, Quarter III-2009 ...................... 17

Rupiah Exchange Rate ........................................................................................ 17

Inflation ................................................................................................................. 19

MonetaryPolicy ................................................................................................... 21

Box:SecondaryStatutoryReservesRequirementEffectivefrom24October2009 . 26

4. The Indonesian Economic Outlook ............................................. 27

AssumptionsandScenarios ................................................................................ 27

EconomicGrowthOutlook ................................................................................... 27

Inflation Forecast ............................................................................. 36

5. Monetary Policy Response, Q3/2009 .......................................... 38

Statistics ............................................................................................ 39

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Monetary Policy Report - Quarter III-2009 Contents


General Review

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1. General Review

The ongoing recovery in the global economy has helped bring improvement to the

domestic economy, which now has potential to outperform earlier forecasts for

both 2009 and 2010. In 2009, the economy is expected to chart 4.0%-4.5% growth,

ahead of the earlier 3.5%-4.0% prediction. Following this, the economic growth

forecast for 2010 is 5.0%-5.5%.

The recovery process in the global economy is showing indications of increased

momentum across a broader range of countries. The most dramatic gains are visible

in Asia’s emerging markets, led by China. In the developed world, economic contraction

has eased. A wide range of global macroeconomic indicators points to growing optimism

for global economic recovery. Retail sales, capacity utilisation and production indices have

begun to climb in advanced nations and emerging market countries alike. Despite the

improvement, the recovery continues to be daunted by risks. The risk of sustained high

unemployment in developed economies poses hurdles to further improvement in global

economic performance.

Recovery in the world economy is also reflected in the improving condition of global

financial markets. The risks daunting advanced economies and the developing world

receded further during Q3/2009, as evident in the progressive easing in the risk indicator of

Currency Default Swaps (CDS). The global stock market forged ahead during the quarter,

despite some temporary correction. In the real sector, optimism for economic recovery

and the depreciating trend in the US dollar have boosted international commodity prices.

Nevertheless, these price movements have not produced significant upward pressure on

overall price levels. Inflation in advanced nations and emerging markets remains low, with

some nations still undergoing deflation as a result of weakened consumption.

At home, the Indonesian economy is moving into more positive territory in response

to the steady improvement in the global economy. Q3/2009 GDP growth is estimated

at 4.2%, up from the earlier 3.9% prediction. On the demand side, rising consumption has

been bolstered by increased export revenues, stronger consumer confidence and seasonal

factors in the period preceding the Eid-ul-Fitr festivities. Modest improvement is reported

in investment, despite continued sluggish growth. Externally, preliminary figures for export

growth are stronger due to improving economic conditions in trading partner nations and

rising global commodity prices. On the other hand, import growth is estimated at minimal

levels. On the supply-side, the manufacturing and the trade, hotels and restaurants sectors

charted improved growth in Q3/2009 in keeping with the Eid-ul-Fitr religious festivities.

Further confirmation of renewed growth momentum comes from the regional

economic assessments conducted by Bank Indonesia. For the most part, local economies

report brisk consumption and exports driven by rising demand from China, India and South

Korea for primary products and an upswing in investment activity across all regions. Export

growth in the Sumatra and the Kali-Sulampua (Kalimantan-Sulawesi-Maluku-Papua) regions

is fuelled mainly by rubber, nickel, coal and CPO, while in the Jakarta region, growth is

Monetary Policy Report - Quarter III-2009

2

driven by manufactured products. On the supply side, the mainstay of regional growth in

Jakarta is strengthening performance in manufacturing, trade, hotels and restaurants and

the financial sector. In the Jabalnustra (Java-Bali-Nusa Tenggara) region, the key growth

sectors are food crop agriculture and trade, in contrast to the Sumatra and Kali-Sulampua

regions where growth relies primarily on mining and estate crops. Added support for regional

economic growth came from the increased volume of regional budget expenditures during

Q3/2009. However, the recent earthquake in West Sumatra portends to impact economic

growth in that region. Leading sectors forming the traditional economic backbone of West

Sumatra, such as agriculture, the trade, hotels and restaurants sector and transport and

communications, have inevitably been impacted by the quake. However, from a nationwide

perspective, the West Sumatra economy accounts for a comparatively small share of national

economic growth at 1.7%.

Concerning prices, inflation in Q3/2009 maintained a steady downward trend,

falling to 2.83% (yoy). Inflationary pressure remained low during the quarter due to

improving inflation expectations, the appreciating exchange rate and still modest global

commodity prices. Alongside this, demand-side pressure remained minimal, despite

indications of resurgent pressures. On the non-fundamentals side, the Government kept

hikes in administered prices to a minimum during Q3/2009. Combined with plentiful supply

of foodstuffs, this has eased upward pressure on prices. The hike in toll road charges on 28

September 2009 is expected to have negligible impact on inflation, accounting for 0.05%

of inflation formation during 2009.

The improvement in the global economy and particularly in trading partner nations

is set to have positive impact on the Q23/2009 balance of payments. The recovery

in the global economy and especially in trading partners alongside the escalating trend

in global commodity prices has potential to boost export performance to new levels. At

the same time, imports are expected to remain low due to continued weak demand from

investment. The current account in Q3/2009 has potential to chart a surplus. Alongside

this, in the capital and financial account, inflows of foreign funds and portfolio investments

again recorded an estimated surplus, despite short-lived correction in foreign portfolio capital

during August 2009.

In other developments, the decision by Moody’s to upgrade Indonesia’s sovereign

credit rating from Ba3 to Ba2 is expected to have a beneficial effect on capital

inflows and cost of financing. Besides this, Indonesia, like other IMF members benefiting

from coordinated global policy actions, received an SDR allocation worth SDR1.74 billion

equivalent to USD2.7 billion. This helped boost international reserves to USD62.3 billion at

the end of September 2009, sufficient for 6.2 months of imports and servicing of official

external debt.

The improvement in the balance of payments and positive sentiment on global

financial markets has contributed to the stability of the rupiah. Despite coming

under temporary pressure at end-August 2009, the exchange rate gained value while

charting reduced volatility. This appreciation in the rupiah is supported by robust domestic

economic fundamentals reflected in the balance of payments surplus, attractive returns and

General Review

3

improving perceptions of risk that offer attraction for foreign investors. Reinforcing this is

positive sentiment for the global economy that contributed to brisk inflows of capital into

Indonesia. The rupiah remains competitive against other currencies in the region. During

Q3/2009, the average value of the rupiah appreciated 5.5% to Rp 9,973 to the US dollar

while charting reduced volatility.

In the financial sector, these developments have provided an uplift for domestic

financial market conditions. Overall financial market performance is up alongside steady

improvement in monetary policy transmission. During Q3/2009, the stock market charted

index gains. Improving domestic fundamentals and rising global commodity prices were the

key factors providing significant boost to share buying by foreign and domestic investors. On

the bond market, yield on government securities is down in keeping with the lower level of

the BI Rate and growing foreign investor interest in these instruments. Even so, yield on longer

tenors (above 15 years) remains comparatively high due to lingering perceptions of risk.

The banking sector is marked by stable conditions in the national banking system

and initial improvement in bank response to monetary policy signals. On the micro

level, this stability is indicated by the comfortable level of the capital adequacy ratio (CAR) at

17.0% in August 2009. Similarly, the gross non-performing loans (NPLs) ratio remains below

5% with the net ratio at less than 2%. The ample condition of bank liquidity is reflected

in the rise in bank holdings of monetary instruments (SBIs and FASBI), increased volume

of interbank money market transactions and decline in the overnight interbank rate, now

hovering below the BI Rate level. In other developments, the bank interest rate response

to monetary policy measures showed further improvement, particularly in deposit rates. By

mid-Q3/2009, the average lending rate had dropped 18 bps or more than for the equivalent

period one quarter earlier. Related to this, bank loan disbursements from January to August

2009 were up by Rp 46.7 trillion or 3.5% (ytd).

Looking forward, the Indonesian economy has potential to surpass earlier growth

projections in 2009 and 2010. Key to this is the continued strength of private consumption

growth, better than expected exports and the government stimulus. The brisk pace of private

consumption is bolstered by high levels of consumer confidence in line with low inflation

and interest rates and the effect of mounting export revenues. Alongside this, export

performance is improving on the back of the strengthening global economic recovery and

higher prices for oil, natural gas and non-oil and gas commodities. Only limited investment

growth, however, is expected due to persistently low levels of capacity utilisation. The fiscal

stimulus has also bolstered the performance of the domestic economy, as reflected in brisk

growth in government consumption and investment. On the supply side, renewed growth

is forecasted across a range of sectors, consistent with strengthening domestic and external

demand in tradable sectors. In response to these developments, the Indonesian economy in

2009 is forecasted to chart 4.0%-4.5% growth in 2009, ahead of the originally predicted

3.5%-4.0%. For 2010, Bank Indonesia forecasts economic growth in the range of 5.0%-

5.5%. Vigilance is still needed in regard to various risks from uncertainty in the recovery

process for world trade given that the stimulus-backed actions to boost recovery in advanced


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nations are more oriented to domestic demand, the high unemployment besetting developed

nations and protectionist tendencies in operation in some countries after the global crisis.

At the same time, a close watch is needed on the risk of escalation in world oil prices driven

by speculative activity.

The balance of payments outlook for 2009 and 2010 points to a growing surplus.

Exports are predicted to gather pace on the strength of world economic recovery and rising

commodity prices. On the domestic front, imports are set to maintain limited growth due to

the sluggish pace of investment expansion. In 2010, the current account is again forecasted

to chart a surplus. Similarly, improved performance in the capital and financial account is

expected as a result of more favourable domestic and external conditions compared to

the past. The secure condition of domestic fundamentals, improving risk perceptions and

keen investor interest in domestic assets is expected to boost inflows of foreign capital into

Indonesia, channelled into both portfolio investments and foreign direct investment.

In the inflation outlook, the downward trend in 2009 is forecasted to continue,

despite potential for return to normal levels in 2010. CPI inflation in 2009 is on track

to come within the inflation targeting range at 4.5%±1%. In 2010, CPI inflation is predicted

to return to normal in the 5±1% range as a result of domestic economic expansion, rising

imported inflation driven by higher commodity prices and inflation expectations. On the

non-fundamentals side, heightened inflationary pressure is expected from hikes in some

non-strategic administered prices. Nevertheless, volatile foods inflation is forecasted to stay

low in view of measures taken to safeguard the supply and distribution of food and energy

commodities.

After factoring in these developments, the Bank Indonesia Board of Governors

Meeting convened on 5 October 2009 decided to keep the BI Rate unchanged at

6.5%. The decision was taken after the Board of Governors concluded that the 6.50% BI

Rate remains consistent with achievement of the 5%±1% inflation target for 2010. This

policy stance is also regarded conducive to the economic recovery and banking intermediation

processes.

Latest Macroeconomic Indicators

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2. Latest Macroeconomic Indicators

The more conducive trend in global economic developments has provided an uplift

for domestic economic performance. During Q3/2009, the increasingly broad-based

global economic recovery was supported by improvement in Asian economies, with

positive impact on the domestic economy. The renewed economic expansion is

bolstered by more robust export performance as trading partner economies recover

momentum. Private consumption is also estimated ahead of earlier predictions as

a result of higher incomes and stronger consumer confidence. In a similar vein,

investment growth is forecasted to improve with support from increased demand

and business optimism. Renewed growth in exports and investments is believed to

have kept imports from further decline during the quarter under review. On the

supply side, growth estimates for Q3/2009 are up in some sectors in response to

improvement in domestic and external demand. The Eid-ul-Fitr celebrations at end-

Q3/2009 are also seen as providing a significant boost to growth in relevant sectors,

mainly industry, trade and transport and communications.

DEVELOPMENTS IN THE WORLD ECONOMY

The global economy in Q3/2009 witnessed more robust recovery spread more

evenly across all regions. Recovery was driven mainly by strong performance in Asian

emerging markets, while advanced nations reported some easing in the rate of economic

contraction. World growth (qtq) at the beginning of second half 2009 is estimated in positive

territory. However, stubbornly high rates of unemployment continued to hamper recovery

in consumption in advanced economies. The outlook for faster than expected recovery

in the global economy is seen as conducive to accelerating improvement in the domestic

economy. Despite this, attention is needed to the lack of commensurate response from

financial markets to the improving condition of economic fundamentals, as this could trigger

renewed correction with disruptive consequences in macro instability.

Economic contraction in the US eased during Q2/2009 with positive growth (qtq)

indicated for Q3/2009. The US economic downturn has been triggered primarily by falling

private consumption driven by high unemployment. As a result, households are maintaining

tightened levels of consumption. However, the latest data indicates a slowing in the rate of

contraction with US economic growth in Q3/2009 estimated at a positive 3.1% (qtq) or -2.5%

(yoy). The high rate of household savings, previously feared to hamper economic recovery,

instead helped to keep household consumption from even steeper decline. The levelling off in

the decline in household consumption is also reflected in retail sales during Q3/2009, which

reached a trough. However, numbers of laid off workers continue to mount, as indicated

by steep unemployment in the US at 9.7% despite signs of easing. Indications of respite in

worker lay-offs are reflected in falling numbers of jobless claims (initial and continuing) and

a drop in the average non-farm payroll during Q3/2009 at 246 thousand compared to 428

thousand persons in the preceding quarter.


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Conditions in the global financial sector are steadily improving. The liquidity crunch

has eased in response to added liquidity and quantitative easing launched by some central

banks. Liquidity injections by the Fed, BoE, BoJ and ECB have freed up credit markets, as

reflected in the decline in the LIBOR spread against Overnight Index Swaps (OIS) to levels

preceding the Lehman Brothers bankruptcy. In a similar vein, financial market developments

have been positive overall, despite some correction marked by falling share prices mainly

in China at end-Q3/2009. Signs of world economic recovery are reflected in the improved

economic growth in various regions and the conducive conditions in the US housing sector.

All this has fuelled optimism on global financial markets. However, financial asset prices

in some nations soared at excessive rates seen as disproportionate to improvement in

macroeconomic fundamentals, leading to a process of correction marked by plunging stock

prices in a number of economies led by China at end-August 2009.

Economic growth has also picked up in Asia. In most Asian economies, growth has

rebounded following the steep decline in early 2009. Externally oriented countries in Asia

saw significant improvement in line with growing demand for exports to China and India

alongside a renewed climb in world commodity prices. Similarly, positive growth trends were

maintained in other Asian economies relying more on domestic demand, such as China

with growth rising from 6.1% (yoy) to 7.9% (yoy), India from 5.8% (yoy) to 6.1% (yoy) and

Vietnam from 3.1% (yoy) to 3.9% (yoy).

World inflation remains on a downward trend due to the slow pace of economic

activity. According to composite data on inflation outcomes, world inflationary pressure

underwent further decline. In July 2008, world inflationary pressure was still high at 6.0%

(yoy), with world oil prices running at USD147 per barrel. However, with sluggish pace of

the world economy and weak world commodity prices, world inflationary pressure eased

to 0.9% (yoy) in August 2009.

ECONOMIC GROWTH

Aggregate Demand

Given the ongoing improvement in domestic demand and global

economic conditions, preliminary figures for GDP growth in Q3/2009

are ahead of the preceding quarter. Key to this is the recovery indicated

in leading indicators for the GDP (Graph 2.1). Accordingly, GDP growth

in Q3/2009 is estimated at 4.2% (y-o-y). Higher economic growth during

Q3/2009 was bolstered by improvement in all components of aggregate

demand. Household consumption climbed more aggressively on surging

household spending in advance of the religious festive season, stronger

export revenues and improving consumer confidence. Export growth

is also estimated on an upward track in response to the sustained

improvement in trading partner demand, led by emerging markets, and

rising commodity prices. In a similar vein, indicators suggest renewed

investment growth on the back of strengthening demand and business

Graph 2.1

Leading Indicators of GDP

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7

optimism. The more robust export and investment growth during the

quarter is estimated to have prevented imports from further decline

(Table 2.1).

Household consumption in Q3/2009 is estimated above the levels

of the preceding quarter. This is consistent with the leading indicators

for household consumption, which point to improvement despite

remaining within the contractionary cycle for at least another quarter

(Graph 2.2). The buoyant growth in household consumption is explained

by rising purchasing power fuelled by stronger exports, planned payment

of holiday bonuses and more robust consumer confidence in the wake

of the presidential election. Added factors in household consumption are

the religious festive season and the school holidays early in Q3/2009. In

the overall analysis, growth in household consumption during Q3/2009

reached 4.9% (yoy).

Indications of improved household consumption in Q3/2009

are also reflected in movement in early indicators. Consumption

of durable goods widened further in early Q3/2009, with motorcycle

sales in the lead. Also reflecting the brisk growth in consumption was

more vigorous growth in consumer goods imports during July 2009. A

similar trend was also evident in higher sales reported by publicly-listed

companies trading in middle and upper class consumer goods. The retail

index similarly improved in early Q3/2009, strengthened by purchases of

stationery, clothing and supplies during the school holidays. However,

as of July 2009, no significant gains were evident in indicators related

to consumption financing, such as real growth in M1 and consumption

credit. Attesting to the relatively stable and even escalating level of public

purchasing power was the upward trend in credit card transactions

early in Q3/2009, even in spite of decline in debit card transactions. The

improvement in purchasing power is thought to have come from the

slowing rate of job losses, as visible in data published on 11 September

III IV I II III IV I II III*Indicators

Table 2.1

Economic Growth - Demand Side

2007

* Bank Indonesia Projection Figures

Source : Statistics Indonesia

Total Consumption 5.3 5.0 4.9 5.5 5.5 6.3 6.4 5.9 7.2 6.3 5.7

Private Consumption 5.1 5.5 5.0 5.7 5.5 5.3 4.8 5.3 5.8 4.8 4.9

Government Consumption 6.5 2.0 3.9 3.6 5.3 14.1 16.4 10.4 19.2 17.0 11.4

Gross Domestic Fixed Capital Formation 9.7 12.4 9.4 13.7 12.0 12.2 9.1 11.7 3.5 2.7 3.2

Export of Goods and Services 7.4 7.9 8.5 13.6 12.4 10.6 1.8 9.5 -19.1 -15.7 -12.4

Import of Goods and Services 7.0 13.9 9.0 18.0 16.1 11.0 -3.5 10.0 -24.1 -23.9 -20.3

GDP 6.6 5.8 6.3 6.2 6.4 6.4 5.2 6.1 4.4 4.0 4.2

20072008

20082009

Graph 2.2

Leading Indicators of Consumption

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Graph 2.3

Consumer Confidence Index - BI Consumer Survey

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8

2009 by the Ministry of Labour and Transmigration citing a 1,134

reduction in new worker dismissals. In similar developments, worker

remittances, representing another source of income, also climbed 5.8%

(qtq) to USD1.8 billion during Q2/2009. Consumer confidence was up

during Q3/2009 in response to perceptions of improvement in current

economic conditions and expectations of higher incomes (Graph 2.3).

The rise in the Consumer Confidence Index came most importantly

from improvement in the Current Situation Index components, public

perceptions of a healthier outlook for the economy and the easing of

public concerns over price increases for staple food items. This optimism

was consistent with the gains in the Consumer Tendency Index released

by the Central Statistics Agency (BPS), driven by expectations of higher

incomes during Q3/2009.

Growth in investment (gross fixed capital formation) is estimated

higher in Q3/2009 due to onset of recovery in external and

domestic demand. Despite this, the most recent leading investment

indicators suggest that investment growth will persist in the downward

cycle phase for at least the next quarter (Graph 2.4). Investment growth

is expected to climb after uncertainties in the global economy have eased

and with support from renewed export demand from trading partners.

The improvement in the global economy and domestic stability in the

aftermath of the Presidential Election provided a boost to business

optimism during Q3/2009. In response to these developments, estimated

investment growth during Q3/2009 reached 3.2% (y-o-y). In preliminary

figures, most of this growth has been generated by construction

investment (Graph 2.5).

Added confirmation of improved investment growth is offered

by various early indicators. Preliminary figures for non-construction

investment growth remain low due to the continued weak demand

for foreign machinery and equipment and sluggish imports of capital

goods (Graph 2.6). On the other hand, construction investment is

estimated higher due to improved progress in work on construction

and infrastructure projects. Supporting this are indications of more

robust growth in cement consumption as of mid-Q3/2009. On the

financing side, no significant improvement is visible in investment

credit expansion. Despite this, business indicated rising interest in

investment during the quarter. Findings from the BI Business Survey

(SKDU-BI) suggest an increase in planned investment during Q3/2009,

driven by forecasts of higher selling prices, stronger domestic demand,

the seasonal trend in advance of the religious festive season and the

improving market situation in the aftermath of the presidential election.

Consistent with the BI Business Survey, improved business optimism

Graph 2.4

Investment Leading Indicators

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Graph 2.5

Construction and Non-Construction Investment Growth

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Graph 2.6

Import of Capital Goods

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9

during Q3/2009 is reflected in the Q3/2009 Business Tendency

Index published by BPS, which advanced to 107.8 (Graph 2.7). This

improvement is consistent with the seasonal factor of rising demand

in advance of the religious festive season and growth in foreign and

domestic orders.

Export growth is estimated up during Q3/2009, bolstered by

improvement in global economic conditions. While indicators

were buoyed by strengthening demand in emerging markets,

particularly for CPO and coal, an added boost came from more upbeat

consumer confidence in advanced nations and higher production

indices in Europe and Japan. Export volume, reflected in the Baltic Dry

Index, similarly points to rising external demand as of early Q3/2009.

Export financing is expected to become more widely available with

the inauguration of the Export-Import Bank (LPEI) and deferment of

L/C obligations during the second half of 2009. In response to these

developments, Q3/2009 export growth is estimated ahead of the

previous quarter at -12.4% (yoy). According to the latest BPS data,

August 2009 exports reached US$10.55 billion, down 15.41% (yoy)

from August 2008. Analysed by sector and the HS 2-digit commodity

classification, export demand in August 2009 was bolstered by primary

agricultural commodities such as CPO, manufactured products and

minerals (Graph 2.8).

With domestic and external demand on the rise, preliminary

figures point to healthier import growth during Q3/2009. Imports

are forecasted to remain within the contractionary stage of the cycle

for at least the two subsequent quarters, as suggested by movement in

leading import indicators (Graph 2.9). Despite this, the drop in import

growth is predicted to ease as household consumption gains added

momentum and demand picks up for raw materials and capital goods

for production in the manufacturing sector. Indications that imports

have stopped slowing are also supported by more vigorous growth in

imports of raw material commodities, such as iron and steel, as well as

import duties. Taken together, import growth in Q3/2009 is estimated

at -20.3%, representing a modest improvement over the preceding

quarter. The most important contribution to this improvement comes

from stronger growth in imports of raw materials and intermediate

inputs. Analysed by 2-digit HS commodity classification, import growth

during January-August 2009 was again dominated by raw materials

and capital goods intended for boosting production capacity, such

as machines, mechanical tools, electrical motors and other electrical

equipment.

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Graph 2.7

Business Sentiment - BPS

Graph 2.8

Export Growth by Sector

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Graph 2.9

Leading Import Indicators

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Government Financial Operations

Government financial operations during the first two months of Q3/20091 were

more expansive compared to the same period one year before. The overall deficit

from Government financial operations in July-August 2009 came to Rp 15.7 trillion (0.3%

of GDP), in contrast to surplus recorded for the same period last year at Rp 20.3 trillion

(0.4% of GDP). This deficit is the result of falling government revenues, while only limited

acceleration has taken place in Government expenditures overall and especially central

government spending. Nevertheless, the estimated level of overall Government financial

operations for Q3/2009 differs little from Q3/2008. This is explained by the non-payment

of revised allocations from General Allocation Funds, unlike September 2008, and lower

payments of Profit Sharing Funds in September 2009 compared to September 2009 due to

falling crude oil prices.

State revenues again recorded decline during Q3/2009. Taxation and non-tax revenues

in July-August 2009 were down from the same period one year earlier. The drop in tax

revenues resulted largely from weaker performance in major tax revenue components, such

as VAT and Income Tax, not adequately compensated by increases in land and building

tax and cigarette excise despite the average 7% hike in excise since February 2009.2 Due

to this decline, the outcome for most revenue components during the first eight months

of 2009 was also down in comparison to the same period in 2008, with the exception of

Other Taxes, Non-Tax Revenues on Non-Oil and Gas Natural Resources and other Non-Tax

Revenues, which recorded slight improvement.

Procurement by line ministries and government agencies gathered pace during

Q3/2009. In view of the outcomes during July-August 2009, line ministry and government

agency expenditures in Q3/2009 are estimated ahead of Q2/2009, except for personnel and

other expenditures. Personnel expenditures peaked in the second quarter due to a salary

increase and payment of additional benefits, while the holding of only the first round of the

presidential election led to reduction in other expenditures. As a result of this surge, line

ministries and government agencies reported increased expenditures compared to the same

period last year. Transfers to Regions were up in keeping with budget increases in General

Allocation Funds (DAU) for 2009 and Special Allocation Funds. Taken together for the year

as a whole, absorption of expenditures was up in almost all categories compared to the same

period in 2008, with the exception of debt interest payments, subsidies and Special Autonomy

Equalisation Funds (DOKP). However, the sluggish rate of increase means that growth in

some major Central Government expenditure components remains slow in relation to the

same period last year, especially in personnel expenditures, capital expenditures and other

expenditures. Most of the realised capital expenditures have been used for construction of

roads, irrigation and other infrastructure, as in the preceding year. However, implementation

of the fiscal stimulus package for infrastructure spending and tax subsidies remains very low.

At end-August, line ministries and government agencies reported only 14.7% absorption

of budget allocations for the infrastructure fiscal stimulus package totalling Rp 11.5 trillion.

The slowed delivery of the stimulus was also evident in failure to take maximum advantage

1 Data for July-August 2009.2 Stipulated in Minister of Finance Regulation No. 203/PMK.011/2008 concerning Tobacco Product Excise Rates dated 9 December

2008 and effective from 1 February 2009.


11

of tax subsidies, with the exception of tax savings that operate on an automatic basis. As of

mid-August, the value of tax relief requested by companies in relation to import duties on

raw material and capital goods imports and payroll taxes in both cases amounted to 15%

of allocations in the Revised 2009 Budget.

Aggregate Supply

Preliminary figures point to improvement across several economic sectors during

Q3/2009, alongside more robust demand (Table 2.2). Key sectors such as manufacturing

and trade are estimated to have charted more vigorous growth compared to one quarter

earlier in response to renewed growth in demand and the added factor of the religious festive

season at the end of Q3/2009. Agriculture, another important sector, posted more modest

estimated growth due to the passing of the harvest season and the prolonged dry season

(El Nino). In analysis by structure, the dominant sectors of the economy, like before, are

manufacturing, the trade, hotels and restaurant sector and agriculture. However, the most

important contributors to growth were the transport and communications sector, general

services and the financial services, leasing and corporate services sector.

Manufacturing performance showed some improvement during Q3/2009 despite

a continued downward trend when compared to the preceding year. Nevertheless,

preliminary figures suggest that industry sector performance has benefited from the onset of

strengthening demand and the religious festive season. Analysed by structure, manufacturing

predominantly consists of the transportation equipment, machinery and tools subsector,

food, beverages and tobacco and the chemicals and rubber products subsector. However,

the major contributors to manufacturing growth are food, beverages and tobacco, chemicals

and rubber products and the paper and printed products subsectors.

Improvement in manufacturing performance is reflected in the initial gains in

some early indicators and survey findings. The results of the BI Production Survey in

% Y-o-Y, Base Year 2000

III IV I II III IV I II III*Sectors

Table 2.2

Economic Growth - Supply Side

2007


Source : Statistics Indonesia

Agriculture 7.6 3.1 3.5 6.3 4.8 3.4 4.7 4.8 5.2 2.4 2.2

Mining and Quarrying 1.0 -2.1 2.0 -1.7 -0.5 2.1 2.1 0.5 2.4 2.4 2.2

Manufacturing 4.5 3.8 4.7 4.3 4.2 4.3 1.8 3.7 1.5 1.5 1.7

Electricity, Gas and Water Supply 11.3 11.8 10.4 12.3 11.8 10.4 9.3 10.9 11.4 15.4 15.5

Construction 8.3 9.9 8.6 8.0 8.1 7.6 5.7 7.3 6.3 6.4 6.5

Trade, Hotels and Restaurants 7.9 9.1 8.5 6.9 8.1 8.4 5.6 7.2 0.5 -0.1 1.6

Transportation and Communication 14.1 17.4 14.4 18.3 17.3 15.5 15.8 16.7 17.1 17.5 16.5

Financial, Rental and Business Services 7.6 8.6 8.0 8.3 8.7 8.6 7.4 8.2 6.3 5.3 5.6

Services 5.2 7.2 6.6 5.9 6.7 7.2 6.0 6.4 6.8 7.4 6.6

GDP 6.5 6.3 6.3 6.2 6.4 6.4 5.2 6.1 4.4 4.0 4.2

20072008

20082009


12

early Q3/2009 point to improvement in the manufacturing index and production capacity.

At a more detailed level, performance was up in the major subsectors of transportation

equipment, machinery and machine tools and food and beverages manufacturing, while

other subsectors were comparatively stable. At the same time, historical trends suggest that

the food and beverages subsector climbed significantly in advance of the religious festive

season of Eid-ul-Fitr. Besides the improvement in domestic demand, the renewed growth

in industry has also benefited from more robust export demand. Q3/2009 saw increased

export demand for manufactured products, reflected in higher export volume for key industry

commodities including CPO, chemicals, paper and electronic equipment. Indications of gains

in the manufacturing sector are also evident in higher imports of industrial raw materials

and especially semi-finished goods. Other early indicators, such as electricity output and

consumption, similarly point to higher growth. In early Q3/2009, car production was on

a stable track, while motorcycle production had begun to climb. Alongside this, industrial

electricity consumption and cement consumption were up in keeping with historical trends.

Cement consumption mounted significantly in mid-Q3/2009, running above consumption

levels in 2008. In regard to financing, banks reported sluggish growth in lending to the

manufacturing sector as of early Q3/2009, below the average for 2008.

The trade, hotels and restaurants sector grew by an estimated 1.6% (yoy) in

preliminary figures for Q3/2009. The renewed improvement in the trade, hotels and

restaurants sector is the culmination of a number of factors, including stronger demand

and the religious festivities at end-Q3/2009 that boosted sales of various commodities and

especially food and beverages, textiles and textile products. Added to this was the upswing

in the BI retail sales index in early Q3/2009. At a more detailed level, sales were up in almost

all commodity categories encompassing durables and non-durable goods. The average hotel

occupancy rate in Jakarta, which serves as a performance indicator for the hotels subsector,

was comparatively stable in early Q3/2009. VAT on imported goods and Luxury Goods Tax on

imports, two key indicators for the wholesale subsector, were again marked by contraction

in July 2009, albeit not as steep as in the preceding month. From the financing side, banks

are lending less aggressively to the trade sector with growth below the average for 2008.

Agriculture posted an estimated 2.2% growth (yoy) in Q3/2009, down from the

preceding quarter. The reduced growth in the agricultural sector is explained primarily by

the passing of the harvest and the effects of the prolonged dry season related to El Nino.

In the BPS Forecast Figures II (ARAM-II), rice production and harvested land is set to decline

from the second subround (May-August) to the third subround (September-December),

due to the passing of the harvest season. This decline in rice production and harvested area

has significantly impacted agricultural sector growth, given that the food crops subsector

constitutes the largest segment of agriculture as a whole. In contrast, the estates subsector

is expanding in response to renewed growth in demand. In regard to financing, indications

point to more rapid growth in bank lending to the agricultural sector in early Q3/2009.

The mining sector is predicted to gather momentum in response to strengthening

demand. Reflecting this are rising exports of various mining commodities, such as mineral

ores, matte and metal concentrates, coal and aluminium. The upswing in mining sector


13

performance is also reflected in higher production and sales by mining companies. In regard

to financing, the mining sector was the recipient of increased lending at early Q3/2009.

The transport and communications sector again forged ahead with growth in

Q3/2009 estimated at 16.5% (yoy). One key indication of robust growth in this sector

is the ongoing expansion in numbers of cellular subscribers. Also reflecting growth is the

upbeat performance of telecommunications companies reported for Q2/2009. The seasonal

factor of the annual religious festivities is expected to boost telecommunications sector

performance in Q3/2009. In similar developments, performance was up in the transportation

subsector in early Q3/2009, reflected in higher air passenger numbers and cargo traffic at

Indonesia’s five major seaports (Belawan, Tanjung Priok, Tanjung Perak, Balikapan and

Makassar). Potential for even greater transportation subsector performance is expected with

the religious festive season at the end of Q3/2009. Concerning financing, bank lending for

transport and communications has been levelling off, with slow lending growth in early

Q3/2009 below the average for 2008.

The construction sector is estimated higher in Q3/2009 compared to the preceding

quarter, as suggested by various early indicators such as mounting cement consumption

reported at mid-Q3/2009. Similar signs are also evident in commercial property construction

reported in the Bank Indonesia Commercial Property Survey, which points to improvement

in Q2/2009. Concerning levels of financing, bank lending to the construction sector in early

Q3/2008 again came below the average rate of credit expansion in 2008. Nevertheless, the

onset of declining bank lending rates, mainly for home mortgages, is expected to have a

positive effect on property sector growth.

Notes :

Up

Down

Sumatera Jabalnustra Jakarta Kali-Sulampua Notes *

Qtr II Qtr III* Qtr II Qtr III* Qtr II Qtr III* Qtr II Qtr III*

Penj. Barang Eceran (% yoy) 26.7 14.0 15.1 12.3 -1.8 1.8 107.29 109.06 Agt 2009

Medan 3 Large Cities Kaltim (Index)

Registration/Sales of 4-wheels or 19.6 thousands 25.6 thousands -17.8 -17.3 -39 -35 -24.0 -14.9 Agt 2009

2-wheels vehicle (% yoy) Sumsel, Babel, Aceh (2-wheels vehicle) Jatim Kalteng, Maluku

Household Electricity Cnsumption (% yoy) 11.4 13.7 11.3 12.5 9.6 10.5 7.1 20.2 July 2009

Purchasing Power

Farmet Term of Trade (index) 101.4 101.7 98.3 98.6 na na 101.2 101.4 July 2009

Consumption Credit (real% yoy) 22.5 21.0 12.6 13.2 14.4 12.8 21.3 20.5 July 2009

Consumer Confidence (index) 108.6 113.5 102.2 108.9 104.5 105.8 120.7 126.0 Agt 2009

Cnsumption Realization (%) 20.0 27.9 25.2 27.6 18.5 31.1 30.9 37.6 July 2009

Indicator

Table 2.3

Regional Consumption Prompt Indicators


14

Regional Economic Performance

Indications of strengthening economic performance at the regional level

were supported by regional economic assessments pointing generally to

invigorated growth in all regions of Indonesia. The more robust regional

level growth is explained by greater consumption across all regions and

continued strong performance in primary exports in the Kali-Sulampua

and Sumatra regions and for manufactured products in Jakarta. In all

parts of Indonesia, activity in construction investment has also begun

to mount.

Consumption recorded increased growth distributed across all regions,

as demonstrated in stronger consumption indicators. Key factors in rising

consumption are improved consumer confidence and higher incomes, in

addition to increased consumption expenditures in regional government

budgets. Investment activity showed a similar trend, bolstered mainly by

construction investment including infrastructure projects (Graph 2.10).

Exports, like investment and consumption, are up particularly in the

regions of Kali-Sulampua (nickel, coal and CPO), Jakarta (manufactured

products) and Sumatra (coal, CPO). This is attributable to escalating

demand from China, India and South Korea with added boost from rising

international prices for primary commodities (Graph 2.11). In regard to

financing, stronger regional economic performance was bolstered by

higher disbursements of regional government expenditures across all

regions and financing from non-bank institutions, mainly in Jakarta. On

the other hand, credit was again constrained by limited expansion.

Potential for low national CPI inflation in 2009, now forecasted below

the 4.0% mark, is confirmed by the slowing trend in regional inflation

across the whole country. The sustained low level of inflation is explained

by improved supply-side response in the regions. This is visible in the

expanding manufacturing capacity and increased industrial use of

electricity amid rising consumption bolstered by more robust consumer

confidence. The inflationary spike triggered by falling agricultural

production from the effect of El Nino is not expected to have significant

impact, due to the actions and anticipatory measures taken by the central

and regional governments to counter the impact of El Nino. However, the

persistently high inflation in some cities, particularly in the Kali-Sulampua

and Sumatra regions, may become a potential source of inflationary

pressure. The high rate of inflation in these regions is explained by

difficult access for supply and distribution of goods.

At the regional level, the economic growth outlook is predicted to

improve in line with the forecast for national economic growth at

4.2% in 2009. The higher growth figure is supported by strengthening

consumption and exports. In disaggregation of growth, the Jabalnustra

Graph 2.10

Cement Sales

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Graph 2.11

Kali Sulampua’s Main Commodities Export Volume

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Graph 2.12

Regional Inflation

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15

region accounts for the leading contribution to the national economy, followed by the Jakarta,

Kali-Sulampua and Sumatra regions. However, the future inflation outlook for all regions

remains at a low level, consistent with the national inflation projection for 2009. Although

regional inflation is low, there is still potential for increased pressure from the steady rise

in consumption and also from distribution of goods to various regions, most importantly

Kalimantan, the Maluku islands and Papua.

BALANCE OF PAYMENTS

The recovery in the global economy has had a beneficial effect on Indonesia’s external

performance, particularly in the current account. Merchandise trade showed improved

performance on the back of positive developments in commodity prices and strong demand

for resource-based commodities, especially in China and non-Japan Asia. The improved

absorption capacity of the domestic economy has stimulated imports. Accordingly, the

balance of trade is predicted to post an increased surplus. In the capital and financial account,

the sustained upward trend in domestic consumption and measures to ensure a conducive

investment climate support the continued positive outlook for investment in Indonesia. While

short-term capital inflows underwent some correction in mid-Q3/2009, foreign portfolio

investment transactions maintained a stable surplus. Taken together, the Q3/2009 balance

of payments is expected to chart a surplus.

The Current Account

Evaluation of the current account for Q3/2009 points to improvement. The trade surplus

was better, attributable largely to imports. Key to the positive export performance is robust

demand for resource-based commodities from some countries in non-Japan Asia, led by

China. This is expected to compensate in part for the drop in global demand, particularly

from G3 countries. Added to this, exports are also benefiting from the escalating trend in

commodity prices. At home, while consumption retains a positive role in bolstering economic

performance, the most recent data suggests that imports are somewhat below, a development

that has strengthened the trade surplus. This surplus was sufficient to offset the deficit in

the services transactions, income and current transfers account.

Exports have been bolstered by developments in commodity prices. During Q3/2009,

non-oil and gas export commodity prices contracted by -20.1%, representing an improvement

over the -22% of the preceding quarter. Non-oil commodity prices were down 1.3% during

September compared to one month earlier, with CPO and mining commodities especially

affected. The fall in CPO prices is related to the successful soy bean harvest in the US and

Latin America that has reduced demand for CPO as a soy bean substitute. The levelling of

mining commodity prices is suspected to be linked to the massive stocks held by some Asian

countries, most importantly China. Nevertheless, the drop in these commodity prices is not

expected to persist in view of the faster than expected economic recovery in trading partner

nations. As a result, the outcome for non-oil and gas exports for Q3/2009 is projected ahead

of earlier estimates. Imports are expected to benefit from the upturn in domestic economic


16

activity. In the oil and natural gas sector, oil consumption is predicted to gather momentum

in Q3/2009. In view of the absorption capacity of the economy and the religious festive

season, oil imports are estimated higher for Q3/2009.

The Q3/2009 services, income and current transfers deficit is largely on track with earlier

forecasts, except for the income account. The expanded income deficit is related to higher

levels of foreign portfolio placements in domestic assets, resulting in increased interest

payments.

Capital and Financial Account

The capital and financial account has potential to record a surplus for Q3/2009.

Despite some correction sustained by foreign portfolio investments in August 2009, the

prevailing stability of global financial markets and keen foreign investor interest in domestic

investment outlets have had a positive effect on short-term capital inflows. The secure

condition of domestic fundamentals and the decision by Moody’s on 16 September 2009

to upgrade Indonesia’s debt rating from Ba3 to Ba2 has kept foreign capital flowing into

the Indonesian economy. Analysis of portfolio investments during Q3/2009 indicates that

foreigner interest domestic commercial assets (SBIs, government securities and stocks)

remains positive, despite some correction during August 2009. Concerning inflows from

foreign direct investment, rising oil prices prompted more aggressive exploration by oil and

natural gas companies necessitating larger cash calls from overseas affiliates. In domestic

economic financing, the increased ratio of disbursed foreign private sector borrowings and

new private sector foreign borrowing commitments is illustrative of the international support

for domestic corporates.

International Reserves

Following the latest developments in the current account and the capital and financial account,

international reserves reached USD62.3 billion at end-Q32009, a level equivalent to

6.2 months of imports and servicing of official external debt.

Monetary Indicators and Policy, Quarter III-2009

17

3. Monetary Indicators and Policy, Quarter III-2009

In Q3/2009, global economic developments were marked by steady improvement. The

faster than expected global economic recovery has imbued investors with optimism

for reinvesting in emerging markets. In addition, the solid condition of domestic

economic fundamentals underpinned movement in the exchange rate during

Q3/2009. The rupiah maintained an appreciating trend during Q3/2009 alongside

reduced volatility. Measured as an average, the rupiah gained 5.55% to Rp 9,973 in

Q3/2009, up from Rp 10,578 in the preceding quarter, while volatility narrowed from

1.20% in Q2/2009 to 0.69%. Concerning prices, inflationary pressure eased further

during Q3/2009. Measured annually, CPI inflation dropped to 2.83% (yoy) from 3.65%

(yoy) one quarter earlier. The persistently low rate of inflation is attributable mainly

to falling inflation expectations. Added to this, external pressures ameliorated from

appreciation in the rupiah and the low level of imported inflation.

Movement in a range of monetary indicators varied considerably. BI Rate cuts during

Q3/2009 were transmitted to the money market through easing of interbank rates

in various tenors, producing an improvement in the interest rate curve for short

tenors. Similarly, bank deposit and lending rates showed further decline as of July

2009. Deposit funds maintained growth in line with the expansion in rupiah deposits

from non-financial private companies and individual customers. On the other hand,

nominal credit has begun to climb, although insufficient to produce accelerated

growth. Looking forward, credit expansion is expected to gather momentum in

keeping with seasonal trends. On the stock market, optimism for global economic

recovery and the conducive condition of domestic economic fundamentals has

prompted investors to place funds in the capital market. During Q3/2009, the JSX

Index continued to climb, despite coming under some pressure half-way through the

period. On the government securities market, yield eased in all tenors. The return of

foreign investors and safeguarding of investor confidence in the domestic economy

were two factors pushing down government securities yield.

In view of the various developments during Q3/2009, Bank Indonesia policy will

maintain a pro-growth track for the domestic economy while curbing inflation and

safeguarding financial sector stability for the medium-term. During the quarter under

review, Bank Indonesia decided to lower the BI Rate 50 bps to 6.50% in July and

August 2009 and followed by holding the BI Rate at 6.50% at end-Q3/2009.

RUPIAH EXCHANGE RATE

Conducive conditions in the global and domestic economy paved the way for strengthening

of the rupiah. Inflows of foreign funds on the strength of rising investor optimism for world

economic recovery produced 5.55% average appreciation in the rupiah to Rp 9,973 to the


18

US dollar from Rp 10,578 to the US dollar in the preceding quarter

(Graph 3.1). At end-Q3/2009, the rupiah closed at Rp 9,645, up 5.84%

over the close of the preceding quarter. The strengthening of the rupiah

was accompanied by more stable movement, with volatility falling from

1.20% in Q2/2009 to 0.69% (Graph 3.2).

The rupiah gains during Q3/2009 were closely linked to the positive

influence of world economic developments. Signs point to increasingly

broad-based recovery in the global economy, spread across the

United States, Europe and Asia. The US economy reported improved

performance during the quarter under review. Added to this, renewed

economic momentum was visible in the positive growth reported by some

major economies in Europe and Asia. Optimism for global economic

recovery was reflected in the world economic confidence index, which

rebounded in September 2009 to 58.5, the highest level reached since

the Lehman Brothers bankruptcy in October 2008. In a similar vein, the

improvement in the world economy has encouraged global investors

to flock back to stock markets, imbued with expectations of higher

corporate earnings. The consequent rebound on global stock markets

has in turn strengthened the majority of global currencies against the

US dollar.

Besides external factors, conducive conditions in the domestic economy

also contributed to rupiah appreciation. The domestic economy charted

4% growth in Q2/209, the third highest growth rate in Asia. Added to

this was positive performance in the balance of payments, which posted

a current account surplus in Q1/2009 and Q2/2009 also expected to

carry forward into Q3/2009. The international reserves position at

end-Q3/2009 was significantly higher than for the preceding quarter

at USD62.3 billion, equivalent to 6.2 months of imports and servicing

of official external debt. This attests to the solid condition of domestic

economic fundamentals that has stimulated investor confidence in the

rupiah and fostered positive perceptions of the currency’s resilience to

external shocks.

Perceptions of risk in the Indonesian economy have improved. Downward

movement was reported the majority of risk perception indicators for

Indonesia, such as the CDS, yield spread on Global Bonds and the

EMBIG spread (Graph 3.3). The Indonesia CDS narrowed from 310 bps

in Q2/2009 to 183 bps in Q3/2009, consistent with CDS movement in

Asia. The yield spread on RI Global Bonds against US T-Notes contracted

from 396 bps in the previous quarter to 251 bps in the quarter under

review, commensurate with the decline in RI Global Bond yield and

increased yield on US T-Notes. Similar movement was recorded in the

EMBIG spread, which came down from 432 bps in Q2/2009 to 345 bps

Graph 3.1

Rupiah Exchange Rate Average

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Graph 3.2

Rupiah Exchange Rate Volatility

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Graph 3.3

Perceptions of Risk Indicator

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in Q3/2009. Another indicator, the swap premium, offered a general

indication of improvement in risk and liquidity perceptions. The 1-month

swap premium fell from 8.82% at end-June 2009 to 7.34% at the end

of Q3/2009 (Graph 3.4).

Return on rupiah financial assets ran comparatively high. Uncovered

interest parity (UIP) narrowed from 7.00% at end-Q2/2009 to 6.45%

at the end of Q3/2009. However, after factoring in the risk premium,

covered interest parity (CIP) in fact widened to 3.94% from 3.03% in

the preceding quarter, due to improvement in risk indicators (Graph 3.5).

The yield spread between Indonesian domestic government securities

and US treasuries remains the highest in Asia, giving added attraction

to investment in domestic bonds (Graph 3.6).

Improvement in global investor confidence and high yields on rupiah

investments have stimulated inflows of foreign funds into Indonesia.

During Q3/209, inflows into SBIs and government securities were

recorded at USD1.58 billion and USD620.25 million, bringing the position

of foreign holdings in SBIs and government securities to USD3.71 billion

and USD9.42 billion. Similar gains took place on the stock market, where

foreigners booked a net purchase of USD608.70 million (Graph 3.7).

Substantial foreign capital inflows adequately balanced the supply and

demand structure on the domestic forex market. During Q3/2009, brisk

domestic forex demand pushed transactions to USD3.14 billion, an

effect of the religious festive season (the Ramadan fasting month and

Eid-ul-Fitr) (Graph 3.8). Despite this, net inflows from foreigners were

down slightly from the preceding period due to heavy outflows during

August in the wake of the surge of correction on the global market. As

a result of the diminished forex supply on the domestic market, daily

forex transaction volume on the domestic market differed little from

conditions in Q2/2009 (Graph 3.9).

INFLATION

Inflation in Q3/2009 continued to ease despite a surge during August

2009. Annual CPI inflation at the end of Q3/2009 came to 2.83% (yoy),

down from 3.65% (yoy) one quarter earlier (Graph 3.9). Inflationary

pressure in Q3/2009 was fuelled mainly by soaring demand in advance

of the Eid-ul-Fitr holidays and annual expenditures related to the

academic calendar.

The lower inflation in Q3/2009 is the result of developments in

fundamentals and non-fundamentals. The drop in CPI inflationary

pressure came largely from non-fundamentals, in line with the

Graph 3.4

Swap Premium in Various Tenors

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Graph 3.5

CIP in Several Region Countries

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Graph 3.6

Asia Region Yield Spread

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20

absence of government decisions to raise strategic administered prices.

Reinforcing this food production and distribution at levels adequate to

maintain security of domestic food supplies. The reduced pressure from

fundamentals is also closely linked to falling expectations of inflation,

softening of external pressures with appreciation in the rupiah and low

imported inflation.

The downward trend in inflationary pressure was reflected across

almost all inflation categories. In most expenditure categories, inflation

continued to ease. Even so, inflation in a few categories mounted higher,

for example in foodstuffs due to escalating demand in line with seasonal

trends. Another category marked by significant inflation was education,

an annual development associated with the academic calendar. Despite

this, the annual measure of education inflation maintained a declining

trend (Graph 3.10).

Measured annually, core inflation remains in decline. Q3/2009 core

inflation reached 4.86% (yoy), having eased from 5.56% (yoy) one

month earlier. The relatively modest pressure from core inflation is

explained largely by falling expectations of inflation in keeping with

conducive external conditions. The downward trend in inflation

expectations is confirmed in various surveys, among others the Consensus

Forecast in which inflation expectations reached 4.9%, down from

5.4% one quarter earlier (Graph 3.11). On the external side, softening

external pressure due to the effect of rupiah appreciation contributed to

reduced inflationary pressure (Graph 3.12). At the same time, pressure

from imported inflation remained low due to the current low prices of

global market commodities other than sugar.

In other developments, indications point to increasing demand-side

pressure in the output gap, although prices remain unaffected. Further

confirmation came from the Retail Sales Survey (SPE), in which real

growth in retail sales climbed to 5.32% in August 2009 compared to

3.97% in June 2009 (Graph 3.12). Domestic demand begin showing

signs of recovery in early Q2/2009, although remaining below the levels

preceding the global crisis. Despite renewed growth in demand, supply

side capacity is still estimated adequate, with minimum pressure from

the output gap. The latest developments in manufacturing production

indices suggest an upward trend (Graph 3.14) commensurate with

improvement in capacity utilisation.

Consistent with seasonal trends, volatile foods inflation mounted higher

in Q3/2009 compared to one quarter earlier. Despite falling prices for

most global food commodities, such as CPO, wheat, corn and soy beans,

domestic commodities showed only limited response to these declining

Graph 3.7

Foreign Capital

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Graph 3.8

Forex Supply and Demand

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Graph 3.9

CPI Inflation Growth

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21

prices. This is reportedly due to the ongoing fluctuation in global food

stuff prices and growing demand related to the Eid-ul-Fitr festive season.

However, the annual measure of volatile foods inflation continues to

ease. Volatile foods inflation in Q3/2009 came to 4.98% (yoy) compared

to 4.32% (yoy) one quarter before.

The absence of hikes in strategic administered prices contributed to

significantly reduced inflation in the administered prices category. In

Q3/2009, administered prices inflation sank to -5.73% (yoy) from -3.22%

(yoy) one month earlier. This steep deflation is explained by the influence

of high inflationary pressures during Q3/2009, driven by increased prices

for oil-based fuels in the wake of shortages. Administered prices inflation

in Q3/2009 was driven only by cigarettes1 and household fuels 2.

MONETARY POLICY

Interest Rates

Banking liquidity freed up significantly during Q3/2009 with the average

overnight interbank rate below the BI Rate. The liquid condition of the

money market during the quarter was reflected in the decline in the

weighted average overnight rate, which exceeded the magnitude of the

BI Rate cuts. The average daily overnight rate fell 62 bps during Q3/2009

to 6.30%, while the BI Rate came down 50 bps. On 7 September 2009,

Bank Indonesia added a 3-month repo window to the existing 14-day

and 1-month options in a move to assure liquidity on the money market

in line with the ongoing expansion in bank lending. Also reflecting

money market liquidity was the low average volatility in the overnight

interbank rate.

Movement in overnight interbank rates was followed by interbank rates

in longer tenors. During Q3/2009, the average interbank rate in above

overnight tenors dropped by an average of 61 bps, exceeding the total 50

bps cut in the BI Rate. The steepest decline in above overnight interbank

rates was recorded in the 7-day tenor (65 bps). Taken together, the

interbank rate structure for various tenors moved lower during Q3/2009,

indicating adequately healthy perceptions of liquidity across tenors also

reflected in the decline in the average JIBOR quotation.

Deposit rates recorded further estimated decline in Q3/2009. During

the period of steady reductions in the BI rate from December 2008

to August 2009, the 1-month deposit rate came down by 246 bps. In

August 2009, the 1-month deposit rate fell 37 bps, slightly less than for

the BI Rate over the same period. In similar movement, deposit rates also 1 Cigarette prices contributed to inflation almost every month, albeit in minimal increments, due to the headroom for price adjustments

with some cigarette selling below the recommended retail price.2 Kerosene prices surged in response to shortages in some regions related to the energy conversion programme.

Graph 3.10

Inflation and Contribution to Inflation by Category, (qtq)

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Graph 3.11

Inflation Expectation – Consensus Forecast

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Graph 3.12

Exchange Rate and Trade Partner Countries Inflation

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22

eased across a range of tenors, albeit in varying magnitude. In analysis by

category of bank, the steepest decline in time deposit rates took place

at foreign and joint venture banks.

Loan interest rates showed improved response to cuts in deposit rates

during Q3/2009. In mid-Q3/2009, the average lending rate fell by 18

bps, surpassing the average decline recorded for the same period3 in

the preceding quarter. In analysis by categories of lending, rates for

investment credit were down 30 bps, alongside decline in working

capital credit. By comparison, rates for consumption credit edged down

by a thin 1 bps. This is explained by the nature of consumption credit,

which is not influenced strongly by interest rate movements. Otherwise,

in disaggregation by category of bank, the steepest drop in rates for

investment credit and working capital credit took place at private national

commercial banks.

Funds, Credit and the Money Supply

In figures for mid-Q3/2009, depositor funds maintained steady expansion

on the strength of rupiah deposits held by private non-financial companies

and individuals. In August 2009, funding growth widened to 20.9% (yoy)

from 17.4% (yoy) one quarter earlier.Depositor funds mounted by Rp

22.8 trillion. This rise is explained mainly by growth in demand deposits

held by privately-owned non-financial sector companies and individuals

(Graph 3.15) and is consistent with the accelerated loan disbursement

by the banking system. On the other hand, government-held demand

deposit accounts, particularly those held by regional governments,

reported further correction. This could be a positive sign, indicating that

regional governments have commenced work on projects.

3 First 2 months of the quarter.

July Agt Sep Oct Nov Dec Jan Feb Mar Apr May June July AgtInterest Rate (%)

Quarter III-2008 Quarter IV-2008 Quarter I-2009 Quarter II-2009 Quarter III-2009

Table 3.1

Interest Rate Movements

BI Rate 8.75 9.00 9.25 9.50 9.50 9.25 8.75 8.25 7.75 7.50 7.25 7.00 6.75 6.50

1-month Dep. Guarantee 8.25 8.75 8.75 10.00 10.00 10.00 9.50 9.00 8.25 7.75 7.75 7.50 7.25 7.00

1-month Dep. (Weight Avg) 7.51 8.04 9.26 10.14 10.40 10.75 10.52 9.88 9.42 9.04 8.77 8.52 8.31 7.94

1-month Dep. (Counter Rate) 7.18 7.42 7.77 8.32 8.67 8.69 8.75 8.52 8.23 7.68 7.39 7.44 7.30 7.17

Base Lending Rate 12.95 13.21 13.29 13.65 14.07 14.16 14.18 13.98 13.94 13.78 13.64 13.40 13.20 13.00

Working Capital Credit 13.14 13.42 13.93 14.67 15.13 15.22 15.23 15.08 14.99 14.82 14.68 14.52 14.45 14.30

Investment Credit 12.61 12.86 13.32 13.88 14.28 14.40 14.37 14.23 14.05 14.05 13.94 13.78 13.58 13.48

Consumption Credit 15.73 15.78 15.87 16.05 16.24 16.40 16.46 16.53 16.46 16.48 16.57 16.63 16.66 16.62

Graph 3.13

Growth of Real Retail Sales (SPE - BI)

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Graph 3.14

Industrial Capacity Utilization (Production Survey)

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Like with depositor funds, credit underwent nominal expansion,

although growth remained sluggish. In mid-Q3/2009, credit (including

channelling) widened by Rp 31.4 trillion, well ahead of the Rp 26.9

trillion expansion one quarter earlier. Taken together, credit expansion

in January-August 2009 totalled no more than Rp 46.7 trillion, equal to

3.5% (ytd). Measured annually, credit expansion was comparatively low

at 12.3% (yoy), down from the previous quarter’s level of 17.7% (yoy).

Analysed by category of lending, the key factor in slow rate of credit

growth is the steep correction in working capital credit. Most affected by

this drop in lending is industry, one of the largest borrowers of working

capital credit, as well as agriculture. Conversely, lending again climbed

significantly in the consumption credit category.

Economic liquidity widened in Q3/2009. In August 2009, M1, M2 and

rupiah M2 were up by Rp 8.1 trillion, Rp 17.2 trillion and Rp 12.1 trillion

from the previous end-month positions. The M1, M2 and rupiah M2

positions in August 2009 reached Rp 50.1 trillion, Rp 1,984.9 trillion and

Rp 1,698.8 trillion. The expansion in economic liquidity during Q3/2009

was greater than the historical trend. Taken together, annual growth in

M2, M2 and rupiah M2 came to 10.85%, 18.5% and 19.2% (Graph

3.16). This improvement in economic liquidity points to renewed growth

in economic activity during Q3/2009, despite lack of full recovery as visible

in M1 growth that remained below the historical level.

Financial Markets

The bullish stock market trend continued through the quarter, in keeping

with the growing optimism for global economic recovery that has

whetted investor risk appetite for emerging market assets. However,

fears of a burst in the financial market bubble in China bore down on

stock market performance in Shanghai and Shenzen, dragging down

global financial markets including Indonesia. Following this, positive

developments on global financial markets spurred renewed growth in

the JSX Composite index. Indonesia’s stock index closed at 2,468, having

climbed 21.75% over the closing position for Q2/2009 (Graph 3.17).

Alongside this, market capitalisation widened by a further Rp 341.6

trillion over the Q2/2009 position to Rp 1,895.3 trillion.

JSX Index gains were also bolstered by the conducive condition of

the domestic economy. Stable macroeconomic conditions, loose bias

monetary policy and adequate results in Q2/2009 financial statements

released by publicly listed companies provided added lift to the JSX index

during Q3/2009. Positive economic growth alongside subdued inflation

contributed to bolstering investor confidence in the domestic economy.

Graph 3.16

Nominal Growth in M1 and M2

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Graph 3.15

Funding vs Credit

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Graph 3.17

JCI and Trade Volume

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The ascent in the JSX index was also consistent with gains in sectoral

indices. Performance was up in all sectors, with the highest advances

recorded in the multifarious industry sector.

Foreign investor activity also contributed to the rise in the JSX Index.

Renewed risk appetite for emerging market assets prompted strong

inflows into the domestic stock market. During Q3/2009, foreigners

booked a net purchase of Rp 6.06 trillion (Graph 3.18). Despite this, daily

average trading on the JSX came to only Rp 5.06 trillion, down slightly

from the previous quarter’s daily average of Rp 5.39 trillion.

Capital market performance was matched by improvement on the

government securities market. The return of foreign investors stimulated

a new round of brisk activity in government securities. This development

has driven yield down across all tenors to a new low (in average terms)

for 2009. Government securities yield in all tenors narrowed 54 bps

to 10.39% during Q3/2009. In addition, the improvement in yield on

long-term government securities has produced a flatter term structure

in government securities yield compared to end-Q2/2009.

Improvement in government securities yield was supported by positive

developments on global financial markets and sustained investor

confidence in the fundamentals of the domestic economy. Positive

impact from externals were reflected in the decline in the Indonesia

CDS and appreciation in the rupiah. Similarly, domestic factors driving

the improvement in government securities yield include the relatively

buoyant economic growth in Indonesia compared to other countries

in Asia, subdued inflation expectations and the decision by Moody’s in

September 2009 to upgrade Indonesia’s sovereign rating from Ba3 to

Ba2. The upgrading of the sovereign rating has strengthened market

confidence and stimulated significant capital inflows into the government

securities market. In other developments, the fall in bank deposit rates

has led to a migration of funds from banks to government securities and

particularly Indonesian Retail Bonds (ORI), which offer more attractive

yields compared to 1-month deposit rates across the banking system.

In analysis by ownership, holdings of government securities by insurance

companies, pension funds, mutual funds, individuals and foreigners all

mounted in contrast to the declining position held by banks. In Q3/2009,

real money investors such as insurance companies and pension funds

embarked on actively expanding their positions on the government

securities market. With retail investor interest in ORI bonds running

high, 4 individual investors and mutual funds also took on increased

positions. Similarly, higher ownership among foreign buyers was fuelled

4 The ORI bonds carry a coupon of 9.35%, while the average 1-month deposit rates based on July 2009 commercial bank reports stood at 8.31%.

Graph 3.20

Daily Average Govt Bond Trade Frequency

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Graph 3.18

JCI and Net Foreign Buying

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Trade Volume & Govt Bond Yield (all tenors)

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25

by declining emerging market risk and keen foreign investor interest in high yielding assets.

The overall government securities position in Q3/2009 widened to Rp 569.4 trillion.

Foreign investors in Q3/2009 again booked a net purchase on the government securities

market. The net foreign purchase reached Rp 6.1 trillion in Q3/2009, down from the Q2/2009

net foreign purchase of Rp 7.3 trillion. Liquidity on the government securities market was

reflected in daily average trading volume in Q3/2009 at Rp 3.71 trillion, up slightly from one

quarter earlier when trading averaged Rp 3.67 trillion. The rise in trading volume was also

matched by increased frequency of daily trading. During Q3/2009, government securities

were traded in an average of 383.3 transactions per day, compared to only 392.5 per day

in the preceding quarter. The significant rise in government securities trading fuelled by

active secondary market trading in in the ORI 006 bonds following their issuance on 12

August 2009.

On the mutual funds market, lower bank deposit rates and stronger performance in underlying

assets during Q3/2009 boosted NAV past the Rp 100 trillion mark. Mutual funds net asset

value (NAV) mounted to Rp 101.68 trillion in early August 2009, up considerably from the

beginning of the year when NAV was only Rp 75.82 trillion. Mutual funds contributing to

the rise in NAV include equity, fixed income and mixed funds. In early August, NAV for the

three categories of funds reached Rp 35.69 trillion, Rp 14.16 trillion and

Rp 12.5 trillion. With strengthening performance in underlying assets

and the ongoing decline in bank deposit rates, mutual funds currently

enjoy a strong growth outlook.

BBased on an assessment by Bank Indonesia, the banking system is

currently in quite liquid condition and commercial banks have readied

themselves during the transition period for compliance with the

secondary reserve requirement. In data for the October 2008-July 2009

period, average holdings of SBIs, government securities and excess

reserves at all banks accounted for 27% of depositor funds, well in

excess of the 2.5% secondary reserve requirement. Accordingly, the

introduction of the secondary reserve requirement is consistent with the

current monetary policy stance and BI measures to promote banking

intermediation.

Graph 3.21

Growth NAV Mutual Funds

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26 26

Box : Secondary Statutory Reserves Requirement Effective from 24 October 2009

On 24 October 2008, in a move to mitigate the impact of the global crisis with focus on

maintaining adequate levels of banking liquidity, Bank Indonesia lowered the Statutory Reserve

Requirement from the former effective 9.1% to 7.5%. Within the prescribed 7.5% reserve

requirement, the main statutory reserves are set at 5% and secondary reserves at 2.5%.

Accompanying this reduction is a simplification of the statutory reserve requirement, with

the discontinuing of additional statutory reserves reserves linked to the bank LDR and size of

deposits (Table 1).

The main 5% reserve requirement came into immediate effect when announced on 24

October 2008. The 2.5% secondary reserves, however, come into force only on 24 October

2009 after a one-year transition period. This transition period is intended to allow banks

opportunity to prepare for the secondary statutory reserve requirement, given the turbulent

financial market conditions at the end of 2008 and strong liquidity demand. With the

receding of the global crisis, banking liquidity has steadily improved during 2009. At the end

of September, liquidity conditions in the banking system had returned to normal, and banks

were ready for compliance with the secondary statutory reserve requirement.

The purpose of the new secondary reserve requirement is to promote improved liquidity

management at banks and create conducive conditions for boosting the confidence of

market actors. With improved liquidity management, the banking sector is expected to

become stronger and more resilient to the challenges facing the economy. The formation

of secondary reserves of SBIs and government securities is envisaged as strengthening the

financial deepening on the money market, which in turn will expedite monetary policy

transmission through the interest rate channel.

26

New RegulationFormer Regulation Description

Table 1 Changes in the Statutory Reserve

Requirement, 24 October 2008

• Requiredreservesdividedinto:- 5% main statutory reserves, plus- 0%-3% linked to bank depositor funds, and - 0%-5% linked to the bank LDR and depositor funds.• Theentirereserverequirementmustbedeposited

in the bank demand deposit account at Bank Indonesia.

• Reservesheldabovethemainstatutoryreservelevelearn demand deposit interest.

• Foreigncurrencyreserverequirementat3%oftotalforeign currency deposits.

• Appliedonlytoforeignexchangebanks

• Rupiahreserverequirementchangedto7.5%,dividedinto:- 5% main statutory reserves- 2.5% secondary reserves• ThesecondaryreserverequirementheldinSBIsand

government securities will remain on the books of the individual banks.

• Reservescomprisingmainstatutoryreservesandexcessreserves placed in demand deposit accounts at BI shall not receive demand deposit interest.

• Reserverequirementis1%oftotalforeigncurrencydeposits

• Appliedonlytoforeignexchangebanks

• SBIs,governmentsecuritiesandexcessreservesmaybe used for secondary reserves.

• A1-yeartransitionperiodapplies,withthesecondary reserve requirement effective on 24 October 2009.

• Thedepositorfundscalculationremainsunchanged.


The Indonesian Economic Outlook

27

4. The Indonesian Economic Outlook

The ongoing recovery in the global economy has helped bring improvement to the

domestic economy, As a result, the Indonesian economy has potential to outperform

earlier growth forecasts for 2009 and 2010, buoyed by brisk household consumption,

better than predicted export performance and the government stimulus. Key to the

continued strong household consumption are high levels of consumer confidence

engendered by low inflation and interest rates and the income effect of rising

exports. Similarly, exports will benefit from the strengthening global economic

recovery process and hikes in oil, natural gas and non-oil and gas commodity prices.

Investment is forecasted to maintain limited growth in view of currently low levels

of capacity utilisation. The fiscal stimulus has also bolstered the performance of the

domestic economy, as reflected in brisk growth in government consumption and

investment. On the supply side, renewed growth is forecasted across a range of

sectors, in tandem with rising domestic and external demand in tradable sectors. In

response to these developments, the Indonesian economy is on track for 4.0%-4.5%

growth in 2009, ahead of the original 3.5%-4.0% prediction. Similarly, for 2010,

Bank Indonesia forecasts economic growth in the range of 5.0%-5.5%. Vigilance is

still needed in regard to various risks from uncertainty in the recovery process for

world trade given that the stimulus-backed actions to boost recovery in advanced

nations are more oriented to domestic demand, the high unemployment besetting

developed nations and protectionist tendencies in operation in some countries after

the global crisis. At the same time, a close watch is needed on the risk of escalation

in world oil prices driven by speculative activity.

Concerning the inflation outlook, the downward inflation trend in 2009 is set to

continue, but with potential for a return to normality in 2010. During 2009, CPI

inflation is expected to stay on course for the inflation target set at 4.5%±1%. In

2010, CPI inflation is predicted to resume normal behaviour in the 5±1% range in

response to strengthening domestic economic activity, higher imported inflation from

increased commodity prices and rising inflation expectations. On the fundamentals

side, mounting inflationary pressure is predicted from increases in various non-

strategic administered prices. Despite this, only modest volatile foods inflation is

expected in view of adequate measures to safeguard the supply and distribution of

food and energy needs.

ASSUMPTIONS AND SCENARIOS

International Economic Conditions

The world economy, which underwent contraction during the first half of 2009, is forecasted

to chart more rapid recovery with positive growth in the second half of 2009. The recovery


28

process in the global economy is showing indications of increased momentum across a broader

range of countries. The most conspicuous improvement has taken place in emerging Asia,

led by China. In the developed world, economic contraction has eased. A wide range of

global macroeconomic indicators points to growing optimism for global economic recovery.

In developed economies and the developing world alike, retail sales, capacity utilisation

and production indices are showing improvement. Despite the improvement, the recovery

continues to be daunted by risks. The risk of sustained high unemployment in developed

economies poses hurdles to further improvement in global economic performance.

Taking account of these developments, the overall world economy is forecasted to chart

negative 1.1% growth in 2009 (IMF, World Economic Outlook, October 2009). Recovery is

being driven by the emerging markets of Asia, while in advanced nations, economies are still

undergoing contraction albeit at a slowing rate. In 2010, advanced economies are predicted

to return to positive growth at 3.1% (Table 4.1).

Global economic performance will in turn influence activity in world trade. International

institutions project a contraction in world trade volume for 2009. In forecasts by the IMF,

World Trade Organisation (WTO) and the World Bank, world trade volume is set to decline

by -11.9%, -9.0% and -9.7%. Following this, improvement in economic conditions in

2010 will pave the way for renewed positive growth in volume of world trade. In 2010, the

IMF predicts world trade volume to expand by 2.5%, while the World Bank forecasts even

stronger growth at 3.8%.

Fiscal Policy Scenario

In a parliamentary committee meeting in August 2009, the Revised 2009 Budget deficit

has been set at Rp 129.8 trillion (2.4% of GDP), below the 2.5% Government-proposed

deficit in the stimulus document. This amendment factors in downgraded assumptions of

economic growth, the exchange rate and inflation, higher crude oil prices and more modest

absorptions of personnel expenditures, procurement expenditures, capital expenditures

and other expenditures compared to the levels set out in the stimulus document. The fiscal

sustainability outlook remains sound with the reduction in the expected official debt ratio

from 33% of GDP in 2008 to about 32% in 2009 and conducive macroeconomic conditions

(economic growth ahead of real interest rates).

Looking forward, the 2010 Budget focuses on sustaining social welfare and safety net

programmes and accelerating the recovery in the national economy. A plenary session

convened by Parliament in September 2009 adopted the 2010 Budget Law with a deficit at

Rp 98 trillion or 1.6% of GDP. Highlights of fiscal policy in 2010 include the following: (a)

support for strengthened business resilience and investment, measures to promote industry

revitalisation and business recovery through provision of taxation and import tariff relief

including a reduction in the Corporate Tax rate from 28% to 25%, incentives for companies

going public (5% of normal rates) and Rp 16.87 trillion in tax subsidies 1; (b) maintaining

the real value of civil servant incomes through a 5% increase in basic salary levels and civil

1 To promote activity in priority sectors (such as oil and natural gas), encompassing income tax, VAT and import duties.

World GDP 3.0 –1.1 3.1

Advanced Countries 0.6 –3.4 1.3

United States 0.4 –2.7 1.5

Euro Area 0.7 –4.2 0.3

Japan –0.7 –5.4 1.7

Other Advanced Countries 1.6 –2.1 2.6

Emerging Countries 6.0 1.7 5.1

Africa 5.2 1.7 4.0

Eropa Timur dan Tengah 3.0 –5.0 1.8

Negara Persemakmuran 5.5 –6.7 2.1

Asian Developing Countries 7.6 6.2 7.3

China 9.0 8.5 9.0

India 7.3 5.4 6.4

Middle East Countries 5.4 2.0 4.2

Latin America 4.2 –2.5 2.9

Table 4.1

World GDP Projection

Sources : IMF, World Economic Outlook Projections, Oktober 2009

Projection Projection

2008 20102009


29

servant pensions and payment of a 13th month salary; (c) continuation of social welfare

programmes (among others the National Community Block Grant Programme (PNPM),

School Operational Assistance, Social Health Care, Rice for the Poor and the Hopeful Family

Programme); (d) further progress on development of infrastructure, agriculture, energy and

labour-intensive projects and an added fiscal stimulus package, if required; (e) continued

administrative reforms; (f) improvement in the key equipment for weapons systems; and (g)

maintaining the education budget ratio at 20% of the State Budget.

In 2009 and 2010, the Indonesian economy is positioned to grow beyond original

forecasts. Supporting this is the continued strength of household consumption growth,

better than expected exports and the Government stimulus. The brisk household consumption

is bolstered by high levels of consumer confidence commensurate with low inflation and

interest rates, in addition to the income effect of rising export revenues. Externally, export

performance will improve on the growing strength of global economic recovery and increases

in prices for oil and natural gas as well as non-oil and gas commodities. On the supply side,

renewed growth is forecasted across a range of sectors, consistent with strengthening

domestic and external demand in tradable sectors. In response to these developments,

the Indonesian economy in 2009 is forecasted to chart 4.0%-4.5% growth in 2009,

ahead of the originally predicted 3.5%-4.0%. In 2010, economic growth is projected

by Bank Indonesia to reach 5.0%-5.5% (Table 4.2).

Despite the improvement expected in 2010, a number of risks warrant attention. First is the

risk that accelerated growth in volume of world trade will fall short of expectations. Growth

fuelled by fiscal stimulus tends to be oriented to domestic growth, such as in construction of

infrastructure, and thus generates only limited improvement in export demand. In addition,

protectionist trends in some nations will sap export demand. Lower volume of world trade

will diminish demand for goods exported from Indonesia. Declining exports may in turn

reduce private incomes, with knock-on effects on household consumption. Besides trade

volume, a further risk that may adversely impact GDP is uncertainty over world oil prices

caused by speculation. Higher oil prices will drive up prices for imported goods, thus reducing

consumption and investment.

Household consumption in 2009 is projected to expand in the

range of 5.0%-5.4% (y-o-y). During the first half of 2009, household

consumption forged ahead with robust growth even in the midst of the

onslaught of the global crisis. This is explained by the strong multiplier

effects on household consumption generated by activities related

to the legislative and presidential elections. Furthermore, household

consumption is forecasted to maintain brisk growth during the second

half of 2009 as a leading contributor to economic growth.

The high level of household consumption is supported by solid consumer

confidence and the increased income effect from improvement in

exports. The strength of household consumption is reflected in various

indicators. Motor cycle sales and imports of consumer goods are on the

Graph 4.1

Fan Chart GDP

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30

rise. Similarly, household power consumption is climbing at an accelerated rate. Alongside

this, retail sales have recovered ground after sustaining decline at the end of 2008.

Also strengthening the resilience of household consumption are current interest rates.

Historically, low interest rates have a strong correlation with rising consumption. In the view

of the public, lower interest rates diminish the opportunity cost of holding money in banks.

It then becomes preferable to boost consumption to prevent losing out to price increases.

Reflecting this is an upward shift in privately-held liquidity consistent with higher levels of

consumption.

In 2010, household consumption is forecasted to maintain vigorous expansion at

5.1%-5.4%, driven by improvement in external factors. The strengthening global

economic outlook for 2010 will given added momentum to Indonesia’s exports, which in

turn will produce an overall increase in private incomes. On the other hand, more conducive

conditions in the business community will encourage investors to invest in increased

production capacity and business expansion. Higher investment will also contribute to rising

incomes, thus paving the way for stronger public purchasing power.

Government consumption during 2009 is predicted to increase by 10.2%-11.2%.

The high rate of government consumption in 2009 is reflected both in central and regional

government expenditures. The major components of central government consumption

are procurement and other expenditures. For the regions, the largest allocations consist

of General Allocation Funds (DAU). In most areas, the factors boosting government

consumption are expenditure allocations for organisation of the legislative and presidential

elections, civil servant pay increases and payment of the 13th month salary. In 2010,

government consumption is forecasted to widen by 5.0%-6.0%, less vigorously

than in 2009. Government consumption will be driven mainly by central central government

consumption, with increased allocations in procurement, other expenditures and personnel

expenditures.

Due to the effect of reduced economic growth, investment is predicted to grow at

a more moderate 3.2%-3.6% in 2009. The global economic downturn since the second

half of 2008 has impacted export performance, which in turn has depressed the economic

outlook. The effect has been to erode public purchasing power, prompting investors to delay

I II III IV I II III I t e m

Table 4.2

Economic Growth Projection - Demand Side

2008


Total Consumption 5.5 5.5 6.3 6.4 5.9 7.3 6.3 5.7 5.7 - 6.1 5.1 - 5.4

Private Consumption 5.7 5.5 5.3 4.8 5.3 6.0 4.8 4.9 5.0 - 5.4 5.1 - 5.4

Government Consumption 3.6 5.3 14.1 16.4 10.4 19.2 17.0 11.4 10.2 - 11.2 5.0 - 6.0

Total Investment 13.7 12.0 12.2 9.1 11.7 3.4 2.7 3.2 3.2 - 3.6 7.1 - 7.7

Domestic Demand 7.5 7.1 7.9 7.1 7.4 6.2 5.3 5.0 5.0 - 5.4 5.6 - 6.0

Export of Goods and Services 13.6 12.4 10.6 1.8 9.5 (-18.7) (-15.7) (-12.4) (-13.5) - (-12.6) 7.5 - 8.2

Import of Goods and Services 18.0 16.1 11.0 (-3.5) 10.0 (-26.0) (-23.9) (-20.3) (-19.8) - (-18.9) 8.5 - 9.4

GDP 6.2 6.4 6.4 5.2 6.1 4.4 4.0 4.2 4.0 - 4.5 5.0 - 5.5

20082009

2010*2009*


31

new investment with non-construction ventures especially affected. Reflecting investment

delays is the contraction in imports of raw materials and capital goods.

Nevertheless, the outlook is for the BI Rate cuts during the first half of 2009 to be followed

by reductions in loan interest rates during the second half. More affordable lending rates

have historically been followed by faster growth in non-construction investment on the back

of increased disbursement of investment credit. This is confirmed by signs of more vigorous

investment lending during Q3/2009. Similarly, construction investment is predicted to chart

positive growth in keeping with the government stimulus for infrastructure projects. Progress

in infrastructure project construction is reflected in the rising trend in construction investment

growth since Q1/2009. In the second half, construction investment is forecasted to expand

at a faster rate compared to January-June 2009. Indications of improvement are reflected in

cement consumption, with charted positive growth in Q3/2009, as well as mounting share

prices for companies operating in infrastructure.

Optimism for improvement in the economy is expected to boost investment growth

to 7.1%-7.7% in 2010. More favourable externals, domestic conditions bolstered by rising

purchasing power and a conducive climate for business certainty are factors in the more

rapid investment growth set for 2010. Besides this, the positive outlook for the Indonesian

economy will encourage foreign investors to take up foreign direct investment in Indonesia.

This positive outlook is evident from the decision by Moody’s to upgrade Indonesia’s credit

rating from Ba3 to Ba2. The upgraded rating is expected to have a beneficial effect on

capital inflows and cost of financing. Reinforcing this are the economic assessments by

world multilateral agencies such as the World Bank and ADB, which express optimism for

accelerated performance in the Indonesian economy during 2010.

The global economic contraction has resulted in significant decline in exports of

goods and services, predicted in 2009 to reach -13.5% to -12.6%. The global economic

downturn has led to a reduction in volume of world trade, a development that set in during

the second half of 2008. Furthermore, the declining of world trade will weaken demand for

goods exported from Indonesia. Even so, exports are believed to have hit their low in Q1/2009

and since, the world economy has mounted a faster than expected recovery. The accelerated

recovery will bolster future export performance, as reflected in the increased rate of export

growth each month. Besides demand, an important factor in the accelerated export growth

is the resource-based nature of Indonesia’s export commodities, which have been able to

recover quickly in response to increased demand in trading partner nations.

In 2010, global economic recovery will produce renewed acceleration in exports, with

growth reaching 7.5%-8.2%. The global economy is predicted to enter an expansionary

phase phase in 2010, having emerged from the crisis with the aid of various remedial actions

involving fiscal and monetary stimulus measures. Renewed momentum is predicted for the

economies of Indonesia’s major trading partners, such as Japan, China and Singapore, while

recovery at the global level will stimulate resurgent growth in volume of world trade. This

strengthened performance will position exports as one of the main engines of economic

growth in 2010.


32

Weakening domestic demand and plunging exports are expected to result in -19.8%

to -18.9% decline in imports during 2009. Diminishing exports, slowing consumption and

delays in investments will sharply reduce the need for imported goods. Imports have fallen in

all categories, including consumption goods, raw materials and capital goods, as evident in

the first half of 2009, when imports contracted -25%. Nevertheless, improvements during

the second half of 2009 are expected to stimulate renewed demand for imported goods.

Despite the ongoing contraction, imports of goods and services are forecasted to mount

during the second half of 2009 compared to the first half of the year.

Improved domestic demand and exports in 2010 will generated added demand for

imports, with import growth potentially reaching 8.5%-9.4%. More robust exports,

rising public purchasing power and strengthening investment are expected to boost

momentum in imports of goods and services. Import growth is forecasted to overtake exports

in mid-2010 as a result of accelerating investment towards normal levels.

The on going improvement in global economic conditions has fuelled optimism for

economic activity, with Indonesia no exception. Information and economic indicators

point to a more rapid pace of global economic recovery than had been expected. These

developments are predicted to place Indonesia back on the path to increased economic

growth. Recent events have prompted in an upward revision in the supply side economic

growth projection.

Agriculture sector growth in 2009 is forecasted at 3.4%-3.7%. The latest prediction has

been revised downward from previous forecasts. Agricultural output during Q2/2009 is among

the reasons for the correction to the agriculture sector forecast for the year of 2009. Flagging

production in Q2/2009 is explained partly by food crop failures on non-irrigated land, due to

the effects of prolonged dry conditions. Areas hit by crop failures in Q2/2009 include: Cirebon,

Cilacap, Riau, Mojokerto, Purbalinngga, Riau and Southeast Sulawesi. Added to this, rubber

production was low during this period, bringing Indonesia’s rubber production for first half

2009 to 900 thousand to 1 million tons or less than 50% of the envisaged target for 2009.

The drop in rubber production is explained by slack demand and unattractive prices.

I II III IV I II III I t e m

Table 4.3

Economic Growth Projection - Supply Side

2008


Agriculture 6.3 4.8 3.4 4.7 4.8 5.2 2.4 2.2 3.4 - 3.7 3.0 - 3.6

Mining & Quarrying (-1.7) (-0.5) 2.1 2.1 0.5 2.4 2.4 2.2 2.1 - 2.4 2.1 - 2.4

Manufacturing 4.3 4.2 4.3 1.8 3.7 1.5 1.5 1.7 1.5 - 1.8 3.1 - 3.5

Electricity, Gas & Water Supply 12.3 11.8 10.4 9.3 10.9 11.4 15.4 15.5 14.2 - 14.6 15.7 - 16.4

Construction 8.0 8.1 7.6 5.7 7.3 6.3 6.4 6.5 6.1 - 6.6 6.9 - 7.4

Trade, Hotels & Restaurants 6.9 8.1 8.4 5.6 7.2 0.5 (-0.1) 1.6 0.7 - 1.1 3.0 - 3.4

Transportation & Communication 18.3 17.3 15.5 15.8 16.7 17.1 17.5 16.5 16.1 - 17.7 14.7 - 15.7

Financial, Rental & Business Service 8.3 8.7 8.6 7.4 8.2 6.3 5.3 5.6 5.4 - 5.8 6.3 - 6.7

Services 5.9 6.7 7.2 6.0 6.4 6.8 7.4 6.6 6.3 - 6.6 6.3 - 6.7

GDP 6.2 6.4 6.4 5.2 6.1 4.4 4.0 4.2 4.0 - 4.5 5.0 - 5.5

20082009

2010*2009*


33

The El Nino effect -- originally feared to hit agricultural production in 2009 -- is not forecasted

to have significant impact. Production of fresh fruit bunches is predicted to rebound in the

second half of 2009 in line with the oil palm harvest season. Agricultural production in

the second half of the year is expected to provide adequately for food security, with rice

production expected to record a 2.8 million ton surplus. The rice surplus will be used to

cover the rice shortfall in 2010 that may arise from the effects of delayed planting caused

by El Nino.

Agriculture sector growth in 2010 is forecasted at 3.0%-3.6%. Food resilience is

predicted to remain strong in 2010 due to the various preparatory measures taken by the

government, including conversion of swamp lands to paddy fields. At this time, 1.8 million

hectares of swamp lands are available for use as rice paddies. Most agricultural infrastructure,

such as irrigation systems and reservoirs, is in serviceable condition. The government will

deploy agricultural extension workers to provide training and work alongside farmers. Other

government plans for boosting agricultural production include a 59% increase in fertiliser

subsidies over 2009 levels and provision of high quality seeds. To make superior quality seeds

available to farmers, the government will join forces with the private sector. The President

has also launched the Agriculture Revitalisation Phase II programme and has reinforced the

Food Resilience Council, chaired by the President himself.

In 2009, mining sector growth is forecasted at 2.1%-2.4%, up from the preceding year.

Improvement in the mining sector will come mainly from brisk exploration activity in search of

new mineral reserves. Exploration activity will focus mainly on nickel, gold, bauxite and coal.

Looking forward, coal will play an increasing role, primarily in relation to power generation.

Foreign investors from India and China have begun to eye the mining sector in Indonesia. For

the two countries, the main reason behind their aggressive pursuit of mining activity in Indonesia

is the need to achieve energy security. The International Energy Agency (IEA) predicts world

coal consumption to expand at an average of 2.6% per annum over the 2005-2015 period.

In 2010, growth in this sector is predicted at about the same level as 2009.

Since 2005, manufacturing has been in overall decline as indicated by less than 5% growth.

Conditions have worsened with the onset of the economic crisis. Manufacturing growth

in 2009 is projected to reach 1.5%-1.8% (yoy), ahead of the original forecast at 1.4%

(yoy). This upward revision is commensurate with the faster than expected improvement in

economic conditions. The worst of the global economic crisis passed in Q2/2009.

The onset of recovery in economic conditions has stirred fresh optimism in the business

community. Business has responded positively in such actions as increasing capacity and

production, as in the case of local steel manufacturers. Since June 2009, capacity utilisation

in the local steel industry has increased to 90% from the previous 60%, responding to

more rapid economic recovery and to anticipate more vigorous domestic demand. The

trough reached in domestic steel demand in Q1/2009 is well past. In other developments,

the footwear industry began stepping up activity in early Q2/2009. Footwear orders are up

in Indonesia due to a shift in orders away from China, Taiwan and South Korea. In those

countries, the footwear industry is losing competitiveness compared to Indonesia, due to

steep increases in production costs.


34

In the outlook for 2010, global and domestic economic conditions are forecasted to improve

over 2009. Similar improvement is predicted for industry, buoyed by strengthening

exports and household consumption. Industry growth in 2010 is forecasted at 3.1%-

3.5%. Key to this growth will be the development of crude palm oil (CPO) based industries,

now prioritised by the government for development over the coming five years. At this time,

Indonesia produces only about 24 CPO derivative products. This measure will increase the

value added contributed by CPO-based industries. The CPO downstream industries prioritised

for development include fatty acids, stearic acids, margarine, glycerine, fatty alcohol, methyl

ester and surfactants. The vast potential for this development is underscored by Indonesia’s

ranking as a leading world producer of CPO.

In heavy industry, Indonesia has taken initial steps to develop maritime cable manufacturing

with a production plant slated to commence operation in November 2009. This industry

will provide vital support to the implementation of cabotage in domestic shipping. The

introduction of cabotage will strengthen demand for procurement of domestic cargo vessel

as owners replace foreign-flagged vessels previously used to carry domestic freight.

The trade, hotels and restaurants sector is the hardest hit for 2009. Growth in this

sector is forecasted at only 0.7%-1.1%, well below the 2008 growth recorded at 7.2%.

The downturn in the trade, hotels and restaurants sector is closely related to falling imports

and reduced activity in the industry sector. The steepest performance decline has taken place

in the wholesale and retail subsector. Even so, the faster than expected economic recovery

has created conducive conditions for the future growth of the trade, hotels and restaurants

sector. Reflecting this are month-on-month gains in the automotive and electronics markets.

Sole agents representing foreign brands have begun raising their sales targets for the second

half of 2009, which in turn has reinforced positive expectations for the trade subsector. The

bright prospects for the trade sector are also reflected in the growth of local franchises. As

of 2009, franchise operations in Indonesia represent a total of 750 brands.

The gathering momentum of global and domestic economic recovery in 2010 will usher in

more robust performance in the trade, hotels and restaurants sector. This sector is predicted

to grow 3.0%-3.4% during 2010. Improved performance in this sector will be driven mainly

by strengthened public purchasing power reflected in rising household consumption and

surging activity in industry.

In recent years, transport and communications has been a relatively high growth sector, even

during the height of the global economic crisis. Growth in transport and communications

during 2009 is forecasted at 16.1%-17.7%. The communications subsector contributes

significantly to the overall performance of the transport and communications sector.

Investment in development of communications technology is set to forge ahead, primarily

for enhancing communications services.

Communications networks now reach 90% of the population. Advancement in communications

technology has made services more affordable than ever before. The availability of comparatively

adequate infrastructure paves the way for even greater use of communications by the general

public. Services have not only become more affordable in cellular phones, but also in the world

of the internet. The development of Broadband Wireless Access (BWA) supports this trend.


35

Similarly, prospects are bright in the transportation subsector. Cargo handling in ports is set

to climb in line with growing activity in industry and trade. Furthermore, the introduction

of cabotage will strengthen the fortunes of the domestic sea freight industry, particularly

in the shipping of mining products. Indonesian shipping companies are ready to take over

from foreign vessels in such areas as floating storage and offloading (FSO) and floating

production storage and offloading (FPSO). To assume this role, domestic shipping countries

will require long-term contracts. If the contracts are long-term, bank financing for investment

in procuring the necessary vessels will be more easily obtainable.

In 2010, the transport and communications sector is predicted to keep forging ahead

with growth at 14.7%-15.7%. The brisk growth in this sector will be fuelled by product

innovations in communication and investment in technology for upgrading communications

services. Added to this, the improvement in economic conditions in 2010 will also pave the way

for more rapid growth in economic activity. Cargo traffic and business travel will both benefit

from this development. The lifting of the ban on flights to Europe will enable Indonesia’s

airlines to improve performance and contribute to growth in the transportation sector.

Construction sector growth in 2009 is predicted to reach 6.1%-6.6%. The onset of

renewed growth in purchasing power in tandem with rising optimism for future improvement

in economic conditions and declining loan interest rates is expected to boost activity in

the property business. Cement producers have taken action to anticipate this condition

by expanding capacity early in the second half of 2009. The property sector is the major

consumer of cement, accounting for up to 70% of cement supplied to the market, with

infrastructure absorbing approximately a further 10%. Cement plant construction is aimed

not only at expanding capacity, but also to respond to demand in future years.

Besides the property sector, a number of infrastructure projects are ready to go ahead,

having obtained confirmation of funding. The construction of the Jakarta Outer Ring Road

West 2 (JORR W2) project along a 7 km Ulujami to Kebon Jeruk route will receive Rp 800

billion funding from the Public Services Agency (BLU). With confirmation of funding in hand,

the land expropriation for the toll road can commence immediately and construction work

shortly thereafter, with operations targeted to begin in January 2010.

Another infrastructure project about to begin is the 1,200 MW Muara Tawas Add-On

combined cycle power plant, slated to cost USD1 billion or about Rp 10 trillion. This project

forms part of the accelerated programme for the second phase of the 10 thousand MW

power plant megaproject. The Japan Bank for International Cooperation (JBIC) has declared

its interest in funding this project. Another power generation project with approved funding

is the World Bank-funded 1,000 MW Upper Cisokan thermal power plant in West Bandung

Regency.

The construction sector is forecasted to chart even higher growth in 2010 at 6.9%-

7.4%. Construction activity in 2010 will be bolstered by the development of port facilities in

Sumatra over the next 5 years. The port developments form part of an agreement between

the Government (PT. Pelindo) and 11 strategic partners, signed on 20 August 2008. This

collaboration covers the operation of wharves and harbours, logistics and terminal handling

services, pilot and tugboat services, container handling, loading and unloading of CPO and


36

infrastructure construction. These developments will require a combined investment of 500

million US dollars, which will be used for port expansion at Belawan, Batam, Dumai, Perawang

and Malahayati. Funding is being provided, among others, by the Islamic Development

Bank (IDB) and JBIC. Besides port construction, other infrastructure projects slated for

2010 include the completion of accelerated construction of the phase one 10 GW power

generating project, commencement of the second phase 10 GW powerplant megaproject

and toll road projects.

The financial services, leasing and corporate services sector is expected to chart 5.4%-

5.8% growth, down from 2008. Slackened economic activity will lower demand for financial

intermediary services. On the other hand, the 275 basis point reduction in the BI Rate from

January to September 2009 has met with only limited response from the banking system.

Given the signs of more robust recovery under way in the global and domestic economy,

banks are expected to show progressively improved response to changes in the BI Rate. This

will pave the way for more accessible and affordable funding for economic activities.

Despite the present constraints, the financial services, leasing and corporate services sector

still has the capacity to chart a respectable above 5% growth rate. The main driving force in

this sector is corporate services, particularly in relation to advertising. The flurry of election

activities in 2009 is thought to be the main source of growth in the advertising subsector.

Advertising spending in 2009 is estimated significantly higher than in 2008 as a result of

the election activities.

The invigorated pace of economic activity in 2010 will also bring added business to the

financial services, leasing and corporate services sector. Growth in the financial services,

leasing and corporate services sector during 2010 is forecasted at 6.3%-6.7%. The

improvement in the economic outlook will lower risks of doing business. This in turn will

bolster bank confidence in financing economic activities. Steady improvement in automotive

sales is also forecasted for 2010, bolstered by rising public purchasing power. This will

stimulate multifinance companies to play a more active role in facilitating car purchases by the

public. Most private purchases of motor vehicles have so far been conducted on credit.

In a similar vein, the corporate services subsector will see more robust growth. Intensifying

competition in the world of business means that research, product promotion and

organisation of exhibitions will become increasingly important parts of business activity.

Industries operating in these fields will therefore develop further and expand their contribution

to performance in the financial services, leasing and corporate services sector, possibly even

taking a dominant role.

INFLATION FORECAST

Concerning the inflation outlook, the downward inflation trend in 2009 is set to continue,

but with potential for a return to normality in 2010. Annual CPI inflation in 2009 is

forecasted within the inflation targeting range of 4.5%±1% (Graph 4.2). Key to

the reduced inflationary pressure in 2009 is low inflation in administered prices following

the government decision to lower fuel prices at the beginning of the year. The decline in


37

inflationary pressure is also explained by the downward trend in core inflation related to low

inflation in trading partner nations and improving inflation expectations. In the volatile foods

category, inflationary pressure is predicted to be minimal as a result of adequate supply,

efficient distribution and comparatively low food commodity prices. For the remainder of

2009, inflationary pressure is predicted from surging demands around the festivities of the

Ramadan fasting month, Eid-ul-Fitr and Christmas, as well as improvement in the domestic

economy.

In 2010, CPI inflation is predicted to return to normal levels in the range of 5±1%.

On the fundamentals side, pressure from core inflation is predicted to mount overall. The rise

in inflationary pressure will be commensurate with the higher levels of inflation in trading

partners and global economic growth. In addition, prices for imports are predicted to climb

due to increases in freight costs, with oil prices set to rise in 2010.

On the domestic front, the more invigorated economic growth in 2010 is also expected

to fuel inflation, as indicated by the modest rise now visible in total capacity utilisation.

Countering this is a moderating trend in inflation expectations, evident in various survey

findings pointing to reduced inflation expectations in 2010. This trend is understood to be

linked to low actual inflation during 2009, stability in the exchange rate and the absence of

hikes in strategic administered prices.

On the non-fundamentals side, heightened inflationary pressure is predicted from increases

in some non-strategic administered prices. Nevertheless, volatile foods

inflation is forecasted to stay low in view of measures taken to safeguard

the supply and distribution of food and energy commodities. El Nino

is expected to have relatively minimal impact on domestic food stuff

prices. Despite anecdotal information that suggests El Nino will drive up

international food commodity prices, monitoring of forward prices for

various food commodities such as corn, cereal grains and CPO suggest

no imminent threat of soaring food stuff prices.

Risks that must be factored into the inflation projection include the

possibility of hikes in strategic administered prices, such as bottled LPG

and electricity billing rates. In addition, uncertainty persists over the

extent of impact from El Nino on domestic food stuff production and

international food commodity prices, although Bank Indonesia expects

this impact to be limited.

Graph 4.2

Fan Chart Inflation

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38

5. Monetary Policy Response, Q3/2009

On 5 October 2009, the Board of Governors Meeting at Bank Indonesia decided to hold

the BI Rate at 6.50%. The reasoning in this decision is that the 6.50% rate will remain

consistent with achievement of the 5% ± 1% inflation target for 2010 and takes account

of the gradual improvement in the banking response that is conducive to recovery in the

domestic eco nomy.

Inflation in September reached 1.05% (mtm), up significantly from 0.56% (mtm) in the

preceding month. This rise is explained mainly by the Eid-ul-Fitr festive season. As a result,

annual inflation climbed from August 2009 to 2.83% (y-o-y). During the last few months of

2009, inflationary pressure is forecasted to mount, albeit remaining below the levels reached

one year earlier. Administered prices are predicted to boost inflation, largely as a result of

increased toll road charges and cigarette prices.

Financial system stability will remain strong due to improving performance in the banking

system. Aggregate banking liquidity is also sufficient for banking activity in financing for

the economy. Despite this, the slow rate of credit expansion is set to continue, primarily in

response to the continued weak performance in the real sector (credit demand) and the

greater caution demonstrated by banks in lending (credit supply).

Bank Indonesia will stay the course with monetary policy conducive to real sector growth

while remaining committed to safeguarding medium and long-term economic stability. In the

banking sector, Bank Indonesia will continue to promote the banking intermediation process

and bolster the resilience of the banking system amid the global economic turmoil. Bank

Indonesia will also maintain close coordination with the Government in monitoring global,

regional and domestic economic developments and in taking actions as may be necessary.

Statistics

39

Statistics

Table 1

Interest Rate of Money Market, Deposits, and Credit

(Percent per Annum)

PeriodInterbank

MoneyMarket*

SBIDiscount

Rate*

Time Deposit Interest Rate Credit Interest Rate

1month

3months

6months

12months

24months

4.24 7.34 6.23 6.31 6.36 7.68 9.31 14.10 1 4 . 6 4 4.13 7.39 6.31 6.61 6.89 7.27 8.94 13.80 1 4 . 3 3 3.76 7.43 6.43 6.71 7.12 7.07 8.12 13.41 1 4 . 0 5 5.95 7.44 6.50 6.93 7.35 8.04 9.42 13.31 1 3 . 7 8 6.95 8.25 6.98 7.19 7.11 7.11 8.05 13.36 1 3 . 6 5 6.92 10.00 9.16 8.51 8.01 8.65 8.82 14.51 1 4 . 4 7 9.44 12.75 11.98 11.75 10.17 10.95 12.39 16.23 1 5 . 6 6 10.28 12.73 11.61 12.19 12.10 12.02 12.64 16.35 1 5 . 9 0 10.23 12.50 11.34 11.70 12.09 12.28 12.61 16.15 1 5 . 9 4 8.90 11.25 10.47 11.05 11.52 12.36 12.47 15.82 1 5 . 6 6 5.97 9.75 8.96 9.71 10.70 11.63 11.84 15.07 1 5 . 1 0 7.52 9.00 8.13 8.52 9.29 10.17 11.73 14.49 1 4 . 5 3 5.58 8.75 7.46 7.87 8.40 9.54 11.73 13.88 1 3 . 9 9 6.83 8.25 7.13 7.44 7.80 8.91 11.24 13.31 1 3 . 4 5 4.33 8.00 7.19 7.42 7.65 8.24 10.83 13.00 1 3 . 0 1 8.01 7.96 6.88 7.26 7.57 7.79 10.06 12.88 1 2 . 5 9 8.43 8.73 7.19 7.49 7.79 7.78 9.91 12.99 1 2 . 5 1 9.37 9.71 9.26 9.45 9.14 9.34 9.83 13.93 1 3 . 3 2 9.40 10.83 10.75 11.16 10.34 10.43 8.62 15.22 1 4 . 4 0 8.04 8.21 9.42 10.65 10.45 11.31 8.33 14.99 1 4 . 0 5 6.96 6.95 8.52 9.25 9.75 11.37 9.03 14.52 1 3 . 7 8 6.68 6.71 - - - - - - -

WorkingCapital

Investment

2004Qtr. IIQtr. IIIQtr. IV

2005Qtr. IQtr. IIQtr. IIIQtr. IV




2009Qtr. IQtr. IIQtr. III

* July 2009


40

Table 2

Money Market Transactions

(Billions of Rupiah)

Bank Indonesia Certificate (SBI) 2)

Period Interbank Transaction1) Issuance Repayment Outstandng

2004

Qtr. II

Qtr. III

Qtr. IV

2005

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2006

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2007

Qtr. I

Qtr. II

Qtr. III

Qtr.IV

2008

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2009

Qtr. I

Qtr. II*

* April 2009 1) Morning Transaction2) Transaction between Bank Indonesia and Commercial Banks only. Since March 1994 includes Repo SBPU.

87,082 283,275 304,891 118,776

165,064 252,542 339,339 31,979

204,336 293,933 252,929 103,825

216,381 369,495 415,784 57,536

237,571 362,770 315,996 101,058

250,610 230,026 289,657 41,427

264,348 183,663 150,534 74,632

310,175 415,638 356,471 133,799

280,836 517,853 483,967 167,685

286,958 599,495 586,715 180,464

329,312 665,673 636,381 209,756

495,786 774,866 740,951 243,671

362,339 846,655 832,325 258,002

413,527 895,562 887,411 266,152

313,544 777,247 795,475 247,926

368,429 858,289 906,767 212,463

246,462 489,529 543,655 165,145

326,315 389,138 437,313 116,969

326,310 404,071 340,913 180,128

265,674 450,275 397,703 232,699

123,429 141,864 141,112 233,453

Statistics

41

III IV I II III IV I II III IV I II III*

* Juli 2009 1) Excluded central government, non-resident, foreign counter part value, and managable credit.

Table 3

Outstanding of Credits in Rupiah and Foreign Currency of Commercial Banks by Group of Banks and Economic Sector1)


1 State Bank - Agriculture - Mining - Industry - Trade - Services - Others

2 Private National Foreign Bank - Agriculture - Mining - Industry - Trade - Services - Others 3 Regional Government Bank - Agriculture - Mining - Industry - Trade - Services - Others 4 Foreign and Joint Bank - Agriculture - Mining - Industry - Trade - Services - Othersn

5 Rurral Bank - Agriculture - Mining - Industry - Trade - Services - Others

5 Sub total (1 until 4) - Agriculture - Mining - Industry - Trade - Services - Others

264,735 282,784 282,633 301,186 314,427 348,973 350,232 394,065 432,850 461,877 466,605 476,280 498,516 23,012 25,816 24,222 26,805 28,433 30,281 30,711 32,381 35,153 37,409 38,367 41,901 42,049 3,485 4,771 7,414 9,006 6,556 10,647 13,371 14,922 14,778 13,807 13,363 12,893 12,213 64,265 71,165 71,600 69,959 69,450 72,810 72,706 81,038 88,181 96,838 98,660 96,970 96,786 61,031 61,431 63,561 68,172 75,722 85,601 79,209 92,719 98,865 102,017 103,408 107,064 113,456 39,269 43,481 39,477 44,868 47,465 55,587 55,271 64,182 77,295 87,505 83,540 86,885 90,453 73,673 76,120 76,359 82,376 86,801 94,047 98,964 108,823 118,578 124,301 129,267 130,567 143,469 313,651 334,943 335,998 367,168 394,451 432,595 451,967 500,718 534,599 552,617 530,642 530,642 531,585 10,316 11,430 11,312 12,053 12,467 15,533 15,571 18,298 18,169 19,150 18,722 18,722 19,389 3,775 6,460 5,409 7,321 7,076 10,678 9,621 10,137 10,850 11,137 8,979 8,979 9,379 58,125 61,525 59,826 63,319 68,670 73,840 77,952 84,610 90,896 97,042 93,414 93,414 84,001 78,679 85,628 86,783 95,549 100,883 108,726 111,756 123,057 125,908 130,687 120,114 120,114 121,361 74,729 78,963 80,252 90,497 98,503 110,144 115,400 131,115 143,486 148,332 144,072 144,072 147,475 88,027 90,937 92,416 98,429 106,852 113,674 121,667 133,501 145,290 146,269 145,341 145,341 149,980 55,009 55,959 58,851 65,123 70,937 71,921 75,065 85,339 93,991 96,440 100,817 104,021 113,708 1,922 2,030 2,090 2,130 2,248 2,274 2,379 2,710 3,067 3,182 3,143 3,147 3,281 54 58 58 58 55 43 53 182 187 270 312 364 475 476 457 487 520 543 631 710 770 787 814 829 913 964 8,312 8,239 8,386 8,762 9,295 9,617 10,191 11,504 12,042 12,055 12,638 13,020 14,202 7,531 6,915 6,776 7,747 9,850 8,879 8,615 10,831 13,456 13,356 13,153 14,380 16,859 36,714 38,260 41,054 45,906 48,946 50,477 53,117 59,342 64,452 66,763 70,742 72,197 77,927 107,692 113,450 117,232 121,509 127,445 141,622 151,908 161,998 178,061 189,245 184,654 173,853 170,325 4,727 5,727 5,395 5,460 5,933 7,817 7,449 6,425 6,505 6,419 7,020 6,601 6,754 2,369 2,607 2,287 2,540 2,629 3,972 4,591 3,910 4,478 5,327 6,081 5,581 5,950 49,682 49,285 50,219 51,029 51,259 56,527 60,265 65,896 68,739 74,458 71,358 65,486 61,051 6,663 7,098 7,691 9,035 10,379 11,726 11,383 13,022 14,256 13,246 15,113 14,295 13,331 24,726 28,279 30,709 31,540 34,679 37,831 43,878 46,763 56,523 60,766 57,418 53,655 54,808 19,525 20,454 20,931 21,905 22,566 23,749 24,342 25,982 27,560 29,029 27,664 28,235 28,431 107,692 113,450 117,232 121,509 20,334 20,469 21,592 23,856 25,706 25,413 25,333 26,382 26,736 4,727 5,727 5,395 5,460 1,294 1,339 1,498 1,672 1,769 1,733 1,774 1,915 1,951 2,369 2,607 2,287 2,540 0 0 0 0 0 0 0 0 0 49,682 49,285 50,219 51,029 324 333 367 391 436 426 433 456 473 6,663 7,098 7,691 9,035 7,831 7,664 7,973 8,866 9,516 9,307 8,998 9,368 9,489 24,726 28,279 30,709 31,540 2,084 2,093 2,185 2,433 2,684 2,672 2,705 2,861 2,874 19,525 20,454 20,931 21,905 8,801 9,040 9,569 10,494 11,301 11,275 11,423 11,782 11,949 741,087 787,136 794,714 854,986 913,158 1,004,178 1,038,912 1,148,891 1,249,970 1,313,873 1,308,051 1,331,091 1,340,870 39,977 45,003 43,019 46,448 49,654 57,203 57,562 61,413 64,623 67,828 69,026 73,267 73,424 9,683 13,896 15,168 18,925 16,310 25,336 27,634 29,151 30,293 30,541 28,735 26,720 28,017 172,548 182,432 182,132 184,827 190,242 204,141 212,000 232,705 249,039 269,578 264,694 247,132 243,275 154,685 162,396 166,421 181,518 192,985 214,804 211,719 235,898 249,762 259,953 260,271 272,058 271,839 146,255 157,638 157,214 174,652 188,838 210,561 221,123 249,700 286,740 306,141 300,888 306,972 312,559 217,939 225,771 230,760 248,616 275,129 292,133 308,874 340,024 369,513 379,832 384,437 404,942 411,756

2006 2007 2008 2009


42

* Juli 2009 1) M1 plus Quasi Money2) Currency Outside Banks plus Demand Deposits3) Including Government Particular Account

Table 4

Money Supply and Its Affecting Factors

(Billion of Rupiah)

M2 Affecting Factors

End ofPeriod

Total 1) Total 2)

M1

CurrencyOutside

BanksDemand

DepositsQuasi

MoneyNet Foreign

Assets

NetClaims On

CentralGovt.3)

Claims OnOfficial

Entities andState

Enterprises

Claims OnPrivate

Enterprisesand

Individuals

2004

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2005

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2006

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2007

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2008

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2009

Qtr. I

Qtr.II

Qtr.III*

935,247 219,086 86,881 132,205 716,161 275,819 443,440 22,803 454,663 -261,518

975,166 233,726 97,574 136,152 741,440 280,070 468,907 27,806 522,161 -323,778

986,806 240,911 99,505 141,406 745,895 258,684 476,451 25,261 551,562 -325,152

1,033,528 253,818 109,265 144,553 779,710 263,647 498,019 26,919 588,885 -343,940

1,020,693 250,492 98,584 151,908 770,201 268,482 456,274 28,257 612,463 -344,783

1,073,746 267,635 106,125 161,510 806,111 256,058 468,004 28,237 659,129 -337,682

1,150,451 273,954 114,998 158,956 876,497 280,369 488,483 29,805 708,018 -356,224

1,203,215 281,905 124,316 157,589 921,310 313,082 498,901 28,059 710,783 -347,610

1,195,067 277,293 112,625 164,668 917,774 347,970 470,048 25,557 705,321 -353,829

1,253,757 313,153 123,761 189,392 940,604 345,457 481,654 29,746 729,609 -332,709

1,291,396 333,905 129,969 203,936 957,491 401,065 481,641 31,858 758,261 -381,429

1,382,074 361,073 151,009 210,064 1,021,001 413,265 506,488 38,946 798,125 -374,750

1,375,947 341,833 129,618 212,215 1,034,114 457,382 447,655 35,032 810,996 -375,118

1,451,974 381,376 146,715 234,661 1,070,598 496,522 430,956 44,185 865,144 -384,833

1,512,756 411,281 160,327 250,954 1,101,475 519,360 439,649 45,496 916,657 -408,406

1,643,203 460,842 183,419 277,423 1,182,361 524,703 497,478 56,152 984,844 -419,974

1,586,795 419,746 164,995 254,751 1,167,049 549,049 375,976 49,644 1,025,856 -413,730

1,699,480 466,708 189,453 277,255 1,232,772 562,636 359,645 57,304 1,131,796 -411,901

1,768,250 491,729 223,166 268,563 1,276,521 525,702 348,387 64,488 1,222,193 -392,520

1,883,851 466,379 209,378 257,001 1,417,472 602,347 379,217 66,571 1,282,257 -446,541

1,909,681 458,581 186,538 272,043 1,451,100 703,621 348,466 67,164 1,283,406 -492,976

1,967,776 493,384 203,838 289,546 1,474,392 655,130 348,466 71,044 1,320,131 -453,873

1,961,634 483,170 200,906 282,264 1,478,464 639,858 375,944 1,334,731 -465,944

NetOtherItems

Statistics

43

Table 5

Base Money and Its Affecting Factors


257,843 297,080 272,239 289,727 310,265 379,582 325,044 349,649 392,136 344,688 304,718 322,994 322,850

0 0 0 0 0 0 0 0 0 0 0 0 0

153,569 178,572 155,498 173,888 189,221 220,785 198,940 224,342 270,243 264,391 226,672 244,634 242,408

129,969 151,009 129,618 146,715 160,327 183,419 164,995 189,453 223,166 209,378 186,538 211,864 199,515

23,600 27,563 25,880 27,173 28,894 37,366 33,945 34,889 47,077 55,013 40,134 32,770 42,894

104,061 118,417 116,558 115,524 120,740 158,452 125,705 124,811 121,302 79,648 77,404 77,744 79,831

213 91 183 315 304 345 399 496 591 650 642 616 611

255,182 274,694 305,744 330,295 337,523 356,883 351,874 351,561 355,967 338,692 354,727 356,930 355,049

2,661 22,386 -33,505 -40,569 -27,258 22,699 -26,830 -1,912 36,169 5,996 -50,009 -33,935 -32,199

219,538 265,919 200,460 187,081 184,961 249,069 128,907 117,614 123,797 172,012 105,571 136,202 137,709

18,226 18,196 18,186 18,136 18,136 8,847 8,838 8,800 8,800 8,711 8,715 8,715 8,715

11,035 10,832 10,598 10,366 10,206 9,994 9,751 9,353 9,227 9,009 8,783 8,622 8,530

5,494 5,352 5,366 5,389 5,357 3,074 3,089 3,295 3,155 3,815 2,545 2,473 2,460

-189,131 -242,001 -247,525 -264,280 -254,096 -281,164 -219,099 -191,525 -152,563 -233,866 -257,701 -267,412 -264,395

-180,382 -208,763 -239,977 -257,998 -265,034 -247,688 -212,463 -165,145 -116,967 -179,879 -232,700 -232,731 -236,025

-16,829 -41,568 -19,298 -21,615 -4,750 -48,933 -5,737 -4,989 -1,403 -4,223 -15,288 -28,277 -33,089

8,080 8,330 11,750 15,333 15,688 15,457 14,356 14,172 15,929 19,569 15,599 22,580 17,541

-62,501 -35,912 -20,590 2,739 8,178 32,879 41,684 50,551 43,752 46,316 82,078 77,465 74,783

2006 2007 2008 2009

III IV I II III IV I II III IV I II III*

I. Base Money

a. Statutory Reserve Shortfall

b. Currency

- Currency outside bank

- Cash in vaults

c. Commercial Banks Positive Balance

d. Private Sector Demand Deposits

I. Factor Affecting Base Money

a. Net International Reserve 1)

b. Net Domestic Assets

- Net Claims on Central Government

- Liquidity Support

- Liquidity Credits

- Others Claims

- Open Market

- SBI (net) 2)

- FASBI

- Others 3)

- Net Other Items

* July 2009 1) Before June 1997 : NFA, after June 1997 : NIR using constant rate Rp7,000/$ Since June 1998 up to March 1999 using constant rate Rp10,000/$ Since April 1999 using constant rate Rp7,500/$ Since 21 November 1999 using constant rate Rp7,000/$ Sejak 25 Mei 2000 for account NIR using IRFCL (Int’l Reserve and Foreign Currency Liquidity) concept2) Since March 2000 include SBI Syariah3) including Government Bonds and FTO (Fine Tune Operation)


44

Table 6

Indonesia Current Account Payment 1)

(Millions of $)

2006 2007 2008* 2008*

III IV Total I II III IV Total I II III IV Total I II

I. Current Account

A. Goods, net (Trade Balance) Export f.o.b Import f.o.b

B. Services (net)

C. Income (net)

D. Current Transfers (net)

II. Capital and Financial Account

A. Capital Account B. Financial Account

1. Direct Investment Abroad (net) Domestic (FDI), (net) 2. Portfolio Investment Asset (net) Liability (net) 3. Other Investment Asset (net) Liabiliaty (net) 2)

III. Total (I + II)

IV. Errors and Omissions

V. Overall Balance (III + IV)

VI. Monetary Movements 3)

Changes in Reserves Assets 3)

a.l. Transaction

IMF: Purchases Repurchases

Memorandum: Reserve Assets Posistion 4)

Current Account (% GDP) Debt Service Ratio (%) 5)

a.1. Government Related & Monetary Authorities 6) *) Angka sementara **) Angka sangat sementara 1) Format baru sejak publikasi Januari 2004 2) Tidak termasuk pinjaman IMF3) Negatif berarti surplus dan positif berarti defisit. Sejak kuartal pertama 2004, perubahan cadangan devisa untuk data realisasi hanya mencakup data transaksi. 4) Sejak 1988, posisi cadangan devisa berdasarkan aktiva luar negeri menggantikan cadangan devisa resmi. Sejak 2000, posisi cadangan devisa memakai konsep

Internasional Reserve and Foreign Currency Liquidity (IRFCL). 5) Perbandingan antara pembayaran pokok dan bunga utang luar negeri terhadap ekspor barang dan jasa. 6) Terdiri dari Pemerintah, BUMN di luar bank, dan Bank Indonesia.

3,795 2,157 10,859 2,640 2,271 2,151 3,430 10,493 #REF! #REF! #REF! #REF! #REF! 2,885 3,104 8,596 7,386 29,660 7,712 8,107 7,487 9,448 32,754 7,536 5,443 5,771 4,166 22,916 6,969 8,705 27,604 27,178 103,528 26,626 29,202 30,009 32,177 118,014 34,412 37,345 38,081 29,768 139,606 24,205 27,509 -19,008 -19,792 -73,868 -18,914 -21,095 -22,521 -22,729 -85,260 -26,876 -31,902 -32,309 -25,603 -116,690 -17,236 -18,805 -2,402 -2,829 -9,874 -3,163 -2,991 -2,764 -2,922 -11,841 -2,972 -3,290 -3,195 -3,288 -12,745 -2,535 -3,097 -3,720 -3,539 -13,790 -3,163 -4,023 -3,811 -4,527 -15,525 -3,120 -4,469 -4,803 -2,879 -15,271 -2,672 -3,714 1,321 1,139 4,863 1,254 1,178 1,240 1,432 5,104 1,373 1,359 1,336 1,317 5,385 1,122 1,210 -1,039 1,303 3,025 1,836 2,029 -935 660 3,591 -1,430 2,512 904 -3,340 -1,354 1,750 -2,414 97 132 350 43 127 255 122 546 17 62 187 29 294 19 29 -1,136 1,170 2,675 1,793 1,902 -1,190 539 3,045 -1,447 2,450 717 -3,368 -1,648 1,731 -2,443 -273 1,232 2,211 -246 1,426 764 309 2,253 -271 604 404 2,061 2,799 1,660 9 -1,328 -204 -2,703 -1,282 392 -1,427 -2,358 -4,675 -1,730 -1,436 -1,517 -1,217 -5,900 -821 -1,029 1,055 1,435 4,914 1,037 1,034 2,191 2,667 6,928 1,460 2,040 1,921 3,278 8,698 2,481 1,037 207 1,312 4,174 2,491 3,810 465 -1,200 5,566 1,984 4,188 -74 -4,377 1,721 1,859 2,003 -332 -762 -1,933 -497 -1,897 -1,257 -764 -4,415 -823 60 -65 -467 -1,294 133 406 539 2,074 6,107 2,988 5,707 1,722 -437 9,981 2,807 4,128 -9 -3,910 3,015 1,726 1,597 -1,209 -1,382 -3,791 -452 -3,334 -2,419 1,430 -4,775 -3,160 -2,342 387 -1,052 -6,167 -1,788 -4,455 -235 -1,707 -1,588 -105 -2,283 -2,360 262 -4,486 -2,672 -1,974 -1,610 -3,720 -9,977 -811 -2,692 -974 325 -2,204 -348 -1,051 -59 1,168 -289 -489 -367 1,998 2,668 3,810 -976 -1,763 2,756 3,459 13,885 4,476 4,300 1,217 4,091 14,083 1,387 1,554 14 -4,024 -1,069 4,634 690 -118 -751 625 -97 -663 -37 -571 -1,368 -355 -229 -103 -188 -876 -680 362 2,637 2,708 14,510 4,379 3,637 1,179 3,520 12,715 1,032 1,324 -89 -4,212 -1,945 3,955 1,052 -2,637 -2,708 -14,510 -4,379 -3,637 -1,179 -3,520 -12,715 -1,032 -1,324 89 4,212 1,945 -3,955 -1,052 -2,189 292 -6,902 -4,379 -3,637 -1,179 -3,520 -12,715 -1,032 -1,324 89 4,212 1,945 -3,955 -1,052 -448 -3,001 -7,608 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -448 -3,001 -7,608 0 0 0 0 0 0 0 0 0 0 0 0

42,353 42,586 42,586 47,221 50,924 52,875 56,920 56,920 58,987 59,453 57,108 51,639 51,639 54,840 57,576 2,9 2,6 2,1 1,9 3,0 2,4 2,3 -0,7 -0,6 -0,6 0,1 2,6 2,4 17,5 33,2 24,8 19,8 21,4 15,2 21,2 19,4 16,2 17,8 15,2 24,2 18,1 23,3 24,8 7,1 18,6 14,2 5,6 9,4 5,1 9,0 7,3 4,4 7,7 4,7 9,2 6,4 6,0 10,2

Statistics

45

Notes :

1) Index quarterly changes.

CPI Calculated based on 2002 prices (2002 = 100).

* Started in 1 Juli 2008, CPI Calculated based on 2007 prices (2007 = 100), quarter II-2008 data is mtm inflation data (month to month) June 2008

** August 2009

Source : BPS-Statistic Indonesia (processed)

Table 7

Inflation Rate by Group of Goods and Services

(Percent)1

1.27 6.05 3.71 -1.21 4.00 4.43 5.91 1.28 4.75 0.60 1.44 -1.76 2.45 2.60 8.63 12.16 -6.50 0.69 3.48 2.59 2.11 0.60 0.91 2.76 -0.75 0.40 5.62 -0.25 -2.93 5.12 9.08 -2.04 4.14 0.29 13.94 -4.64 2.39 -0.26 2.73 3.66 1.46 1.37 -2.71 4.65 2.11 5.84 2.01 12.12 2.94 2.25 -2.52 2.72 2.72 1.64 0.35 0.39 3.06 0.73 7.87 1.84 8.04 4.32 2.24 -0.88 1.00 1.96 2.55 -1.02 4.05 11.46 0.26 6.88 -0.19 8.94 -2.51 -0.34 -0.54 3.59 1.00 11.87 -0.30 -1.04 2.17 7.39 2.42 1.68 3.79 6.60 2.59 -5.97 3.22 1.73 1.72 3.81 2.61 4.49 7.90 28.51 1.84 5.93 0.42 0.18 -2.59 -0.95 0.50 4.46 2.21 1.39 2.87 1.79 1.38 0.89 7.30 1.68 0.71 3.11 3.76 -13.98 24.41 -3.70 -8.06 -0.43 25.17 2.85 -0.07 -10.49 8.28 1.66 -8.24 10.38 1.41 3.65 8.63 12.79 7.09 6.71 15.72 1.47 -1.65 -6.81 -0.81 0.12 -1.64 4.36 3.13 1.32 1.50 0.75 -1.47 2.02 1.00 3.57 1.20 1.62 0.61 0.87 0.80 2.24 1.89 1.19 1.33 1.85 4.02 1.33 2.62 2.43 2.40 1.18 1.02 0.96 2.25 1.67 1.00 1.35 2.36 5.50 1.63 2.83 2.35 1.59 1.03 0.84 0.31 1.95 1.75 0.20 0.46 -0.20 1.47 1.06 2.15 1.50 5.39 2.15 2.14 0.86 2.59 2.24 2.60 1.85 2.28 1.89 0.73 2.60 3.70 2.42 0.82 0.59 0.78 1.30 1.81 0.75 1.27 0.97 2.79 1.14 3.58 1.00 0.42 0.26 0.29 0.98 1.73 2.12 0.83 1.11 1.58 2.22 1.67 2.16 0.73 1.00 0.12 0.30 0.34 0.56 1.69 0.15 1.92 -0.45 4.69 -0.12 8.94 1.66 -1.48 0.29 0.42 0.67 0.78 1.20 0.52 0.57 1.05 1.45 0.97 1.66 1.10 0.95 0.68 0.43 0.99 0.99 1.70 1.79 1.61 1.30 2.71 0.86 1.71 1.08 1.00 0.53 -0.20 0.57 1.84 0.72 0.39 2.34 4.78 4.30 0.49 0.77 2.58 4.48 -1.88 -0.22 0.80 1.81 0.37 0.29 1.29 1.70 0.81 0.27 3.02 0.35 0.38 0.55 0.89 0.69 1.41 0.10 0.71 0.94 1.45 0.68 0.46 2.15 0.30 0.44 0.29 0.58 1.00 1.35 0.50 0.32 1.34 0.86 0.56 0.64 2.13 0.23 0.26 0.39 0.82 0.22 2.47 2.09 0.35 5.53 13.60 12.66 0.59 -2.46 7.26 13.49 -6.30 -1.98 le 0.70 1.76 1.39 0.71 1.03 1.12 3.00 0.83 1.64 1.10 1.27 1.20 0.47 0.94 3.70 1.92 0.45 0.32 0.44 5.12 0.47 1.07 0.69 1.60 1.72 0.60 -0.19 0.18 1.32 0.82 1.08 1.46 1.96 1.31 2.19 1.60 1.14 1.39 0.29 0.84 0.80 1.16 1.85 0.61 0.73 1.15 1.10 2.36 1.61 1.39 0.73 0.82 0.77 0.72 1.46 0.80 1.56 1.52 2.32 0.90 1.76 1.26 1.01 0.42 0.45 7.44 0.20 0.36 0.01 7.97 0.43 0.14 0.44 3.77 0.82 0.22 0.22 2.49 11.41 0.12 0.46 0.03 12.73 0.36 0.09 0.18 6.76 0.70 0.04 0.06 4.35 2.31 0.23 1.04 0.26 0.87 0.48 0.72 0.45 4.95 0.32 0.59 0.46 1.07 3.61 0.27 0.36 0.36 1.58 0.66 0.30 0.72 1.14 1.11 0.37 0.16 0.74 0.06 0.28 0.13 -0.23 0.01 0.64 0.20 0.92 0.51 1.02 0.48 0.55 0.34 1.19 0.88 0.79 0.36 0.35 2.23 0.47 0.20 0.91 0.49 0.51 0.33 0.40 0.08 0.35 0.22 0.46 0.15 0.42 0.37 8.72 0.92 -2.94 -4.66 0.32 0.26 0.02 0.33 0.24 0.60 0.00 0.49 0.27 12.98 1.03 -4.46 -6.95 0.54 0.37 -0.01 -0.01 0.05 0.01 -0.02 0.00 0.01 -0.12 0.02 0.20 -0.07 -0.31 -0.27 1.26 1.56 0.50 0.24 2.43 1.27 1.40 0.84 1.34 1.64 1.38 0.34 0.56 0.05 0.01 0.01 0.01 0.00 0.00 4.90 0.01 3.89 0.00 0.00 0.00 0.65 1.16 2.44 1.91 0.17 2.28 2.09 3.41 2.46 2.88 0.54 0.36 -0.15 1.01

Sub Group 2006 2007 2008 2009 III IV I II III IV I II* III IV I II III**

I. Food A. Cereal and Product B. Meat and Meat Product C. Fresh Fish D. Dried Fish E. Egg and Milk F. Vegetables G. Beans and Nuts H. Fruits I. Species J. Fat and Oil K. Others

II. Prepared Food, Beverage, Cigarettes and Cloves A. Prepared Food B. Non-alcoholic-Beverage C. Cigarettes, Cloves, and Alcoholic BeverageIII. Housing A. Home Owner Cost B. Fuel, Electricity, and Water C. Household Equipment D. Household Operation IV. Clothing A. Clothing for Men B. Clothing for Women C. Clothing for Children D. Personal Effect and Other Clothing

V. Health A. Medical Care and Medicine B. Medicine C. Personal Care D. Personal Care and Cosmetics

VI. Education, Culture, Sport, and Entertainment A. Education B. Courses and Training C. Education Equipment D. Recreation E. Sport

VII. Transportation and Communication A. Transportation B. Communication and Delivery C. Transport Facility D. Financial Service

GENERAL


46

Table 8

Inflation Rate Contribution in 44 Cities (cont.)

(Percent)1

1.09 4.45 2.16 -2.16 5.34 -1.05 4.84 4.38 2.92 2.97 -0.56 -0.37 4.37 2.64 2.81 4.61 -1.67 5.85 1.94 3.49 2.75 1.36 1.39 0.35 0.14 4.12 2.74 4.93 1.92 -2.34 3.76 2.51 4.65 2.53 1.27 1.56 -0.03 -1.07 2.66 1.90 1.07 6.92 -0.29 1.15 2.69 4.63 2.31 3.06 2.22 -0.52 -0.01 3.45 1.68 4.01 2.98 -0.55 3.78 1.97 3.07 2.88 1.37 1.33 -0.20 0.10 3.26 0.85 3.31 1.63 -0.51 1.96 3.23 2.19 2.07 1.21 2.26 -0.84 -0.17 3.35 0.93 5.07 3.68 -1.96 2.06 3.05 4.35 4.09 2.04 2.07 0.04 -1.34 2.79 1.21 3.36 3.67 -1.49 1.92 3.31 4.15 2.46 3.17 0.55 0.48 -0.54 1.70 2.30 1.97 1.40 -0.34 2.15 1.56 2.91 2.29 1.72 0.58 0.64 -0.43 1.76 1.61 6.14 3.17 -1.22 2.57 2.75 2.16 4.19 1.76 -0.19 0.26 -0.72 2.37 0.96 4.27 0.64 0.85 3.23 3.28 3.11 3.41 3.20 -0.29 -0.06 0.09 1.57 1.23 3.76 1.36 -0.88 3.10 1.37 4.09 4.14 3.61 0.34 0.09 -0.74 4.06 0.69 2.31 0.71 0.12 3.40 2.22 3.29 2.93 4.95 0.74 0.92 -1.29 4.85 2.16 0.93 2.62 -0.98 0.67 0.33 6.53 4.20 4.26 0.13 -0.78 -0.74 3.16 - - - - - - - 3.80 3.04 1.22 -0.74 -0.77 3.52 - - - - - - - 2.45 3.33 1.19 0.32 -0.73 1.29 1.21 2.07 1.95 0.51 1.85 1.61 3.51 1.94 2.54 - - - - 2.23 3.53 3.73 -0.04 1.65 2.20 2.57 2.54 3.64 - - - - - - - - - - - 2.21 4.50 - - - - - - - - - - - 3.04 3.21 0.00 0.32 -0.06 2.03 - - - - - - - 2.11 0.88 1.57 0.63 0.36 1.89 - - - - - - - 1.15 2.38 0.46 0.79 -0.27 1.72 - - - - - - - 2.80 3.42 1.32 1.67 0.35 1.25 - - - - - - - 1.24 3.82 0.03 0.01 -0.26 1.76 - - - - - - - 2.45 3.49 0.18 -0.87 -0.20 2.43 1.26 1.87 1.13 -0.26 2.48 1.82 2.81 2.76 2.28 -0.07 0.11 -0.14 1.64 0.63 4.23 3.24 0.15 2.22 2.06 3.52 3.33 4.04 0.19 0.91 0.04 2.49 2.21 2.48 2.22 1.33 2.21 0.26 3.60 2.75 3.53 1.16 0.78 0.11 1.17 0.36 2.41 1.19 -0.34 0.99 1.42 2.74 2.13 1.74 0.13 1.06 0.19 1.21 1.48 1.57 2.37 0.52 1.98 1.72 4.18 2.40 2.83 0.18 0.72 0.06 1.96 1.48 3.19 1.66 1.24 2.84 2.88 2.72 1.82 2.36 0.45 1.05 1.05 3.15 2.52 2.42 1.86 0.18 3.17 2.59 2.85 2.51 3.16 - - - - 0.70 2.68 1.26 0.78 2.13 2.91 2.73 3.46 2.77 - - - - - - - - - - - 1.62 2.83 1.05 0.25 0.14 1.90 0.80 3.11 2.50 -0.11 1.55 2.76 2.94 2.11 3.10 -0.35 0.90 0.02 2.04 0.60 1.76 1.30 0.13 2.12 2.28 4.06 2.77 2.93 0.38 1.28 0.16 1.38 - - - - - - - 1.81 3.85 0.00 0.60 0.07 1.84 - - - - - - - 4.05 2.27 -0.32 1.02 0.00 1.52 0.81 2.61 1.09 0.90 2.02 2.12 3.59 2.00 2.56 0.14 1.06 -0.41 1.97 -0.12 1.37 2.19 0.29 1.36 1.95 3.35 1.78 3.14 - - - - -0.05 1.93 3.59 1.00 1.14 2.78 3.23 3.21 3.23 - - - - - - - - - - - 4.94 3.16 0.77 2.41 -1.12 2.06 - - - - - - - 2.24 6.66 -2.44 0.39 1.10 3.47 0.86 3.32 5.29 -0.39 0.90 2.47 3.33 2.31 0.46 - - - - 1.72 1.29 2.56 1.14 2.12 2.49 4.21 2.27 3.21 - - - - - - - - - - - 2.94 2.73 0.02 0.38 -0.90 2.44 0.30 1.74 0.81 0.39 1.84 4.38 1.60 2.87 1.72 - - - - -0.52 3.94 0.62 -0.14 2.38 4.95 4.48 2.22 3.62 - - - - 0.10 3.14 3.29 -0.66 2.60 2.39 4.12 2.48 2.23 - - - - -0.06 1.05 0.81 0.39 4.54 1.40 3.75 2.88 1.84 - - - - 2.44 0.61 1.72 0.52 4.84 1.85 3.97 3.32 2.96 - - - -

C i t i e s 2006 2007 2008 2009

III IV I II III IV I II* III IV I II III*

1. Lhokseumawe2. Banda Aceh3. Padang Sidempuan4. Sibolga5. Pematang Siantar6. M e d a n7. Padang8. Pekanbaru9. Batam10. Jambi11. Palembang12. Bengkulu13. Bandar Lampung14. Pangkal Pinang15. Dumai16. Tanjung Pinang17. Jakarta18. Tasikmalaya19. Serang20. Tangerang21. Cilegon22. Bogor23. Sukabumi24. Bekasi25. Depok26. Bandung27. Cirebon28. Purwokerto29. Surakarta30. Semarang31. Tegal32. Yogyakarta33. Jember34. Sumenep35. Kediri36. Malang37. Probolinggo38. Madiun39. Surabaya40. Denpasar41. Mataram42. Bima43. Maumere44. Kupang45. Pontianak46. Singkawang47. Sampit48. Palangka Raya49. Banjarmasin50. Balikpapan51. Samarinda

Statistics

47

Notes :

1) Index quarterly changes.

CPI Calculated based on 2002 prices (2002 = 100).

* Started in 1 Juli 2008, CPI Calculated based on 2007 prices (2007 = 100) with total 66 cities, quarter II-2008 data is mtm inflation data (month to month) June 2008

** May 2009

Source : BPS-Statistic Indonesia (processed))

Table 8

Inflation Rate Contribution in 44 Cities (cont.)

(Percent)1

- - - - - - - 2.48 5.54 0.82 0.53 1.34 3.52 2.15 1.29 3.34 -0.43 3.45 3.46 1.04 3.63 3.02 0.17 1.18 -2.08 0.74 1.23 1.74 0.60 1.87 1.60 3.84 1.49 2.44 5.01 -0.63 1.78 -0.36 3.35 - - - - - - - 6.26 3.62 0.27 2.14 0.84 2.85 1.58 0.66 2.28 0.51 3.38 -0.54 4.45 3.39 3.50 - - - - - - - - - 2.76 4.21 0.43 0.40 -0.53 1.85 - - - - - - - 3.15 3.50 1.16 1.14 -0.12 2.00 2.29 2.97 1.94 2.20 0.15 2.94 2.91 6.49 3.30 0.74 2.99 -0.34 2.20 2.34 3.48 -1.24 0.46 3.22 4.51 -0.04 2.59 4.01 0.16 2.33 0.59 0.85 - - - - - - - 3.04 5.86 -0.29 -0.35 0.06 1.45 -0.47 1.25 1.77 0.51 2.38 1.07 2.92 1.76 5.06 -4.80 2.26 -2.43 1.82 0.82 1.72 2.39 2.06 0.44 5.21 4.71 1.17 4.30 -0.92 1.25 -0.27 1.32 - - - - - - - 5.78 8.31 0.62 3.52 0.36 2.39 - - - - - - - 5.72 7.29 -1.86 0.77 0.52 0.42 1.57 2.31 4.93 0.15 0.52 4.45 6.49 5.86 2.88 0.31 -0.06 -0.36 1.55 1.16 2.44 1.91 0.17 2.28 2.09 3.41 2.46 2.88 0.54 0.36 -0.15 2.07

K o t a 2006 2007 2008 2009

II III IV I II III IV I II* III IV I II*

52. Tarakan53. Manado54. P a l u55. Watampone56. Makassar57. Parepare58. Palopo59. Kendari60. Gorontalo61. Mamuju62. Ambon63. Ternate64. Manokwari65. Sorong66. Jayapura

NATIONAL


48

Notes :1) Index quarterly changes. Wholesale Price Index (WPI) calculated based on 2000prices (2000 = 100).*) July 2009Source : BPS-Statistic (processed)

Table 9

Changes of Wholesale Price Index

(Percent) 1

1.26 9.77 1.18 3.10 3.91 2.90 6.75 2.35

3.20 1.55 2.34 6.67 7.32 2.26 21.16 4.37

-1.29 0.35 0.60 3.41 4.68 0.89 13.39 1.80

1.84 1.02 0.52 0.34 -1.48 2.42 -9.47 0.18

3.80 3.00 8.04 9.11 10.73 4.61 24.20 8.02

0.00 0.70 1.34 0.69 1.43 0.00 5.13 1.38

2.76 0.70 1.32 6.85 9.15 3.28 20.49 4.08

4.03 13.19 22.22 0.64 -3.87 2.38 -13.77 9.15

3.87 0.61 1.60 -0.64 -1.34 -4.65 3.29 -1.20

4.97 1.83 2.11 5.13 8.84 6.50 13.64 4.85

5.33 2.40 2.58 0.61 0.00 2.29 -3.60 2.31

6.74 3.51 1.51 1.82 -5.00 1.49 -16.18 0.56

6.32 3.39 3.47 3.57 2.63 3.68 1.49 3.93

2.97 1.64 3.35 5.75 7.05 2.84 14.63 4.32

7.69 1.61 3.70 3.26 1.80 -0.69 6.38 3.63

7.59 3.70 5.80 11.05 10.00 2.08 24.40 8.50

7.05 4.08 7.17 6.64 5.88 5.44 6.43 6.45

7.75 10.78 12.60 15.56 14.14 5.16 28.10 12.55

4.32 3.54 1.40 -9.23 -5.31 2.45 -15.09 -1.92

0.00 4.27 -4.14 -11.86 -13.55 9.58 -47.22 -6.67

-31.27 -15.57 -41.37 -24.52 -25.95 -17.49 -50.53 -32.35

3.31 -0.64 1.12 0.43 -0.65 -5.30 21.28 1.27

4.37 -0.54 1.09 0.15 -3.00 -7.95 22.34 0.93

End of Agriculture Mining Industry Import Export General

Period Total Non Oil/Gas Oil/Gas

2004

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2005

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2006

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2007

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2008

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2009

Qtr.I

Qtr.II

Qtr.III*

Documents

Jl.MH. Thamrin No.2 Jakarta 10110 - Indonesia … · economic conditions in trading partner nations and upward movement in global commodity prices. Growth in imports, however, remains