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Danamon Economic and Market Research | Please read the disclaimer on the back of this report 11
The Deterioration of the Global Outlook and How This
Might Impact on Indonesia
The World Bank & University of Paramadina ~ Jakarta: 4 October 2011
Anton Gunawan
Chief Economist [email protected]
+62 21 5799-1466
+62 21 5799-1001 ext 1095
See the Disclosure Appendix for the Analyst
Certification and Other Disclosures
Anton Hendranata
Economist / Econometrician [email protected]
+62 21 5799-1563
+62 21 5799-1001 ext 1128
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 2
On the menu today
• Recent financial markets’ turmoil ~ Getting a taste of capital inflows reversal,
when offshore investors were panicking
• Facing a possible double dip
– Trade channel
– Relatively small fiscal space
– Growth stress test
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3
Jun-2007 Jun-2008 Jun-2009 Jun-2010 Jun-2011
50
40
30
20
10
0
-10
-20
-30
-40
Credit Growth by Currency%yoy
Total
LCY
FCY
3
Declining FCY liquidity, as loan growth strongly pick up
Movements of Nostro account, 2004-11 Net Foreign Assets of Commercial Banks 2006-11
Source: BI, CEIC Source: BI, CEIC
Growth of Bank Loans by Currency, June 2011 Growth of Bank Deposits by Currency, June 11
Jun-2007 Jun-2008 Jun-2009 Jun-2010 Jun-2011
40
35
30
25
20
15
10
5
0
-5
%yoy Third Party Fund Growth by Currency
Total
LCY
FCY
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 44
-50,000
-40,000
-30,000
-20,000
-10,000
0
10,000
Total State Private Nat Reg Dev Joint &
Foreign
Jan Mar Jun
Declining FCY liquidity by type of banks
FCY Loans and TPF Growth (%ytd) by Bank Category , Jul 11 Net TPF Change (ytd, IDR bn) by Bank Category 2011
Source: BI, CEIC Source: BI, CEIC
Bank Excess Deposits (FCY, IDR bn) by Bank Category
Notes: Net TPF change = change in (TPF – Loans)
Bank Excess Deposit = TPF – Loans – Reserves
Bank Excess Deposits (FCY, IDR bn) by Bank, June 11
10,812
-1,806
3,696
1,261
-1,382
1,325
2,927
-776
-3,000
-1,000
1,000
3,000
5,000
7,000
9,000
11,000
BCA Mandiri BRI BNI CIMB Permata Panin Danamon
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 5
89,427
31,121
-1,105
28,294
-1,188
1,544 3,762
-10,061-7,237
-20,000
0
20,000
40,000
60,000
80,000
100,000
BCA Mandiri BRI BNI CIMB Permata Panin BTN Danamon
-100,000
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
Total State Private Nat Reg Dev Joint &
Foreign
Jan Mar Jun
Bank Excess Deposits (LCY, IDR bn) by Bank, June 11
5
0
100,000
200,000
300,000
400,000
500,000
Total State Private Nat Reg Dev Joint &
Foreign
Dec-10 Mar-11 Jun-11
LCY: declining liquidity, except for BPD
LCY Loans and TPF Growth (%ytd) by Bank Category , June 11
Net TPF Change (ytd, IDR bn) by Bank Category 2011
-5
0
5
10
15
20
25
30
Total State Private Nat Reg Dev Joint &
Foreign
TPF Loans
Bank Excess Deposits (LCY, IDR bn) by Bank Category
Source: BI, CEIC Source: BI, CEIC
Notes: Net TPF change = change in (TPF – Loans)
Bank Excess Deposit = TPF – Loans – Reserves
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 66
August 2011 global market turmoil versus GFC 2008
• Practically no major impact of Aug-11 global financial market turmoil on Indonesia bond market. Impact
on longer tenor bonds’ yields were not significant and short lived, as the Rupiah was kept stable by bank
Indonesia. Meanwhile 10-year US Treasury yield down from 3.7% to 2.2% during the week.
• BI’s and banks’ bond holdings up by IDR 4.5tn and IDR 2.5tn, respectively, during the week (5-12
August 2011), while foreign holdings down by IDR 8tn.
• Risk aversion and deleveraging in October 2008 pushed 10yr UST to decline from 4% (on 14 Oct) to 2%
(on 18 Dec), while IDR 10yr gov bonds yields rose to 21% (on 28 Oct) from 12% in Aug-08.
Yield: UST vs IDR 10yr
Source: CEIC Source: BI, Depkeu
10-Oct-2007 9-Sep-2009 10-Aug-2011
25
20
15
10
5
0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
yield spread: IDR SUN 10yr - UST 10yr
IDR 10yr yield
UST 10yr yield (rhs)
IDR was relatively stable
10-Oct-2007 9-Sep-2009 10-Aug-2011
12500
12000
11500
11000
10500
10000
9500
9000
8500
8000
90
85
80
75
70
65
IDR/US$
Dollar Index (major currency)
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 7
Sep-11 Market Turmoil: the pressures coming from offshore
Source: Bloomberg
Recent situation of IDR vs NDF GFC 2008 of IDR
• Offshore investors have been excessively ―long‖ Rupiah financial assets for sometime.
• Fears over Greek default (risk aversions), the strengthening of USD, and the tightening global
USD liquidity lead to offshore investors shifting to ―neutral‖ positions and hitting NDF for cover
(to hedge against their currency exposures)
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 8
Global bonds funds getting out from EMs, incl. Indonesia
Source: Citigroup’s ICG-CIRA
• The largest weekly outflows from dedicated EM bond funds since EPRF started collecting data, $3.2bn for the
week ending Sep 28, including $1.0bn from hard currency funds, $1.7bn from local currency funds and $502mn
from blended funds. This brings YTD inflows down to $9.9bn. The previous largest outflow was $1.97bn for the
week ending October 29, 2008.
• The $3.2bn in outflows represents 2.3% of AUM (assets under management) for the funds covered by EPFR.
The October 2008 outflow, though smaller in absolute number, represented 4.0% of AUM for the funds covered
at the time
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 9
Massive foreign selling in the IDX, in line with other
countries, though IDX down deeper
Source: Bloomberg, Danamon Calculations
DJI (New York) JCI (Jakarta)
Date Index Change
(%) Length (month) Date Index
Change (%)
Length (month)
Peak 9-Oct-07 14,164 9-Jan-08 2,830
GFC 2008 9-Mar-09 6,547 -53.8 17.2 28-Oct-08 1,111 -60.7 9.8
Peak (2011) 29-Apr-11 12,810 95.7 26.0 1-Aug-11 4,193 277.3 33.6
Current 22-Sep-11 10,734 -16.2 4.9 23-Sep-11 3,393 -19.1 1.8
1 week ago 16-Sep-11 11,509 -6.7 16-Sep-11 3,835 -11.5
2 week ago 9-Sep-11 10,992 -2.3 9-Sep-11 3,999 -15.2
1 month ago 22-Aug-11 10,855 -1.1 22-Aug-11 3,840 -11.6
SX5E (Europe) KLCI (Kuala Lumpur)
Peak 16-Jul-07 4,558 11-Jan-08 1,516
GFC 2008 9-Mar-09 1,810 -60.3 20.1 29-Oct-08 829 -45.3 9.7
Peak (2011) 18-Feb-11 3,068 69.5 23.7 8-Jul-11 1,595 92.3 32.7
Current 23-Sep-11 2,009 -34.5 7.2 23-Sep-11 1,368 -14.2 2.6
1 week ago 16-Sep-11 2,159 -7.0 16-Sep-11 1,431 -4.4
2 week ago 9-Sep-11 2,074 -3.1 9-Sep-11 1,469 -6.9
1 month ago 22-Aug-11 2,183 -8.0 22-Aug-11 1,472 -7.1
NKY (Tokyo) STI (Singapore)
Peak 9-Jul-07 18,262 11-Oct-07 3,831
GFC 2008 10-Mar-09 7,055 -61.4 20.3 9-Sep-09 1,457 -62.0 23.3
Peak (2011) 21-Feb-11 14,691 108.2 23.8 6-Jan-11 3,280 125.1 16.1
Current 22-Sep-11 8,560 -41.7 7.1 23-Sep-11 2,689 -18.0 8.7
1 week ago 16-Sep-11 8,864 -3.4 16-Sep-11 2,789 -3.6
2 week ago 9-Sep-11 8,738 -2.0 9-Sep-11 2,825 -4.8
1 month ago 22-Aug-11 8,628 -0.8 22-Aug-11 2,732 -1.6
Changes in IDX:
• Stock price dropped by 15.2% (9 – 23 Sep)
• Total net foreign sell = IDR 6.5trn (9 – 23 Sep)
• Global funds who mostly sold in the IDX
• as of 27 Sep, IDX recovered to 3,474 from
3,316 (with net foreign buying = IDR 42bn)
5-Jul-11 19-Jul-11 2-Aug-11 16-Aug-11 30-Aug-11 13-Sep-11 27-Sep-11
4200
4000
3800
3600
3400
3200
2000
1600
1200
800
400
0
-400
-800
-1200
-1600
-2000
JCI index (lhs)
Net foreign buying (IDR bn)
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 10
Sharp rise in bond yields (up by >100bps) as foreign sold off
Source: Asia Bonds Online
Foreign Ownership of Government Bonds (%)
• Government bonds yields up by more than 100bps, as
IDR weakened sharply (especially in the last two
weeks of turmoil).
• Indo Gov bonds experienced the worst decline
compared to other countries’ in the last one week
• High price of and high ratio of foreign ownership in
Indo gov bonds, plus currency weakening are the
main factors behind the sharp drop.
• Foreign holding down by IDR 32.7trn (9-29 Sep)
Indonesia
Govt. BondsLatest
ClosingPrevious Day Previous Week YTD
CN 10 Year 4.080 1.00 0.00 17.00
HK 10 Year 1.235 11.60 27.20 162.10
ID 10 Year 7.359 28.80 21.90 24.70
JP 10 Year 0.987 0.00 2.60 14.10
KR 10 Year 3.760 6.00 3.00 76.00
MY 10 Year 3.720 0.00 2.50 31.80
PH 10 Year 6.300 38.57 32.12 41.19
SG 10 Year 1.510 6.00 7.00 120.00
TH 10 Year 3.852 2.80 9.30 12.60
US 10 Year 1.833 11.54 11.72 146.01
VN 10 Year 12.700 5.00 3.30 95.00
Close of 23 Sep 2011 Change From
* Government bond yield changes are expressed in basis points.
23-Sep-11
LCY Gov BondsLatest
ClosingYTD (bp) MTD (bp)
1 Year 5.800 39.1 137.0
2 Year 6.206 34.0 90.6
3 Year 6.295 2.5 73.0
4 Year 6.611 22.2 53.1
5 Year 6.766 6.2 63.9
10 Year 7.359 24.7 56.5
15 Year 7.772 103.0 30.1
20 Year 8.094 117.4 21.0
30 Year 8.323 137.2 12.3
USD Denominated Gov
Bonds
Latest
ClosingYTD (bp) MTD (bp)
3 Year 3.060 41.5 94.3
5 Year 3.602 7.7 70.4
10 Year 4.713 471.3 70.7
26 Year 5.703 18.4 46.4
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 11
10
15
20
25
30
35
40
3-Jun 18-Jun 3-Jul 18-Jul 2-Aug 17-Aug 1-Sep 16-Sep
IDR tn
0
15
30
45
60
75
90
Mar-
08
Jun-
08
Sep-
08
Dec-
08
Mar-
09
Jun-
09
Sep-
09
Dec-
09
Mar-
10
Jun-
10
Sep-
10
Dec-
10
Mar-
11
Jun-
11
Sep-
11
60
95
130
165
200
235
270
SBI IDR Bonds (rhs)
IDR tn IDR tn
BI has been absorbing IDR liquidity through reverse repo
Source: CEIC, Bloomberg13-Jul-11 27-Jul-11 10-Aug-11 24-Aug-11 7-Sep-11 21-Sep-11
255000
250000
245000
240000
235000
230000
225000
220000
215000
210000
710000
700000
690000
680000
670000
660000
650000
640000
630000
620000
IDR bn
Total (rhs)
Bank
ForeignIDR bn
Banks’ bond holdings rose due to Reverse Repo
Increasing amount of Reverse Repo
• Foreign ownership of SBI has long been
declining, while of bonds just very recent
• Increasing amount of Reverse Repo as BI
supporting IDR bond market and also
absorbing banks’ Rupiah liquidity
• Banks’ bond holdings rose due to Reverse
Repo
• Excluding Reverse Repo, BI holdings of
tradable gov bonds up by IDR 13.3tn
during 9-29 Sep 2011
Ownership of SBI and Bonds, 26 Sep 11
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 12
IDR gov bond yields going back into its normal range.
Source: CEIC, Danamon Calculations
Apr-05 Feb-06 Nov-06 Sep-07 Jul-08 Apr-09 Feb-10 Dec-10 Sep-11
18
16
14
12
10
8
6
4
2
yield spread: IDR SUN 10yr - UST 10yr
+1 St Dev
Average
-1 St Dev
Apr-05 Feb-06 Nov-06 Sep-07 Jul-08 Apr-09 Feb-10 Dec-10 Sep-11
18
16
14
12
10
8
6
4
2
yield spread: IDR SUN 5yr - UST 5yr
+1 St Dev
Average
-1 St Dev
• BI and MoF have been buying bonds from the market to prevent yields from rising further
• BI auction = IDR 1.74trn, and MoF direct buying in the secondary market = IDR 1.04trn
1-Jul-11 15-Jul-11 29-Jul-11 12-Aug-11 26-Aug-11 9-Sep-11 23-Sep-11
7.0
6.5
6.0
5.5
5.0
4.5
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
UST 5yr (rhs)
IDR 5yr yield
yield spread: IDR SUN 5yr - UST 5yr
1-Jul-11 15-Jul-11 29-Jul-11 12-Aug-11 26-Aug-11 9-Sep-11 23-Sep-11
8
7
6
5
4
3.5
3.0
2.5
2.0
1.5
yield spread: IDR SUN 10yr - UST 10yr
IDR 10yr yield
UST 10yr yield (rhs)
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 13
US Dollar liquidity getting thinner in the market lately
IDR/USD vs O/N USD inter-bank rate
Source: BI, CEIC
25-Feb-11 6-May-11 15-Jul-11 23-Sep-11
9200
9000
8800
8600
8400
0.5
0.4
0.3
0.2
0.1
Interbank call money
rate USD O/N
IDR/USD (lhs)
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 14
-4.8-5.0-5.6-5.4-6.2-4.712.017.99.26.35.86.8Vietnam
-2.0-2.9-2.02.34.14.63.73.83.35.03.67.8Thailand
2.00.00.515.016.522.22.84.22.84.05.714.5Singapore
-1.1-1.4-3.52.02.84.23.74.53.84.64.07.6Philippines
-5.3-5.5-5.69.010.511.83.53.31.75.35.27.2Malaysia
-1.0-1.5-0.6-0.20.20.95.74.75.16.56.56.1Indonesia
0.90.81.41.21.62.83.24.33.03.93.76.2South Korea
-7.1-8.3-8.1-2.2-2.8-2.67.59.012.07.37.68.5India
-2.0-2.0-1.63.54.05.34.25.33.39.09.210.3China
-2.4-2.6-2.32.52.93.94.75.74.27.57.49.1ASIA
-2.2-2.3-2.51.21.72.55.76.45.35.86.07.2Emerging Markets
-8.8-10.3-9.82.62.33.6-0.20.0-0.72.2-0.44.0Japan
-3.1-4.1-6.0-0.3-0.4-0.51.82.61.60.61.61.8Euro Area
-6.8-8.5-9.0-2.7-3.0-3.21.33.01.61.81.63.0United States
-5.0-6.5-7.2-0.3-0.7-0.61.52.51.61.71.52.8Industrial Econ.
-4.0-5.0-5.70.00.00.23.23.92.73.23.14.1Global Indicators
2012F2011F20102012F2011F20102012F2011F20102012F2011F2010
Fiscal Bal. (% of GDP)Curr Account (% of GDP)Inflation Rate (%YoY)GDP Growth (%YoY)Economic
Indicators
-4.8-5.0-5.6-5.4-6.2-4.712.017.99.26.35.86.8Vietnam
-2.0-2.9-2.02.34.14.63.73.83.35.03.67.8Thailand
2.00.00.515.016.522.22.84.22.84.05.714.5Singapore
-1.1-1.4-3.52.02.84.23.74.53.84.64.07.6Philippines
-5.3-5.5-5.69.010.511.83.53.31.75.35.27.2Malaysia
-1.0-1.5-0.6-0.20.20.95.74.75.16.56.56.1Indonesia
0.90.81.41.21.62.83.24.33.03.93.76.2South Korea
-7.1-8.3-8.1-2.2-2.8-2.67.59.012.07.37.68.5India
-2.0-2.0-1.63.54.05.34.25.33.39.09.210.3China
-2.4-2.6-2.32.52.93.94.75.74.27.57.49.1ASIA
-2.2-2.3-2.51.21.72.55.76.45.35.86.07.2Emerging Markets
-8.8-10.3-9.82.62.33.6-0.20.0-0.72.2-0.44.0Japan
-3.1-4.1-6.0-0.3-0.4-0.51.82.61.60.61.61.8Euro Area
-6.8-8.5-9.0-2.7-3.0-3.21.33.01.61.81.63.0United States
-5.0-6.5-7.2-0.3-0.7-0.61.52.51.61.71.52.8Industrial Econ.
-4.0-5.0-5.70.00.00.23.23.92.73.23.14.1Global Indicators
2012F2011F20102012F2011F20102012F2011F20102012F2011F2010
Fiscal Bal. (% of GDP)Curr Account (% of GDP)Inflation Rate (%YoY)GDP Growth (%YoY)Economic
Indicators
14
Global Double dip? Asian EMs. leading the global growth
• Continuing slowdown in the developed economies, as fiscal tightening programs kick in, prompting
extended monetary easing policies
• Asia’s emerging economies mildly slowing amid threat of rising inflationary pressures
• China continues to gradually slowdown the economy and to contain the inflation pressures
• Southeast Asian economies continue to perform well, except for Vietnam, which is still vulnerable
(high inflation, big current account and fiscal deficit)
• If double dip does happen, open economies, eg. Singapore, Taiwan, will likely get hit severely.
Source: Danamon forecasts
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 1515
2Q11 BOP: no sign of overheating, CA sharp decline
• High BoP surplus (US$ 11.9bn) in 2Q11, despite sharp decline in current account (CA), due to a
jump in services imports (freight, travel and consultants) and repatriation of foreign investment
income
• Modest rise in merchandise trade surplus, despite deterioration in the oil & gas trade balance,
which has turned negative (-US$ 0.9bn) for the first time in 2Q11 no sign of overheating
• There is an increasing amount of equity investment and reinvested profits by foreign direct
investment. Ratio of FDI to portfolio investment flows almost reach one to one.
• FX reserves reach US$ 124.6 end-August, or 7.1 month of import and official debt cover
Indonesia Oil and Gas Trade Balance Ratio FDI to Portfolio Investment in Semester
Source: BI, CEIC Source: BI, CEIC
Q2-08 Q4-08 Q2-09 Q4-09 Q2-10 Q4-10 Q2-11
2500
2000
1500
1000
500
0
-500
-1000
6000
4000
2000
0
-2000
-4000
-6000
OIl and Gas Trade Balance (lhs) Oil Trade Balance
Gas Trade BalanceUS$mn US$mn
Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11
15000
10000
5000
0
-5000
4
3
2
1
0
-1
-2
FDI in
IndonesiaPortfolio Inv: Liabilities
Ratio FDI to Portfolio Inv (rhs)US$mn
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 16
• Trade surplus hinging on primary commodities exports (volume and price effects).
• Excluding commodities, trade balance is in deficit.
• Trade surplus is thus susceptible to commodity price decline.
• Fast movable portfolio inflows still strong.
• But FDI into Indonesia showing an uptrend
– Although some were strategic stock purchases.
– Biggest FDI was in mining sector
16
Trade surplus: Living on borrowed time? Amid improving
composition of capital inflows
Trade balance: Commodity and non-commodities
Source: CEIC
Indonesia: Real Effective Exchange Rate
Notes: Rising REER Index (and above 100) means better competitiveness
90
95
100
105
110
115
120
125
130
135
140
060708091011120102030405060708091011120102030405060708091011120102030405060708
2008 2009 2010 2011
-8
-4
0
4
8
12
16
20
24
28
32
App(-)/Dep(+) in IDRUSD (rhs)
Trade-Weighted Exch. Rate
Trade-Weighted Exch. Rate(Infl. Adjusted)
IDRUSD Index
Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11
8000
6000
4000
2000
0
-2000
-4000
Primary commodity trade surplus
(Rubber, Coal, Ores, O&G, CPO)
Non-primary commodity
trade deficit
US$mn
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 1717
Indonesia’s exports were strongly affected by Global
recession (GFC-08/09)
• Indonesia’s exports value and volume to main trading partners (Japan, EU, USA, and
Singapore) down rather significantly during the GFC-08/09
• Demand by China, Korea and some other countries supported Indonesia’s exports volume to
still be positif
Source: BPS, Danamon Calculations, 2011 = Jan-Apr
Indonesia: Growth (%) of Total Exports to Selected Trading Partners, 2009
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 1818
Stronger growth of Indonesia’s exports to EM Asia
• Indonesia has seen a strong rebound in exports to EM Asian Countries, most notably China, Korea, and India.
Meanwhile, the value of exports to developed markets are still weak after the GFC-08/09.
• Share of Non OG exports has decreased to developed markets, although EU has been the largest destination
for Indonesia’s non OG exports.
• Meanwhile Non OG exports to China, Korea, and India are continuously increasing.
• China in particular has gained strong importance as Indonesia’s trading partner, for both exports and imports.
Indonesia: Share (%) of Non Oil & Gas Exports to
Selected Trading Partners
Source: BPS, Danamon Calculations, 2011 = Jan-Apr
0
2
4
6
8
10
12
14
16
2007 2008 2009 2010 2011
Japan EU USA Singapore China
Korea Malaysia India Thailand Taiwan
-30
-20
-10
0
10
20
30
40
50
60
2008 2009 2010
Japan EU USA Singapore China
Korea Malaysia India Thailand Taiwan
Indonesia: Growth (%) of Non Oil & Gas Exports to
Selected Trading Partners
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 1919
Japan and Korea are the main oil & gas exports destinations
Source: BPS, Danamon calculations
Indonesia: Share (%) of Oil Exports
0
10
20
30
40
50
60
70
80
90
100
2007 2008 2009 2010 2011
Japan Australia Korea Singapore China
Malaysia Thailand US EU
0
10
20
30
40
50
60
70
80
90
100
2007 2008 2009 2010 2011
Japan Korea China Singapore Taiwan US EU
Indonesia: Share (%) of Gas Exports
Country 2007 2008 2009 2010 2011
Japan 39.5 37.5 19.1 23.6 29.9
Australia 12.6 12.5 15.4 13.1 11.7
Korea 12.5 11.3 14.4 19.7 17.9
Singapore 12.5 17.3 11.5 11.0 14.9
China 9.4 8.6 15.3 8.9 6.3
Malaysia 4.2 2.8 10.3 9.0 7.6
Thailand 3.1 2.4 5.8 3.1 2.3
US 2.5 3.2 3.8 6.5 6.0
EU 0.0 0.5 0.3 0.3 0.3
Others 3.7 3.9 4.0 4.8 3.2
All 100.0 100.0 100.0 100.0 100.0
Country 2007 2008 2009 2010 2011
Japan 57.7 60.5 52.2 43.1 51.1
Korea 23.2 20.2 17.0 21.0 23.6
China 18.7 18.8 11.6 2.5 1.7
Singapore 0.0 0.0 12.9 18.9 12.6
Taiwan 0.0 0.0 4.0 9.3 8.0
US 0.0 0.0 0.0 0.0 0.0
EU 0.0 0.0 0.0 0.0 0.0
Others 0.4 0.5 2.2 5.2 3.0
All 100.0 100.0 100.0 100.0 100.0
19
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 20
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010 2011
Singapore Japan US Hong Kong UAE
Malaysia China Thailand Korea
0
10
20
30
40
50
60
70
80
90
100
2007 2008 2009 2010 2011
Japan Korea China Singapore Australia
Taiwan India Malaysia Thailand EU
0
10
20
30
40
50
60
70
80
90
2007 2008 2009 2010 2011
India EU China Malaysia Pakistan Singapore Bangladesh
20
Indonesia’s Non-Oil and Gas by Commodity (1)
Indonesia: Share (%) of Non Oil & Gas Exports
Source: BPS, Danamon Calculations, 2011 = Jan-Apr
Commodity 2007 2008 2009 2010 2011
Animal or vegt. fats and oil (15) 11.1 14.5 12.5 12.6 11.3
Elect. machinery, sound rec (85) 8.2 7.5 8.2 8.0 7.0
Mineral fuels (27) 7.7 9.9 14.3 14.4 14.8
Rubber and articles thereof (40) 6.8 7.1 5.0 7.2 10.1
Ores, slag and ash (26) 5.5 4.0 6.0 6.3 4.7
Mech. machinery & equip. (84) 5.1 4.8 4.8 3.8 3.3
Paper and paperboard (48) 3.6 3.5 3.4 3.2 2.7
Articles of apparel clothing (61/62) 6.1 5.6 5.8 5.0 5.0
Wood and articles of wood (44) 3.4 2.7 2.4 2.3 2.0
Copper and articles thereof (74) 3.0 2.0 2.4 2.5 3.0
Others 39.4 38.5 35.0 34.6 36.1
All 100.0 100.0 100.0 100.0 100.0
Share (%) of Animal/Veg Fats & Oils (HS 15) Exports Share (%) of Mineral Fuels (HS 27) Exports
Share (%) of Elect. machin, sound rec (HS 85) Exports
20
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 21
0
10
20
30
40
50
60
70
80
90
100
2007 2008 2009 2010 2011
USA EU UAE Japan
0
10
20
30
40
50
60
70
80
90
100
2007 2008 2009 2010 2011
Japan EU Korea China India Philippines
0
10
20
30
40
50
60
70
80
90
2007 2008 2009 2010 2011
USA Japan EU China Singapore Korea Brazil
21
Indonesia’s Non-Oil and Gas by Commodity (2)
Share (%) of Rubber & products (HS 40) Exports
Source: BPS, Danamon Calculations, 2011 = Jan-Apr
Share (%) of Mech. machin, sound rec (HS 84) Exports
0
10
20
30
40
50
60
70
80
90
2007 2008 2009 2010 2011
Singapore Japan EU US
Thailand Malaysia China Australia
Share (%) of Ores, Slag & Ash (HS 26) Exports Share (%) of Apparel & Clothing (HS 61/62) Exports
21
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 22
0
2
4
6
8
10
12
14
16
18
20
2007 2008 2009 2010 2011
China EU Japan USA Thailand
Singapore Malaysia Korea India Taiwan
-40
-20
0
20
40
60
80
2009 2010
China EU Japan USA Thailand
Singapore Malaysia Korea India Taiwan
22
China, Korea and India supported Indo exports in GFC-08
• Indonesia’s non OG exports to China, Korea &
India were still positive during GFC-08
• Meanwhile, Indonesia’s non OG imports from
most countries declined in 2009 (due to crisis),
though rebounded in 2010.
• Indonesia’s Non OG imports from China
continuously rising, while from EU is declining.
Share (%) of Non Oil & Gas Imports by Country
Source: BPS, Danamon Calculations, 2011 = Jan-Apr
Growth (%) of Non OG Imports by Country
Growth (%) of Non Oil & Gas Exports in 2009
-60
-40
-20
0
20
40
60
Value Volume
Japan EU USA Singapore China
Korea Malaysia India Thailand Taiwan
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 2323
Indonesia’s Export to China vs China’s Export to EU
• Indonesia mostly exports primary commodities to China,and looks like they are mostly used for
supporting domestic consumption or investments.
• Meanwhile, lots of China’s exports to EU are manufacturing products, possibly using minimal inputs
from Indonesia
• Thus, the indirect trade impact of an EU meltdown (via China) will likely be minimal as well.
China: Share (%) of Exports to EU
Indonesia: Share (%) of Exports to China
Commodity 2007 2008 2009 2010 2011
Animal or vegt. fats and oils (15) 22.8 27.2 22.4 17.4 13.4
Rubber and articles thereof (40) 11.4 11.6 9.4 10.1 13.1
Ores, slag and ash (26) 9.2 8.3 7.8 9.9 14.9
Organic chemicals (29) 8.3 4.3 5.0 6.0 8.6
Pulp of wood; waste of paper (47) 7.7 9.5 5.3 4.7 5.0
Mineral fuels (27) 7.3 9.2 23.3 31.3 23.1
Copper and articles thereof (74) 5.0 4.1 3.5 2.3 2.6
Nuclear react.,boilers,mech (84) 4.2 3.3 2.4 1.0 1.2
Elect. machinery, sound rec (85) 3.3 3.6 3.1 2.9 2.2
Others 20.9 18.9 17.9 14.5 16.1
All 100.0 100.0 100.0 100.0 100.0
Commodity 2007 2008 2009 2010 2011
Machiney, Electrical Equipment 47.3 45.7 45.8 46.6 43.9
Textiles and Textile Articles 10.9 12.7 14.6 13.8 13.3
Base Metals and Articles 9.8 8.8 5.2 5.7 7.1
Miscellaneous Mfg Articles 6.8 7.0 7.9 7.2 7.2
Vehicles, Aircraft, Vessels & Transport Eq 5.0 5.5 5.7 5.7 5.8
Products of Chemcial or Allied Industries 3.8 4.3 4.2 4.4 5.2
Others 16.4 15.9 16.6 16.6 17.6
All 100.0 100.0 100.0 100.0 100.0
Source: CEIC
Source: BPS, Danamon calculations, 2011 = Jan-Apr EU = 27 countries
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 2424
Indonesia’s Export to India vs India’s Export to EU
• Similar to China, primary commodities are the largest contributors of Indonesia’s exports to India.
• India is one of the largest trading partners of EU. Thus, EU meltdown will have a relatively big
impact to India’s trade and economic growth
• The indirect impact of an EU meltdown on Indonesia’s trade (via India) is also relatively small, as
the share of Indonesia’s trade with India is not as big, though increasing.
Source: BPS, Danamon calculations, 2011 = Jan-Apr EU = 27 countries
India: Share (%) of Exports to EUIndonesia: Share (%) of Exports to India
Commodity 2007 2008 2009 2010 2011
Animal or vegt. fats and oils (15) 46.9 60.5 47.7 46.4 31.4
Mineral fuels (27) 16.5 17.5 26.6 24.6 40.3
Ores, slag and ash (26) 11.0 3.9 8.7 9.9 9.8
Miscellaneous chemical prod (38) 2.6 2.3 1.5 1.3 1.5
Rubber and articles thereof (40) 2.2 1.1 1.8 3.2 2.4
Organic chemicals (29) 2.1 0.8 1.2 1.7 2.7
Nuclear react.,boilers,mach (84) 1.7 1.1 1.0 1.5 0.9
Iron and steel (72) 1.6 0.6 0.4 0.2 0.1
Others 15.4 12.1 11.1 11.3 10.9
Total 100.0 100.0 100.0 100.0 100.0
Commodity 2007 2008 2009 2010 2011
Manufactured Goods 31.9 28.5 22.0 22.1 24.0
Miscellaneous Manufactured Articles 26.7 24.3 28.2 23.6 22.7
Machinery & Transport Equipments 14.1 16.9 19.7 18.3 17.8
Chemicals 11.1 11.2 11.7 12.1 13.1
Food & Live Animals 5.8 5.9 5.9 5.1 5.2
Mineral Fuels & Lubricants 5.7 8.0 7.6 14.1 10.8
Others 4.7 5.2 4.8 4.7 6.4
All 100.0 100.0 100.0 100.0 100.0
24
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 25
In retrospect: Averting a deep crisis in 2008 with ......
Lower exports to GDP ratio domestic demand dominance (rising middle
class)
Not really involved in the Asia Production Network
Less sophisticated financial markets
The new tax law was approved finally in 2008, providing stimulus in 2009
Poor infrastructure, thus a lot of room to develop, using social spending
Relative political stability
Quick Policy Response
Blessing in Disguise
Easing up the tightness of bank liquidity (Sept-Oct 2008)
Focus more on stabilizing the financial markets
Resorting quickly to alternative fiscal funding strategy
Trying to soften the drop of exports (current account deterioration)
25
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 2626
Is there still enough fiscal space in the government budget
for stimulus in case there is global double dip?
• Two major weaknesses of the current
fiscal position: (i) relatively low fiscal
space, (ii) government’s inability to spend
effectively and fast
• Major revision to the 2011 budget
(APBN-P), with wider deficits, as macro
economic assumptions have changed
• No subsidized fuel price hike in 2011
leads to ballooning energy subsidies. Oil
lifting target still hard to achieve.
• 2012 proposed budget has lower deficits
(1.5% of GDP)
• Tax ratio slightly raised; tax census,
taxing SMEs (5% rate), giving out tax
holiday.
• Lower energy subsidies with fuel
consumption rationing program, but
without price hike. Electricity rate hike of
10% by April 2012 at the latest
• Salary hike (10%) and 13th month salary
• Capital expenditures picking up
• Slightly higher net bond financing in 2012
Revised 2011 and Proposed 2012 Budget
A. State Revenues and Grants 995.3 1,104.9 1,169.9 1,292.9
1. Tax Revenues 723.3 850.3 878.7 1,019.3
Tax Ratio (% of GDP) 11.3 12.1 12.2 12.6
2. Non Tax Revenues 268.9 250.9 286.6 272.7
B. State Expenditures 1,042.1 1,229.6 1,320.8 1,418.8
I. Central Government Expenditures 697.4 836.6 908.2 954.1
a.o. 3. Capital Expenditures 80.3 135.9 140.9 168.1
4. Interest Payments 88.4 115.2 106.6 123.1
5. Subsidies 192.7 187.6 237.2 208.9
a.o. Energy Subsidies 140.0 136.6 195.3 168.6
i. Fuel (Pertamina) 82.4 95.9 129.7 123.6
II. Electricity (PLN) 57.6 40.7 65.6 45.0
II. Transfer to Regions 344.7 393.0 412.5 464.4
C. Primary Balance (A - B + B.4) 41.5 (9.4) (44.3) (2.5)
D. Fiscal Surplus/Deficit (A - B) (46.8) (124.7) (150.8) (125.6)
% of Fiscal Balance to GDP (0.7) (1.8) (2.1) (1.5)
E. Financing: 91.6 124.7 150.8 125.6
I. Domestic Financing (Nett) 96.1 125.3 153.6 125.9
a.o. State Bonds (Nett) 91.1 126.7 126.7 134.6
II. External Financing (Nett) (4.6) (0.6) (2.8) (0.3) F. Excess (Shortage) of Fiscal Financing 44.7 - - -
Macroeconomic Assumptions:
1. Economic Growth (% pa) 6.1 6.4 6.5 6.7
2. Inflation Rate (%pa, eop) 7.0 5.3 5.7 5.3
3. 3M T-Bills or SPN (%pa) 6.6 6.5 5.6 6.5
4. Exchange Rate (IDR/US$) 9,087 9,250 8,700 8,800
5. Oil Price ICP (US$/barrel) 79.4 80.0 95.0 90.0
6. Oil Lifting (thousand barrel per day) 954 970 945 950
Source: Ministry of Finance (2011), Presentation and "Nota Keuangan dan RAPBN 2012"
(in IDR Trillion) 2010APBN-P
2011
RAPBN
2012
APBN
2011
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 2727
Economic Environment: Pre-GFC 2008 vs. Now
Source: BPS, CEIC, BI
Variable GFC 2008 Now
Economic Growth Still relatively strong Mostly slow
Monetary Policy Rather tight Easy in developed economies
High interest rate Very low interest rate - developed economies
FX Rate US$ start to weaken Very weak US$
Fiscal Policy No big worry of fiscal and debt situation Widespread problems of fiscal and debt
Fiscal policy is not that constrained Hard fiscal constraints
Sovereign Rating High and stable in developed countries Downgrade prospects in developed countries
Indonesia Rating Still below investment grade Upgrade prospect to investment grade
Leverage High Low
Hedge Funds Very active Less active
Indicator Pre Crisis Pre Crisis Pre Crisis
1. GDP growth (% ) 1.91 -1.92 1.61 2Q11 2.83 -1.96 1.67 2Q11 6.01 4.58 6.49 2Q11
2. Inflation (%) 2.1-2.8 4.1-5.5 3.4 Jun 1.9-2.5 3.1-4.1 2.5 Jul 6.0-6.9 8.6-12.1 4.6 Jul
3. M1 growth (%) 0.5-2.1 6.4-18.0 16.2 Jul 0.2-7.0 9.5-13.3 1.2 Jun 20.0-22.5 1.5-11.3 16.7 Jun
4. Interest rate (% ) 3.1-5.3 2.0-3.2 0.11 Jul 3.2-3.5 1.0-2.0 1.5 Jul 8.0-9.0 9.25-9.5 6.75 Aug
5. Stock index 11,740-14,164 6,594 11,410 17-Aug 4,182-4,399 1,817 2,334 17-Aug 1,836-2,810 1,111 3,953 16-Aug
6. FX to US$ 1.32-1.46 1.60 1.44 17-Aug 9,100-9,500 12,400 8,526 16-Aug
8. Bonds yield 10-yr (% ) 3.82-3.96 2.08 2.17 17-Aug 11-13 18.44 6.95 16-Aug
10. Export growth (%) 12.1 -18.0 18.0 1H 5.59 -16.24 17.94 1H 20.1 -15.0 36.0 Jun
11. Import growth (%) 7.5 -25.9 17.9 1H 9.15 -22.97 17.77 1H 41.6 -25.0 32.8 Jun
Pre Crisis
Oil Price (Brent,US$/barrel) 53-92 143 110 16-Aug
US housing price index 184-203 141 141 May
2011
2011 2011 2011
GFC 2008
US EU Indonesia
GFC 2008 GFC 2008 GFC 2008
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 2828
GFC 2008 and Stress Test (Global Recession)
Impact of of GFC 2008, and Stress Test
Source: BPS, CEIC, BI
1. GDP GrowthPre Crisis
GFC 082009
Length
(quarter)Current
Stress
Test5. Loan Growth
Pre Crisis
(2008)2009
Length
(month)Current
Stress
Test
- US 1.91 -1.92 6 3.03 -0.50 - Total 30.5 10.0 12 23.37 12.96
- EU 2.83 -1.96 5 1.69 -0.50 - IDR 33.2 16.5 12 20.92 16.54
- Indonesia 6.01 4.58 3 6.10 5.45 - FC 20.4 -17.4 12 38.30 -6.09
2. Commodity Price Growth Pre Crisis CrisisLength
(month)Current
Stress
Test6. TPF Growth
- CPO 67.9 -37.1 13 42 -18.5 - Total 16.0 12.5 12 19.07 11.15
- COAL 138.6 -41.4 12 27.9 -20.7 - IDR 13.7 13.4 12 20.51 12.09
- RUBBER 34.8 -39.5 12 N/A -19.8 - FC 29.6 8.0 12 11.23 5.63
- OIL 72.6 -44.7 12 43.4 -22.4 7. Interest Rate
- IRON 56.0 -35.2 13 19.7 -17.6 - BI rates 8.00 9.00 8 6.75 6.25
- TIN 51.2 -31.1 12 58.5 -15.5 - JIBOR 8.03 10.26 9 6.858 6.40
- Aluminium 3.8 -37.6 13 20.1 -18.8 - LIBOR 2.82 3.37 2 0.187 0.30
- COPPER 18.7 -39.7 13 32.2 -19.9 - SIBOR 2.84 3.43 2 0.191 0.35
3. Indonesia Export Growth 8. Liquidity
- Non Oil Gas 17.3 -9.6 11 33.20 -6.7 - Bank Excess deposits (IDR tn) 269 325 4 281 261
- US 10.8 -16.4 26.50 -9.9 9. Consumer Spending
- EU 15.1 -11.8 38.18 -8.3 - Average real expenditure (%) -1.7 -6.1 -3.1
- Total 20.1 -15.0 10 36.02 -9.0
- US 12.2 -16.8 28.52 -10.1
- EU 15.8 -12.1 34.49 -8.5
4. Indonesia Import Growth
- Non Oil Gas 42.9 -21.0 29.18 -9.5
- US N/A -8.9 19.44 -5.3
- EU N/A -17.9 30.78 -10.8
- Total 41.6 -25.0 13 32.82 -12.5
- US 64.7 -10.1 15.90 -6.0
- EU 35.0 -17.9 26.72 -9.8
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 29
0
10
20
30
40
50
60
70
80
90
100
0 10 20 30 40 50 60 70 80 90 100
Exp
ort
/Sale
s (
%)
Import/Total Raw Materials (%)
9
10 11
12
13 1415
16
17
21
20
19
18
High Import Contents &Export Oriented
High Local Contents &
Export Oriented
High Import Contents &
Domestic Oriented
High Local Contents &Domestic Oriented
1
2
67
3
25
24
23
2226
5
27
4
8
28
29
Industries likely be most affected by the global double dip
Source: Processed from BPS, Industry Statistics, 2009;
Danamon estimates
Share of Value Added & Labor of Medium & Large
Manufacturing Industries
High Local Contents High Import Contents
& Export Oriented & Export Oriented
VA = 18.8% VA = 23.3%
Labor = 23.9% Labor = 24.7%
High Local Contents High Import Contents
& Domestic Oriented & Domestic Oriented
VA = 34.9% VA = 23.0%
Labor = 41.6% Labor = 9.8%
Note:
1 = Drugs and medicines 15 = Clove cigarettes
2 = Wearing apparel made of textile (garments) 16 = Cement
3 = Electronic valve and tube and other electronic component 17 = Cultural papers
4 = Sport shoes 18 = Cooking oil made of palm oil
5 = Non ferrous metal basic industries 19 = Granulated sugar
6 = Industrial papers 20 = Weaving mill except gunny and other sacks
7 = Spinning mills 21 = Basic organic chemicals resulting special chemicals
8 = Motor cycles 22 = Crude vegetables and animal cooking oil
9 = Motor vehicles 23 = Crumb rubber
10 = Motor vehicle component and apparatus 24 = Pulp
11 = Preparation of textile fiber 25 = Tire and inner tubes
12 = Steel rolling industry 26 = Straight fertilizers
13 = Motorcycle component and apparatus 27 = Laminated board including decorative plywood
14 = Prepared animal feeds 28 = Wood furniture
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 30
Appendix
Background on Indonesia
30
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3131
Indonesia’s Potential 1: abundance of natural resources
Source: Government of Indonesia (2011), “Master Plan: Acceleration and Expansion of Indonesia Economic Development 2011-2025”
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3232
Source: Demographic Projections from BPS and UN Statistics, taken from the World Bank, “Indonesia Economic Quarterly: Back
on Track,” Dec 2009
INDONESIA: Age Structure of Population and Dependency Ratio (%), 1950-2050
• Indonesia is the fourth most populous nation in the world, with 237.6 million people (2010), and the working
age population are close to 70% of the total population. Population growth rose to 1.49% in 2010.
• Indonesia’s window of demographic dividend (only if it accompanied by better quality of education to
produce high skilled workers and more job creation) will close in the next decade, as the dependency
ratio (i.e. ratio of young and elderly to working age) will start to rise afterwards
Indonesia’s Potential 2: demographic dividend
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3333
However, the quality of employment was not that good
Source: BPS
• Despite getting hit by the crisis, unemployment rate continued to come down, from 8.4% in Aug-08 to 6.8% in
Feb-11.
• However, under-employment rate (i.e. people working less than 35 hours a week), is still high, which is around
28.6% of labor force, with part-time workers at around 15.5% of labor force.
• But around 66% of the employed workers are of informal labor.
• The share of employment in agriculture and manufacturing sectors continued to decline, while the ones in trade
and services (especially social services) sectors rising
Share of Employment by SectorFeb 2011
EmploymentIn Million People
95.2 95.597.6
99.9102.5 102.6
104.5 104.9107.4 108.2
111.311.1 10.9
10.6
8.3
8.18.6
9.4
9.4
9.3 9.0
10.0
7.16.87.48.4
8.59.1
8.1 7.9
10.5 10.39.8
90
95
100
105
110
115
120
Feb-06 Aug-
06
Feb-07 Aug-
07
Feb-08 Aug-
08
Feb-09 Aug-
09
Feb-10 Aug-
10
Feb-11
0
2
4
6
8
10
12
Employment Unemployment Unemployment Rate (rhs)
Million People %Unemployment Rate, 2006-11
Financial,
1.9%
Services and
others, 16.8%
Transport
and Comm.,
5.0%
Trade, 20.9%
Construction,
5.0%
Agriculture,
38.2%
Manufacture,
12.3%
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3434
Country LPI Customs InfrastructureInternational
shipments
Logistics
competence
Tracking &
tracingTimeliness
Singapore 4.09 4.02 4.22 3.86 4.12 4.15 4.23
Japan 3.97 3.79 4.19 3.55 4 4.13 4.26
Korea, Rep. 3.64 3.33 3.62 3.47 3.64 3.83 3.97
China 3.49 3.16 3.54 3.31 3.49 3.55 3.91
Malaysia 3.44 3.11 3.5 3.5 3.34 3.32 3.86
Brazil 3.2 2.37 3.1 2.91 3.3 3.42 4.14
Thailand 3.29 3.02 3.16 3.27 3.16 3.41 3.73
India 3.12 2.7 2.91 3.13 3.16 3.14 3.61
Philippines 3.14 2.67 2.57 3.4 2.95 3.29 3.83
Vietnam 2.96 2.68 2.56 3.04 2.89 3.1 3.44
Indonesia 2.76 2.43 2.54 2.82 2.47 2.77 3.46
East Asia &
Pacific (regional
average)
2.73 2.41 2.46 2.79 2.58 2.74 3.33
Lower middle
income (income
average)
2.59 2.23 2.27 2.66 2.48 2.58 3.24
Indonesia: Poor logistics is negative for competitiveness and
inter-connectivity
• Indonesia logistics performance rank lower in
ASEAN. Its rank declined from 43 (in 2007) to 75 (in
2010).
• …. lack of infrastructure is one of the main reasons
• …. low rank of international shipments and logistic
competence lead to consistently high deficit of
services accounts in the BoP
• …. poor inter-connectivity among regions in
Indonesia results in high cost economy, and
possibly also high inflation rate
Source: The
World Bank
(2010),
Connecting
to Compete
2010: Trade
Logistics in
the global
Economy,
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3535
Anecdotal Evidence: Poor logistics creating high cost
economy
Source: RJ Lino (2011) presentation, “Port
Unity Indonesia – Pelindo II”
It is cheaper to ship mandarins to Jakarta from
China than from Pontianak (W. Kalimantan)
Cement price in Papua is 20 times
more expensive than in Jakarta
because of shipping costs
Container Shipment cost:
Padang, W. Sumatera – Jakarta = US$ 600
Jakarta – Singapore = US$185
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3636
GOI’s recently launched Master Plan for 2011-2025
Strategic Initiatives of MP3EI:
Encourage a large scale investment realization in
22 main economic activities
Synchronization of national action plan to revitalize
the real sector performance
The development of center of excellence in each
economic corridor
Projected per capita income is USD 14,250 –
15,500 by 2025 under this government’s MP3EI
program
Source: Government of Indonesia (2011), “Masterplan: Acceleration and Expansion of Indonesia Economic Development 2011-2025”
Main Economic Activity Sumatera Java Kalimantan SulawesiBali - Nusa
Tenggara
Papua - Kep.
Maluku
Steel
Food and Beverages
Textiles
Transport Equipment
Shipping
Nickel
Copper
Bauxite
Palm Oil
Rubber
Food Agriculture
Tourism
Info & Comm.Tech.
Coal
Oil and Gas
Jabodetabek Area
Sunda Strait Nat.Strat.Area
Defence Equipment
Animal Husbandry
Timber
Cocoa
Fishery
Business
as usual
RPJM MP3EI
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3737
Huge financing needs for investment in 6 economic corridors
Source: Government of Indonesia (2011), “Masterplan: Acceleration and Expansion of Indonesia Economic Development 2011-2025”
Seemingly healthy fiscal
position:
Low tax ratio (big informal
sector, high tax avoidance,
many tax exemptions, etc.)
Declining oil & gas production
posing a risk
Small fiscal space (high portion
of non-discretionary spending,
i.e. Interest payments,
subsidies, payroll, education,
transfer to regions, etc.)
95% of local government budget
allocated for payroll
Inability to spend quickly
Financial sector not deep
enough, dominated by banks.
Small domestic base of long-
term investors (pension funds
and insurance companies).
Need foreign investors
participation (volatility risks
the importance of perception)
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 3838
Relatively poor government effectiveness
Source: The World Bank (2010), The Worldwide Governance Indicators, ( http://info.worldbank.org/governance/wgi/index.asp )
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 393939
Indonesia Selected Economic Indicators
Source: CEIC, Danamon estimates
"Note: The above views, trends and pricing are subject to change without notice and are based on certain assumptions. Actual results may differ materially. Prior to making
any investment decision, you should make your own determination that the investment is consistent with your objectives and that you are able to assume the risk."
2008 2009 2010 2011E 2012E
National Accounts
Real GDP (% y-o-y) 6.0 4.6 6.1 6.5 6.5
Domestic demand ex. inventory (% y-o-y) 7.5 5.4 5.2 6.1 6.9
Real Consumption: Private (% y-o-y) 5.3 4.9 4.6 4.8 4.7
Real Gross Fixed Capital Formation (% y-o-y) 11.7 3.3 8.5 9.1 10.2
GDP (US$bn) — nominal 508 542 707 848 972
GDP per capita (US$) — nominal 2,221 2,343 2,976 3,519 3,976
Open Unemployment Rate (%) 8.6 7.9 7.1 6.7 6.3
External Sector
Exports, fob (% y-o-y, US$ bn) 18.3 -14.3 32.2 13.0 17.3
Imports, fob (% y-o-y, US$ bn) 36.9 -23.3 42.0 15.8 22.1
Trade balance (US$ bn) 22.9 30.1 31.1 31.6 29.9
Current account (% of GDP) 0.0 1.9 0.9 0.2 -0.2
Central government debt (% of GDP) 33 28 26 24 22
International Reserves –IRFCL (US$ bn) 51.6 66.1 96.2 125.0 137.0
Reserve Cover (Months of imports & ext. debt) 4.0 6.5 7.1 7.0 7.3
Currency/US$ (Year-end) 10,950 9,403 8,991 8,700 8,950
Currency/US$ (Average) 9,767 10,356 9,074 8,786 8,825
Others
BI policy rate (% year end) 9.25 6.50 6.50 6.50 6.25
Consumer prices (% year end) 11.06 2.78 6.96 4.68 5.70
Fiscal balance (% of GDP; FY) -1.0 -1.6 -0.6 -1.5 -1.0
S&P's Rating - FCY BB- BB- BB BB+ BBB-
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 40
Brief Overview of Indonesia
Source: Wikipedia
• An archipelagic country with more than 17,500 islands; the world’s 16th largest country in terms of land area
• It is the largest economy in the Southeast Asia and a member of the G-20 major economies.
• With Nominal GDP of USD 707 billion in 2010, Indonesia’s economic size ranks 18th largest in the world, and
4th largest in Asia (just smaller than Japan, China, India and South Korea).
• The country has extensive natural resources, including crude oil, natural gas, tin, coal, copper and iron ore.
Major agricultural products include, palm oil, rice, tea, coffee, spices, wood and rubber.
World Map of Nominal GDP (in US$) Indonesia strategic position
40
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 41
0
500
1000
1500
2000
2500
3000
-15
-10
-5
0
5
10
15
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Nominal GDP/Cap (USD, rhs)
GDP Growth (%)
Unemployment Rate (%)
Soeharto Habibie Wahid Megawati SBY
Direct Presidential Election
Reform, Decentralization, BI Independence
A new era, post Asian Financial Crisis. Mild impact of
2008 Global Financial Crisis
Source: BPS, Bank Indonesia, Danamon
41
Danamon Economic and Market Research | Please read the disclaimer on the back of this report 4242
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