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Transcript of Equity House FMCG Sector House Best Research House...
Asiamoney’s
2013
Best Domestic
Equity House
Economics flash
24 August 2015
Disclosure: Bahana Securities does and seeks to do business with companies covered in its research reports. Investors should consider this report as only a single factor
in making their investment decision.
Please see the important disclaimer information on the back of this report
2014Finance Asia's
Best Equity House
Alpha Southeast Asia
2014 Best Research Call FMCG Sector
Asiamoney's2013
Best DomesticEquity House
2015Institutional
Investors Highest RankedLocal Research
House
2015Global
Banking & FinanceReview
Best ResearchHouse
Indonesia economic outlook
Fakhrul Fulvian Adi Saputra E-mail: [email protected] Email: [email protected]
Phone: +6221 2505081 ext. 3602 Phone: +6221 2505081 ext. 3693
Tough times ahead
Moderate domestic demand and investment to continue: Private
consumption growth of below 5% y-y in 2Q15 and declining imports in July (-
28% y-y) affirm our view of continued weak domestic demand and
investment and leads us to make changes to our macro indicators (exhibit
2). The tight monetary policy of the past two years should continue to result
in economic moderation through 1Q16. Region-wise, we expect the
commodity economy outside of Java to persist with lower growth amid soft
commodity prices. At this point, room for a BI rate cut to spur growth still
appears limited, as the Indonesia-US real interest rate gap remains small
(exhibit 10). Historically, a recovery has often followed a negative output gap
by 3-4 quarters (exhibit 5).
2016 state budget draft seems overly optimistic: Last week, the
government announced its 2016 state budget plan, which included
IDR1,848tn of government revenue (+5% y-y). The target looks high, as
assuming a IDR250tn shortfall in 2015, we estimate that tax revenue would
have to jump 26.4% y-y in 2016 to achieve the target (exhibit 15). A higher
regional transfer portion is an interesting part of the new budget, leading to
greater unpredictability in terms of execution risk.
Global slowdown, a blessing and a curse: The IMF already cut its 2015
GDP growth forecast for emerging economies to 4.2% from 4.6% in 2014 on
lower commodity prices (exhibit 6) and tightening global financial conditions.
For Indonesia, lower oil prices are already having a positive net effect on the
external trade balance, as the CAD-to-GDP ratio was only 2.1% in 2Q15
(2014: 3.1%). We estimate that every 10% drop in the oil price would
increase the monthly trade balance by USD78m. That said, even though the
2Q15 trade balance was a net positive, continued steep export drops (2Q15:
-19.2% y-y) and an ongoing lower Indonesian shares in global markets are
restraining the country’s ability to generate foreign reserves to finance
external debt.
Stable inflation the key to avoid a vicious circle: Indonesia currently is
the only country with above 5% y-y inflation among its peers (exhibit 20),
caused by several fuel-price hikes since 2013. In terms of purchasing power
parity (PPP), this is why the IDR has depreciated the most among these
countries. Technically, without another supply shock, we believe inflation
should be below 5.0% at end-2015, but we see possible upside from the
recent El Nino weather pattern and possible additional fuel-price hikes due in
September/October. In our view, a managable inflation level is imperative to
prevent a vicious circle of currency depreciation and high inflation.
Fair and manageable moderation is expected this time: The recent IDR
depreciation has raised concerns about foreign debt payments and the
sufficiency of foreign reserves, which now cover just 6.9 months of imports.
We remain cautious on this issue, although 2Q15 private external debt
growth has slowed but to a still high level of 9.7% y-y (1Q15: 13.4%).
However, BI's tightening policy, in place since 2013, has normalized the
Exhibit 1. Macro assumptions
2014A 2015F 2016F 2017F
Cur acc (% GDP) -3.0 -2.0 -2.3 -2.3
Fiscal bal (% GDP) -2.3 -2.2 -2.2 -2.3
GDP growth(% y-y) 5.0 4.7 5.1 5.2
Inflation (% y-y) 8.4 4.8 5.2 5.3
Oil price(USD/bbl) 57.3 55.0 57.0 63.0
Oil price(USD/bbl)* 99.5 58.0 55.0 60.0
IDR/1USD 12,385 14,000 14,500 14,000
BI rate (% p.a.) 7.75 7.50 7.00 6.50
FX reserve (USDbn) 111.9 105.0 110.0 112.0 Source: BI, BPS, Bahana estimate, *Average Brent oil price
Exhibit 2. Forecast changes
2015F 2016F
Old New Old New
GDP growth (%) 4.86 4.72 5.29 5.10
CAD (% of GDP) 2.50 2.00 2.30 2.30
IDR/USD, Average 13,350 13,455 14,200 14,533
IDR/USD, End-year 13,700 14,000 14,000 14,500 Source: Bahana estimate
Exhibit 3. GDP growth trend
6.1
6.8
6.2
6.5 6.5
6.3
6.05.9
6.16.2
5.95.9
5.6 5.65.5
5.6
5.1
5.05.0
5.0 5.0
4.74.7
4.0
4.5
5.0
5.5
6.0
6.5
7.0
4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15
(%)
Source: Bank Indonesia
Exhibit 4. Interest rate and inflation
7.50 7.50 7.50
7.007.25
3.99
4.83
8.36
6.387.15
7.88
6.90
6.09
6.09
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15F Jan-16F Apr-16F Jul-16F Oct-16F
(%)
BI rate CPI y-y
Source: Bank Indonesia, Bahana estimate
Exhibit 5. Output gap
4.5
5.0
5.5
6.0
6.5
7.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1Q07 4Q07 3Q08 2Q09 1Q10 4Q10 3Q11 2Q12 1Q13 4Q13 3Q14 2Q15
(%)(%)
Output Gap (LHS) Annualized GDP Growth (RHS)
2009-2010 economic moderation period
Source: Statistics Indonesia, Bahana Estimate
Bahana Securities – Equity Research – Economics Flash
2014Finance Asia's
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2014 Best Research Call FMCG Sector
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external balance. Moreover, current country debt levels are still far from
1998 recessions levels.
Cutting 2015F GDP growth to 4.7% and IDR/1USD to 14,000: Looking
ahead, we cut our 2015F GDP growth forecast to 4.7% (from 4.9%) on
softer-than-expected commodity prices, global market uncertainty, CNY
devaluation, and continued tight monetary policy. For 2016F, we expect GDP
growth to rebound modestly to 5.1% (5.3% previously), together with a
possible BI easing policy. Thus, we expect the IDR/1USD to reach 14,000 by
end-2015 (from 13,700), pricing in risk on Indonesia’s terms of trade post
the CNY devaluation. In 2016, we now expect depreciation to continue
toward the IDR14,500 level (from 14,000) on the expected start of the US
monetary tightening cycle.
Exhibit 7. Forecast summary
2013 2014 2015F 2016F 2017F
GDP Growth y-y (%) 5.6 5.0 4.7 5.1 5.2
Private Cons Growth y-y (%) 5.4 5.3 5.0 5.0 5.1
Investment Growth y-y (%) 5.3 4.1 3.3 5.3 6.6
Govn Expenditure y-y (%) 6.9 2.0 5.4 6.7 6.1
Export y-y (%) 4.2 1.0 0.3 2.4 1.0
Import y-y (%) 1.9 2.2 -4.1 1.7 3.2
Exchange rate
USD/IDR (period End) 12,170 12,385 14,000 14,500 14,000
USD/IDR (Average) 10,602 11,917 13,455 14,533 14,115
Central bank and interest rate
BI Rate, year end (%) 7.5 7.8 7.5 7.0 6.5
FASBI, year end (%) 5.5 5.8 5.5 5.0 4.5
Lending Facility, year end (%) 7.5 8.0 8.0 7.5 7.3
JIBOR 1M (%) 5.6 7.5 7.5 7.7 6.0
10yr ID Govn Bond yield (%) 6.9 8.4 8.5 8.3 7.5
Real Interest Rate (%) 0.1 1.1 2.6 1.7 1.1
Real Interest Rate gap to US (%) 1.3 2.4 2.3 1.2 0.6
Foreign Reserve (USD bn) 99.4 111.9 105.0 110.0 112.0
Price
Inflation (%) 8.1 8.4 4.8 5.2 5.3
Core Inflation (%) 4.3 4.9 4.0 4.2 4.5
External balance
Export (USD bn) 182.6 176.3 165.7 169.0 177.5
y-y (%) -3.9 -3.4 -6.0 2.0 5.0
Import (USD bn) 186.6 178.2 158.6 166.5 176.5
y-y (%) -2.6 -4.5 -11.0 5.0 6.0
Trade Balance (USD bn) -4.1 -1.9 7.1 2.5 1.0
CA Balance (% of GDP) -3.1 -3.3 2.0 2.3 2.3
Fiscal Deficit (% of GDP) 2.5 2.1 2.2 2..2 2.2 Source: BI, BPS, Bahana forecasts
Exhibit 6. Commodity prices
550
570
590
610
630
650
670
690
710
730
750
770
790
810
830
850
870
890
45
50
55
60
65
70
75
80
85
90
95
100
105
110
115
120
Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15
(points)(USD/bbl)
Brent oil price (LHS) Coal price (LHS) CPO price (RHS)
Source: Bloomberg
Economic moderation to continue in
2015F …
… due to continued tight monetary
policy ...
… and lower support from external
conditions
Bahana Securities – Equity Research – Economics Flash
2014Finance Asia's
Best Equity House
Alpha Southeast Asia
2014 Best Research Call FMCG Sector
Asiamoney's2013
Best DomesticEquity House
2015Institutional
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2015Global
Banking & FinanceReview
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Consumer spending should continue to normalize; investment to
remain subdued on lower efficiency
Large population and F&B to support private consumption growth: As
the fourth most populous country globally, consumption should continue to
become Indonesia’s most dominant economic activity. Even though
moderation may occur, we expect private consumption to maintain its share
of between 53-55% of GDP in 2016. The recent declining trend is related to
the start of the BI tightening cycle in 2013 (exhibit 8), and we expect
consumption growth to remain muted in 3Q15 to 4.89%, supported by lower
equipment and transportation consumption growth (exhibit 9).
BI pro-cyclicality due to tight global conditions: Under normal
conditions, declining economic sentiment, especially from the demand side, is
typically tackled by interest rate cuts. However, the possible Fed tightening
cycle by the end of this year is restricting BI’s monetary policy options, since
the Indonesia-US real interest rate gap is smaller today (exhibit 10).
Slower consumption is good for private debt: At these levels, we believe
the normalization of private consumer spending is healthy, as it already has
helped to lower the pace of demand for private foreign debt growth in the
last 2 years (exhibit 11).
Continued weak raw material and capital goods imports indicate
moderate investment: Recent weak import data (exhibit 12) affirm our
concern that investment growth could continue its weakening pattern.
Efficiency-wise, the increasing incremental capital-to-output ratio (exhibit 13)
suggests that investment efficiency are subdued at the moment.
Exhibit 8. BI Rate, JIBOR 1M and private consumption growth
6.7
7.5
5.0
4.5
4.7
4.9
5.1
5.3
5.5
5.7
5.9
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
(%)(%)
Jibor 1-month (LHS) BI rate (LHS) Private consumption growth (RHS) Source: Bloomberg, Statistics Indonesia
Exhibit 9. F&B, equipment and transportation sectors
5.5
5.2
4.5
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
4.5
5.0
5.5
6.0
6.5
7.0
7.5
(%)(%)
Equipments y-y (LHS) Transportation y-y (LHS) F&B y-y (RHS)
Source: Statistics Indonesia
Lower private consumption growth is
partly caused by continued high
interest rates
Spending on equipment &
transportation typically drops most
during a slowdown
Bahana Securities – Equity Research – Economics Flash
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Exhibit 10. Indonesia-US real interest rate gap
0.0
-4
-3
-2
-1
0
1
2
3
4
5
6
1/1/2010 9/1/2010 5/1/2011 1/1/2012 9/1/2012 5/1/2013 1/1/2014 9/1/2014 5/1/2015
(%)
Real interest rate gap Indonesia real interest rate US real interest rate
Exhibit 11. Private consumption and private foreign debt growth
22.2
7.5
13.8
27.4
18.3
12.4
14.7
10.8
5.3
4.9
4.7
5.1
5.5
5.4
5.1
5.0
4.4
4.6
4.8
5.0
5.2
5.4
5.6
5.0
7.5
10.0
12.5
15.0
17.5
20.0
22.5
25.0
27.5
30.0
2008 2009 2010 2011 2012 2013 2014 1H15
(%)(%)
Private external debt growth (LHS) Private consumption growth (RHS)
Source: Bank Indonesia, Statistics Indonesia
Exhibit 12. Investment growth and imports
-17.6
-14.8
3.6
-1.0
0.5
2.0
3.5
5.0
6.5
8.0
9.5
11.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15
(%)(%)
Raw material import growth (LHS) Capital goods import growth (LHS) Investment growth (RHS)
Source: BKPM, Statistics Indonesia
Exhibit 13. Indonesia’s incremental capital-to-output ratio (ICOR)
6.2
4.5
6.7
4.9
6.7
4.0
4.5
5.0
5.5
6.0
6.5
7.0
1Q2004 2Q2005 3Q2006 4Q2007 1Q2009 2Q2010 3Q2011 4Q2012 1Q2014 2Q2015
(pts)
Source: Statistics Indonesia
A low real interest rate gap likely to
prevent BI from easing its monetary
policy
Lower consumption is reducing
appetites for foreign loans
A sharp drop in raw materials and
capital goods imports indicates
investment could remain subdued …
… while a continued high ICOR
indicates lower economic efficiency
Bahana Securities – Equity Research – Economics Flash
2014Finance Asia's
Best Equity House
Alpha Southeast Asia
2014 Best Research Call FMCG Sector
Asiamoney's2013
Best DomesticEquity House
2015Institutional
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2016 draft state budget appears ambitious
Government targets IDR1,848tn of revenue in 2016: Recently, the
government issued its 2016 draft budget which assumes GDP growth of
5.5%, an IDR/1USD exchange rate of 13,400 and revenues of IDR 1,848tn.
The budget is optimistic, in our view, given the recent short-fall in tax
revenue. Based on our assumption of a IDR250tn tax revenue shortfall in
2015F (compared to the revised budget), we estimate that tax revenue
would need to grow another 26.4% y-y next year. At this point, we do not
expect a steep jump in government expenditures next year.
Higher regional transfers present opportunities … and risks at the
same time: The 2016 government budget assumes a 30.8% y-y increase in
regional transfers. Our recent channel checks indicate that currently,
execution at the regional level is quite low, contributing to only a 25.9%
realization of the spending. However, if realization were to improve, this
would help bridge the shortfall.
Exhibit 14. 2016 government macro assumption
Assumptions
2014 2015 2015 2016
Revised budget
State budget
Revised state
budget
Bahana forecast
Draft state
budget
Bahana forecast
GDP Growth (% y-y) 5.5 5.8 5.7 4.7 5.5 5.1
Inflation (% y-y) 5.3 4.4 5.0 4.8 4.7 5.2
IDR/USD 11,600 11,900 12,500 14,000 13,400 14,500
Average 3-mo govt T-Bill rate (%)
6.0 6.0 6.2 - 5.5 -
Oil price (USD/bbl) 105 105 60 60 60 55
Oil lifting (k’ bbl/day) 818 900 825 - 830 -
Gas lifting (k’ boe/day) 1,224 1,248 1,221 - 1,155 -
Source: Ministry of finance, Bahana estimate
Exhibit 15. State revenue and state expenditure
2014 2015 2015 2015 2016 %
Unaudited Budget Revised Bahana forecast
Draft Change
realization budget budget vs. Bahana
Revenues & grants 1,537.2 1,793.6 1,762.0 1,479.0 1,848.1 25.0
Tax 1,143.3 1,380.0 1,489.0 1,239.0 1,565.7 26.4
Non-tax 390.7 410.3 270.0 240.0 280.3 16.8
Expenditures 1,764.6 2,039.5 1,984.1 1,719.0 2,121.3 23.4
Central govt 1,190.8 1,392.4 1,319.6 1,121.0 1,339.1 19.5
Capital 71.4 156.5 290.0 261.0 313.5 20.1
Energy subsidies 341.8 344.7 137.8 137.0 121.5 (11.3)
Transfer regions 573.8 647.0 664.0 598.0 782.2 30.8
Surplus/deficit (IDRtn)
-227.4 -245.9 -225.9 -240.0 -273.2 13.8
% of GDP -2.3 -2.2 -1.9 -2.2 -2.1 n.a Source: Ministry of finance, Bahana estimate
The government budget assumptions
for 2016 are optimistic, in our view, at
5.5% growth and IDR/1USD at 13,400
Assuming a IDR250tn tax revenue
shortfall in 2015, tax revenues in 2016
would need to jump 26.4% y-y, from
our 2015 forecasts
Bahana Securities – Equity Research – Economics Flash
2014Finance Asia's
Best Equity House
Alpha Southeast Asia
2014 Best Research Call FMCG Sector
Asiamoney's2013
Best DomesticEquity House
2015Institutional
Investors Highest RankedLocal Research
House
2015Global
Banking & FinanceReview
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BoP to limit GDP growth on the back of global slowdown
Global merchandise goods trade continues to drop: Together with the
slowdown in the China economy, the global trade value growth continues to
drop 13% y-y in May 2015 (exhibit 16). With high exposure in the
commodity export market, Indonesia has lost share on the global market
(exhibit 17), even though the IDR has depreciated on a REER basis (exhibit
18). We suspect Indonesia could lose further market share of the global
commodity export market towards year end as we expect the competitive
trend of monetary easing and devaluation to continue.
World macro backdrop is also bringing some relief in the form of very
low oil prices: On a ytd average, the Brent oil price has dropped 13% y-y.
It has already helped boost Indonesia’s trade balance, leading to a 2.1%
current account deficit (CAD) in 2Q15. We estimate that every 10% drop in
the price of oil would boost the monthly trade surplus by USD78m.
External balance and domestic aggregate supply to limit GDP growth
prospects in upcoming years: Above-capacity economic growth in 2012-
2013 already lifted the country’s CAD and increased the amount of external
funding needed. We expect Indonesia’s reliance on external financing to
place limits on its GDP growth. Lower financial account levels have already
started to show (exhibit 19) as investors are pricing in a US rate-hike cycle.
This is a supporting argument for our more moderate GDP growth forecast at
5.1% 2016.
Exhibit 16. Global trade growth subdued
-13.0
-16.4
-40
-30
-20
-10
0
10
20
30
40
1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015
(%)
World trade value growth (y-y) World trade volume growth (y-y)
Source: IMF Exhibit 17. Indonesian export share in global markets
0.80
0.85
0.90
0.95
1.00
1.05
1.10
1.15
Aug-
05
Dec-
05
Apr-0
6
Aug-
06
Dec-
06
Apr-0
7
Aug-
07
Dec-
07
Apr-0
8
Aug-
08
Dec-
08
Apr-0
9
Aug-
09
Dec-
09
Apr-1
0
Aug-
10
Dec-
10
Apr-1
1
Aug-
11
Dec-
11
Apr-1
2
Aug-
12
Dec-
12
Apr-1
3
Aug-
13
Dec-
13
Apr-1
4
Aug-
14
Dec-
14
Apr-1
5
(%)
10 year average = 0.94%
The rise of China and commodity boom Normalization
Source: IMF, Bahana
Global trade has been subdued in 2015
YTD due to the slowdown in China
As such, Indonesia keeps losing export
share on global markets
Bahana Securities – Equity Research – Economics Flash
2014Finance Asia's
Best Equity House
Alpha Southeast Asia
2014 Best Research Call FMCG Sector
Asiamoney's2013
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2015Institutional
Investors Highest RankedLocal Research
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2015Global
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Exhibit 18. REER change and export growth
IndonesiaMalaysia
China
Thailand
Singapore
Philippines
India
South Korea
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0
y-y
chan
ge o
n R
EER
(%)
y-y change in Exports (%)
Source: IMF, Bahana
Exhibit 19. Balance of Payment during QE period
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
(USDmn)(USDmn)
Financial and capital account (LHS) Current account (LHS) BoP (RHS)
US QE period, 2009-2014
Source: Bank Indonesia
Stable inflation is the key while expecting fair economic moderation to come
Indonesia is the only Asian nation ex-Japan with inflation above 5%
currently: As a consequence of serial fuel-price hikes between 2013-14,
Indonesia is the only country in Asia ex-Japan with above 5% inflation
(exhibit 20). In our view, this is the reason why the IDR has depreciated the
most against the USD, (exhibit 21). The possible absence of another supply
shock due to weak oil prices is behind our assumption of our mild
depreciation forecast at IDR/1USD14,500 for 2016.
Inflation should normalize unless aggregate supply is uncontrollable:
Currently, we still expect 4.8% inflation in 2015F. The main risk currently
comes again from the supply side, as there is the possibility of a 15% fuel-
price hike in September-October (exhibit 22) and given the staple price
impact from a longer dry season during El Nino. If another round of fuel-price
hikes were to come in September, we estimate it would lift year-end inflation
to 5.3%. The recent USD4.1bn of cumulative trade balance should open
room for staples import during the El Nino season.
Fair economic moderation is the main scenario: The recent decline in
foreign reserves amid the IDR depreciation brings back memories of the
1998 economic crisis. However, this time around we do not expect a repeat
of the 1998 crisis due to the following reasons: 1. In 1997, GDP grew 7.8%
(8% above the country’s potential capacity) while the BI’s tightening action
has already pulled Indonesia out from an overheating economy (exhibit 23);
2. In 1997, the foreign-debt-to-GDP ratio stood at 150% of GDP, vs. only
34% today; 3. Indonesia has now already adopted a flexible exchange-rate
… Currency depreciation does not
support exports currently
Financial accounts normalized post the
end of QE
Bahana Securities – Equity Research – Economics Flash
2014Finance Asia's
Best Equity House
Alpha Southeast Asia
2014 Best Research Call FMCG Sector
Asiamoney's2013
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2015Global
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regime. Recent economic moderation is proof that the IDR depreciation
impact has already been absorbed by the economy. But, at this point we
acknowledge the risk from low foreign reserves, as the total-debt-to-foreign-
reserve ratio continues to increase (exhibit 24).
Exhibit 20. Inflation comparison within Asian peers
7.1
2.5
-1.05
0.8
-0.3-0.66
1.6
0.7
-2
-1
0
1
2
3
4
5
6
7
8
Indonesia Malaysia Thailand Philippine Singapore Taiwan China Korea
(%)
Source: Bloomberg
Exhibit 21. 3-year average inflation and currency depreciation
Indonesia
Malaysia
Thailand
PhilippinesTaiwan
China
South Korea
y = 7.5526x - 4.7678
-5
0
5
10
15
20
25
30
35
40
45
50
0 1 2 3 4 5 6 7
3 yr
cur
renc
y de
prec
iatio
n to
USD
(%)
3yr inflation average (%)
Source: Bloomberg, Bahana
Exhibit 22. Another round of fuel-price hikes is expected
6,000
4,500
6,500
8,500
6,700
7,400
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
IDR/LiterIDR/Liter
Brent oil prices (LHS) Regular gasoline prices (RHS)
Source: Bloomberg, Bahana
Indonesia is the only country with
inflation above 5%
Continued high inflation should support
currency depreciation
The government plans to raise regular
fuel prices by 15% this September,
despite the drop in oil prices
Bahana Securities – Equity Research – Economics Flash
2014Finance Asia's
Best Equity House
Alpha Southeast Asia
2014 Best Research Call FMCG Sector
Asiamoney's2013
Best DomesticEquity House
2015Institutional
Investors Highest RankedLocal Research
House
2015Global
Banking & FinanceReview
Best ResearchHouse
Exhibit 23. Business cycle comparison (1990-2015)
7.8
-13.6
5.0
6.4
4.5
6.4
4.8
-8
-6
-4
-2
0
2
4
6
8
10
-15
-10
-5
0
5
10
4Q1991 2Q1993 4Q1994 2Q1996 4Q1997 2Q1999 4Q2000 2Q2002 4Q2003 2Q2005 4Q2006 2Q2008 4Q2009 2Q2011 4Q2012 2Q2014
(%)(%)
Output Gap (RHS) Annualized GDP Growth (LHS)
Economic Overheating
Asian Crisis
SubprimeMortgage
GlobalSlowdown
Source: Statistics Indonesia, Bahana
Exhibit 24.Foreign-reserve-to-debt ratio
27.838.7
55.764.9
81.9
138.8
111.1
226.6
26.136.1
50.669.3
87.2 106.7
108.3
246.0
0
50
100
150
200
250
300
Turkey Indonesia Malaysia India Korea Philippine Thailand Taiwan
(%)
July 2014 July 2015
Source: Bloomberg
The economy is unlikely to overheat
like it did in 1998
Low foreign-reserve-to-debt ratio is a
downside factor
Fakhrul Fulvian
[email protected] 3602
Melvin Mikha Reminov
[email protected] Associate
ext 3621
Research: +62 21 250 5081
Harry [email protected]
Senior Associate DirectorHead of Research
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Novianty Permata Sari
ext 3618
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