Recent Economic Developments · Fitch Ratings (February 24, ... This follows Moody’s release last...
Transcript of Recent Economic Developments · Fitch Ratings (February 24, ... This follows Moody’s release last...
REPUBLIC OF INDONESIA
Recent Economic Developments
August 2011
Published by Investors Relations Unit – Republic of Indonesia
Address Bank Indonesia
International Directorate
Investor Relations Unit
Sjafruddin Prawiranegara Building, 5th floor
Jalan M.H. Thamrin 2
Jakarta, 10110 Indonesia
Tel +6221 381 8316
+6221 381 8319
+6221 381 8298
Facsimile +6221 350 1950
E-mail [email protected]
Table of Content
Executive Summary
Improved International Perception and Rising Investment
Preserved Macroeconomic Stability to Support Further Growth
Prudent Fiscal Management
Improved Government Debt Position
Executive Summary
5
GDP Growth Inflation
Balance of Payments Foreign Exchange Reserves
Macroeconomic Overview
Billion USD
* Bank Indonesia projection
2009
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2005 2006 2008 2008 2009 2010 Q1 2011
Q2 2011
Q3* 2011
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
Jan
Mar
May Ju
l
Sep
No
v
Jan
Mar
May Ju
li
Sep
No
v
Jan
Mar
May
July
2009 2010 2011
%
CPI (%, yoy) Core (%, yoy)
Volatile Food (%, yoy) Administered (%, yoy)
-
2.00
4.00
6.00
8.00
10.00
12.00
-20.00 40.00 60.00 80.00
100.00 120.00 140.00
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
June
Jul
2010 2011
foreign exchange reserves (LHS)
month of import & government debt service (RHS)
0
20
40
60
80
100
120
-10
-5
0
5
10
15
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1*
Q2*
*
2007 2008 2009 2010* 2011
Current Acc. Cap. & Fin. Acc Reserve Assets (RHS)
MBillion USD Billion USD
6
• Domestic economy expected to continue charting strong growth, mainly supported by solid export performance, strong household
consumption, and investment. Investment performance also expected to grow faster driven by higher demand and the realization of
Government’s capital expenditure. In the 2nd quarter of 2011, the economy charted 6.5% (yoy) growth, in line with the projection , and is
forecasted even stronger in Q3/2011 and trough out 2011 to reach 6.6%. The continuing strong economic activities confirm the outlook of
economic growth to potentially reach the upper bound of 6.3-6.8% in 2011 and 6.4-6.9% in 2012.
• The inflation pressure remained subdue, as reflected in July 2011 inflation which is still in line with its seasonal patterns. The CPI
inflation in July 2011 came to 0.67% (mtm) or 4.61% (yoy). Core inflation reached 0.42% (mtm) or 4.55% (yoy) driven by the increase in global
commodity prices and the increase in domestic demand. Looking forward, the increasing inflation is forecasted to grow from household
consumption during Ramadhan and Eid holidays. However, Government policies on securing supply of foods is predicted to mitigate volatility
of the prices hence inflation will be under control.
• The overall balance of payments in Q2/2011 posted a surplus of US$11.9 billion, rose significantly from US$7.7 billion surplus in the
preceding period. Spurring this increase was a sharp rise in the capital and financial account surplus that outweighed a decrease in the current
account surplus. In response, international reserves at the end of June 2011 boosted to US$119.7 billion, equivalent to 6.8 months of imports
and servicing of official external debt. Furthermore, the international reserves at the end of July 2011 reached USD 122.7 billion, or equivalent
to 7 months of imports and external debt services of the Government
• Investment realization up to the 1st half of 2011 spurred optimism that the full year target of Rp240 trillion is achievable. Total
investment realization in the 2nd quarter of 2011 is Rp. 62.0 trillion (around USD7.2 billion) with 85% of investments directed outside of the
island of Java. The realization figures until the 1st semester of 2011 came to Rp.115.6 trillion or 48.2% from the target and an increase of 24.4%
compared to the realization at the same period in 2010.
• On the fiscal front, Indonesia continue to perform a prudent fiscal management in 2011, with strong commitment to fiscal consolidation,
aiming on continue declining debt-to-GDP ratio, diversifying government debt profile, and reducing funding reliance on international capital
market.
• Financial System Stability had been maintained as indicated by the Financial Stability Index which were well below the treshold of 2 (1.61
on July 2011).
• In the Board of Governors’ Meeting held on Tuesday August, 9, 2011, Bank Indonesia decided to keep the BI rate unchanged at
6.75%. Bank Indonesia is confident that the impact of the recent turmoil in the global financial markets due to the downgrade of US credit
rating to the domestic financial market is limited, and can be contained with continuous monitoring of market development and coordination
with the Government. Bank Indonesia is strongly confident that the implementation of monetary and macroprudential policy mix can secure macroeconomic stability and keep inflation within the targets, that is, 5% +1% in 2011 and 4.5% +1% in 2012.
Executive Summary
Improved International Perception and Rising Investment
Improving International Perception: Acknowledged by Rating Agencies
Resilient economy, which impressively navigates through the global crisis and continued confidence in economic
outlook, the Republic continued to receive good reviews.
S&P (April 8, 2011): upgraded Indonesia’s long-term foreign currency rating to BB+ from BB with positive outlook. With the
rating upgrade, puts Indonesia 1 notch closer to investment grade by the three major rating agencies. The positive outlook also
indicates the possibility of Indonesia to have another upgrade in the near future. The main factor supporting this decision is continuing
improvements in the government's balance sheet and external liquidity, against a backdrop of a resilient economic performance and
cautious fiscal management.
Fitch Ratings (February 24, 2011): affirmed Indonesia’s long-term foreign and local currency issuer default ratings (IDRs) at
‘BB+’ and revised the outlooks on both to Positive from Stable. Fitch stated key factors supporting this action were strong
economic growth, well above of the ‘BB’ and ‘BBB’ range medians. Encouragingly, Indonesia’s growth has not been accompanied by
the emergence of potentially-risky external imbalances – rising savings rates have largely matched the growing investment, and
especially the performance of Indonesia's balance of payments. Modest current account surplus is always maintained since 1998. The
strengthening of foreign exchange reserves reached USD96.2 billion, equivalent to 7 months of imports and debt payments become
critical factors that support the credit profile of Indonesia.
Moody’s Investors Service (January 17, 2011): upgraded Republic of Indonesia’s foreign and local-currency bond ratings to
Ba1 with stable outlook. This follows Moody’s release last December which placed the ratings on a review for possible upgrade. The
key factors supporting this action were (1) economic resilience which accompanied by sustained macroeconomic balance; (2)
Improved government’s debt position and central bank’s foreign currency reserve adequacy; and (3) Improved prospects for foreign
direct investment inflows which expected to fortify Indonesia’s external position and economic outlook.
Japan Credit Rating Agency, Ltd (July 13, 2010): upgraded Indonesia's sovereign rating to Investment Grade from BB+ to
BBB- with stable outlook. The first upgrade to reach investment grade in the last 13 years reflects enhanced political and social
stability, sustainable economic growth , alleviated public debt burden as a result of prudent fiscal management, reinforced resilience to
external shocks stemming from the foreign reserves accumulation and an improved capacity for external debt management and efforts
made by the current administration to outline the framework to deal with structural issues such as infrastructure development.
8
Sovereign Rating History
9
Solid economic fundamentals supported the improvement of Indonesia’s sovereign credit rating since 2001
Improving International Perception: Significant Raise in Perception Indices
World Economic Forum – The Global Competitiveness Report 2010 – 2011 (September 15, 2010) reported that Indonesia posts
an impressive gain of 10 places, mainly driven by a healthier macroeconomic environment and improved education indictors.
Indonesia considered to successfully maintain a relatively healthy macroeconomic environment throughout the crisis. While most other
countries saw their budget deficits surge, Indonesia kept its deficit under control”
The IMD Competitive Center (May 19, 2010) reports a major improvement in Indonesia's global competitiveness, with
Indonesia moving up from 42nd to 35nd place among a total of 57 major nations surveyed worldwide. For Indonesia, the
improvement in 2010 has been achieved through significant gains in economic performance, followed by government efficiency and
infrastructure improvement.
OECD (March 31, 2011): Indonesia’s Credit Risk Classification (CRC) still category 4. Indonesia is in one peer with Colombia,
Egypt, Philippina, Turkey and Uruguay. The last year upgrade was a timely acknowledgement by the developed economies of the
consistent economic improvement. And an upgrade in this category would significantly improve Indonesia’s credit standing in front of
the creditor countries especially the credit exports creditor countries which eventually would decrease the debt burden.
10
Conducive business climate improvement to support optimism in FDI inflows
Strong investment underpinned by competitiveness and stability
Realized foreign direct investment (USD billion) Realized domestic direct investment (IDR trillion)
Source: BKPMSource: BKPM
* US$ / Rp. exchange rate of 8,709, the BI middle exchange rate as of March 31, 2011.
Total investment realization in the second quarter of 2011 was Rp. 62.0 trillion (around USD7.2 billion) with 85% of investments are located
outside the island of Java.
Until the 1st semester of 2011 it reached Rp.115.6 trillion or 48.2% from the target and an increase of 24.4% compared to that during the same
period in 2010.
Those figures raised the expectation that domestic and foreign direct investment realization target of Rp240 trillion in 2011 can be
accomplished. Continuous improvements of investment policies and services, acceleration of infrastructure development and the provision of
fiscal incentives on capital investment will contribute to the realization of this target.
11
6.0
10.3
14.9
10.8
16.2
9.4
2006 2007 2008 2009 2010 Semester 1 2011
20.8
34.9
20.4
37.8
60.6
33.0
2006 2007 2008 2009 2010 Semester 1 2011
Strong investment underpinned by competitiveness and stability
Source: BKPM
12
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2006 2007 2008 2009 2010 Semester 1 2011
2,229 2,526
813746
704
1,026
747673
1,612
6281,183
798 903
955
714
1,293 655
806
756860
1,064789
1,428650
706
785
647
3,305
8,530
4,171
5,046
1,051
653
1,138
882
1,295
2,556
Mining
Other primary sector
Food industry
Paper and printing industry
Chemical and pharmaceutical industry
Metal machinery and electronic industry
Motor vehicle and other transport equipment industries
Other secondary sector
Electricity, gas and water supply
Trade and repair
Transportation, storage and communications
Other tertiary sector
FDI – By Sector (USD million)
Preserved Macroeconomic Stability
Robust and Stable Economy Continues to Chart Strong Growth
Source: Bank Indonesia.
14
On the growth side, supported with a more balanced growth structure, investment forging ahead and continued solid performancein exports, BI forecast
the economy to grow around 6.3%-6.8% in 2011 and further 6.4%-6.9% in 2012.
For the 2nd quarter of 2011, the economy, as projected, charted 6.5% (yoy) growth. While in the 3rd quarter of 2011 and trough out 2011 the economy is
forecasted even stronger to reach 6.6% on the back of solid investment, export, and consumption. Investment is gaining momentum to grow stronger
since to government starts to spend its capital expenditure. From the production side, the growth driver are the manufacturing sector, trade, hotel, and
restaurants sector, and transportation and communication sector. % yoy
Economic Growth ForecastTable 3.1
Forecast of Economic Growth - Demand Side
Sector 2009 20102011
2011* 2012*I II III*
Private Consumption 4,9 4,6 4,5 4,6 4,7 4,4 - 4,9 4,8 - 5,3
Government Consumption 15,7 0,3 3,0 4,5 18,4 8,8 - 9,3 3,9 - 4,4
Gross Fixed Capital Formation 3,3 8,5 7,3 9,2 10,5 9,3 - 9,8 12,3 - 12,8
Exports of Goods and Services -9,7 14,9 12,3 17,4 7,9 9,4 - 9,9 9,7 - 10,2
Imports of Goods and Services -15,0 17,3 15,6 16,0 10,3 11,1 - 11,6 11,3 - 11,8
GDP 4,6 6,1 6,5 6,5 6,6 6,3 - 6,8 6,4 - 6,9
* Bank Indonesia Projection
Economic Growth ForecastTable 3.2
Forecast of Economic Growth - Supply Side
S e c t o r 2009 20102011
2011* 2012*I II III*
Agriculture 4,0 2,9 3,4 3,5 3,5 3,1 - 3,6 3,5 - 4,0
Mining and Quarrying 4,4 3,5 4,6 4,1 4,1 3,7 - 4,2 3,7 - 4,2
Manufacturing 2,2 4,5 5,0 5,1 5,1 4,8 - 5,3 5,0 - 5,5
Electricity, Gas, and Water Supply 14,3 5,3 4,2 5,3 5,9 5,1 - 5,6 6,4 - 6,9
Construction 7,1 7,0 5,3 6,8 7,2 6,4 - 6,9 7,6 - 8,1
Trade, Hotels, and Restaurants 1,3 8,7 7,9 8,4 8,9 8,5 - 9,0 8,6 - 9,1
Transportation and Communication 15,5 13,5 13,8 13,1 13,2 12,7 - 13,2 11,6 - 12,1
Financial, Rental, and Business Services 5,1 5,7 7,3 6,9 7,0 6,7 - 7,2 6,8 - 7,3
Services 6,4 6,0 7,0 6,7 6,6 6,3 - 6,8 6,1 - 6,6
GDP 4,6 6,1 6,5 6,5 6,6 6,3 - 6,8 6,4 - 6,9
* Bank Indonesia Projection
1515Source: Bank Indonesia
Balance of Payments Q2/2011
Balance of Payments
• In line with strong capital inflow (including FDI) and surplus in the current account, Indonesia balance of payment is expected to post
another considerable surplus in 2011. The overall balance of payments in Q2/2011 posted a surplus of US$11.9 billion. At the end of
July 2011, the international reserves reached USD 122.7 billion, or equivalent to 7 months of imports and external debt services of the
Government
0
20
40
60
80
100
120
-10
-5
0
5
10
15Q
1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
**
2007 2008 2009 2010* 2011
Current Acc. Cap. & Fin. Acc Reserve Assets (RHS)
MBillion USD Billion USD
16
Balance of Payments Q2/2011
The current account posted a surplus of US$0.2 billion in Q2/2011, buoyed mainly by strong growth in non-oil & gas exports and natural gas
exports. This surplus, however, was declined considerably from the US$2.1 billion recorded in the preceding quarter, a result of larger deficits in
the oil trade balance, services and income accounts.
Declining performance in the current account was offset by a significant rise in the capital and financial account surplus to US$12.5 billion
almost doubled from those in the previous quarter. A more conducive investment climate, continuing attractive returns on investments in
Indonesia, and the need of foreign denominated liquidity in domestic market, while there be sustained excess liquidity in the global financial
markets, were among the key factors that supported the robust capital & financial account performance.
Source: Bank Indonesia
TOTAL Q1 Q2 Q3 Q4 TOTAL Q1* Q2**
I. Current Account 10,628 1,936 1,409 1,205 1,093 5,643 2,089 232
A. Goods 1 30,932 6,954 6,848 7,593 9,232 30,628 8,686 9,728
- Exports 119,646 35,088 37,444 39,712 45,830 158,074 45,818 51,460
- Imports -88,714 -28,134 -30,596 -32,119 -36,597 -127,447 -37,133 -41,732
1. Non Oil & Gas 25,560 5,812 5,881 6,605 9,097 27,395 8,628 10,638
2. Oil -4,016 -1,663 -2,140 -1,991 -2,859 -8,653 -3,438 -4,998
3. Gas 9,388 2,805 3,107 2,980 2,994 11,886 3,495 4,088
B. Services -9,741 -2,106 -2,275 -2,155 -2,788 -9,324 -2,305 -3,598
C. Income -15,140 -3,993 -4,262 -5,385 -6,653 -20,291 -5,318 -6,871
D. Current transfers 4,578 1,080 1,098 1,151 1,301 4,630 1,027 974
II. Capital & Financial Account 4,852 5,590 3,697 7,365 9,550 26,201 6,436 12,518
A. Capital Account 96 18 2 4 26 50 1 0
B. Financial Account 2
4,756 5,572 3,695 7,361 9,524 26,151 6,435 12,518
1. Direct Investment 2,628 2,484 2,298 1,684 4,241 10,706 3,041 2,699
2. Portfolio Investment 10,336 6,159 1,089 4,517 1,437 13,202 3,798 5,742
3. Other Investment -8,208 -3,072 308 1,160 3,846 2,243 -404 4,076
III. Total (I + II) 15,481 7,526 5,106 8,570 10,642 31,844 8,525 12,750
IV. Net Errors & Omissions -2,975 -905 315 -1,616 646 -1,559 -859 -873
V. Overall Balance (III + IV) 12,506 6,621 5,421 6,955 11,289 30,285 7,666 11,876
Memorandum:
Reserve Asset Position 66,105 71,823 76,321 86,551 96,207 96,207 105,709 119,655
In Months of Imports & Official Debt Repayment 6.5 5.2 5.6 6.3 7.0 7.0 6.0 6.8
Current Account (% GDP) 1.95 1.18 0.80 0.65 0.58 0.79 1.06 0.11
Debt Service Ratio (%) 23.2 21.2 23.2 20.3 23.7 22.2 18.0 21.6
o/w. Government & Monetary Authority DSR (%) 7.5 5.0 7.2 4.8 6.2 5.8 4.5 5.4
1) In terms of free on board (fob)
2) Excluding reserves and related items
3) Negative represents surplus and positive represents deficit.
* Provisional figures
** Very provisional figures
- Not available
2009 2010*I T E M S
2011
17
Trade Balance: Non-Oil & Gas
A strong performance of non-oil & gas exports that charted 38.6% growth (yoy) supported the non-oil & gas trade balance surplus of US$10.6
billion. Primary products (resources-based commodities) were the main contributors to exports performance, benefited from buoyant demand
and high commodity prices in international market.
Meanwhile, solid economic growth during the reporting period triggered the non-oil & gas imports to grow at 28.4% (yoy). Imports of raw
materials and capital goods, comprised of 70% and 20% of total imports consecutively, and grew by 31% and 26% respectively.
Source: Bank Indonesia
Balance of Payments Q2/2011: Current Account
-40
-20
0
20
40
60
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
**
2007 2008 2009 2010* 2011
Trade Balance of Non-Oil & Gas
Exports Imports Non Oil & Gas Trade Balance
Billion USD
Trade balance of Non-Oil & Gas
18
Trade Balance: Oil & Gas
The oil & gas trade balance turned into deficit as oil imports drove up in response to rising consumption of oil-based fuels and falling
national oil production amid a hike in international oil price. Meanwhile, further increase in the gas trade balance surplus was constrained by a
shifting of gas supply particularly for fulfiling domestic needs.
Source: Bank Indonesia
Balance of Payments Q2/2011: Current Account
-6
-4
-2
0
2
4
6
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1*
Q2*
*
2007 2008 2009 2010* 2011
Trade Balance of Oil & Gas
Oil Trade Balance Gas Trade Balance Oil & Gas Trade Balance
Billion USD
Trade balance of Oil & Gas
19
• The services account deficit was higher than the deficit in Q1/2010 mainly due to mounting numbers of outbound travellers during the
vacation period (seasonal factors) and increased payments for freight services in line with upbeat import activity.
• The income account deficit in Q2/2011 was broaden to US$6.9 billion (Q1/2011: US$5.3 billion deficit), primarily explained by a rise in
payments of debt interest.
• Meanwhile, current transfers surplus were relatively stable as compared to the previous period.
Services, Income, and Current Transfers
Source: Bank Indonesia
Balance of Payments Q2/2011: Current Account
-8-7-6-5-4-3-2-1012
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
**
2007 2008 2009 2010* 2011
Services, Net
Current Transfer, Net
Income, Net
Services, Incomes & Current TransfersBillion USD
Services, Income, and Current transfers
20
The financial account surplus mounted to US$12.5 billion, almost doubled from a surplus in the previous period. The higher surplus was
primarily due to substantial inflows of foreign capital in terms of domestic debt instruments and growing domestic financing needs that prompted
the private sector to draw on foreign lines of credits and offshore deposits.
Financial Account: Total
Source: Bank Indonesia
Balance of Payments Q2/2011: Capital & Financial Account
-10
-5
0
5
10
15Q
1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1*
Q2
**
2007 2008 2009 2010* 2011
Other Investment Portfolio Investment
Direct Investment Financial Account
Financial Account (Total)Billion USD
Financial Account: Total
21
The residents’ investment abroad (the financial account - assets) posted a lower net outflows in Q2/2010 (US$1.0 billion), compared to a
substantial net outflows of US$3.3 billion in Q1/2010. This was primarily explained by higher withdrawal of resident deposits in overseas banks in
order to fulfill the foreign currency liquidity needs in domestic market.
Financial Account: Assets
Source: Bank Indonesia
Balance of Payments Q2/2011: Capital & Financial Account
-8
-6
-4
-2
0
2
4Q
1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1*
Q2**
2007 2008 2009 2010* 2011
Other Investment Portfolio Investment
Direct Investment (abroad) Financial Account
Financial Account (Assets)Billion USD
Financial Account: Assets
22
Financial Account Liabilities: Foreign Direct Investment (FDI)
Inflows of foreign direct investment (FDI) expanded further to prop up a US$5.2 billion net flows of FDI in Q2/2011. A relatively strong
investment growth was supported by a more conducive investment climate and favorable macroeconomic conditions contributes significantly
to this robust performance.
Source: Bank Indonesia
Balance of Payments Q2/2011: Capital & Financial Account
-8
-5
-3
0
3
5
8
10
13Q
1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
**
2007 2008 2009 2010* 2011
Foreign Direct Investment (FDI)
Inflow (Equity & Loan Disb)
Outflow (Equity & Debt Repayment)
Total
Billion USD
Foreign Direct Investment (FDI)
23
Financial Account Liabilities: Foreign Portfolio Investment
Foreign portfolio investment recorded a US$6.3 billion surplus in Q2/2011, higher than US$4.1 billion surplus in the preceding period. The
massive inflows were mainly charted in domestic stocks and government bonds, driven by sustained excess liquidity on global financial markets
and continuing attractive returns on investments in Indonesia.
Source: Bank Indonesia
Balance of Payments Q2/2011: Capital & Financial Account
-6
-4
-2
0
2
4
6
8Q
1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
**
2007 2008 2009 2010* 2011
Foreign Portfolio Investment
Public Sector Private Sector Liabilities, Total
Billion USD
Financial Account Liabilities: Foreign Portfolio Investment
24
Financial Account: Foreign Other Investment
Foreign other investment booked a US$2.0 billion surplus, rose from a US$0.8 billion surplus in Q1/2010. This upturn was mainly caused
by larger withdrawal of corporates’ foreign debts to support their business activities and mounting foreign deposits in domestic banks.
Meanwhile, the government debts showed a net outflows due to the seasonal factors of debt repayments.
Source: Bank Indonesia
Balance of Payments Q2/2011: Capital & Financial Account
-3-2-1123456
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
**
2007 2008 2009 2010* 2011
Foreign Other Investment
Public Sector Private Sector Total
Billion USD
Foreign Other Investment
The CPI inflation in July 2011 recorded at 0.67% (mtm) or 4.61% (yoy), which is relatively in line with its seasonal pattern. Core inflation
reached 0.42% (mtm) or 4.55% (yoy) driven by the increase in global commodity prices and the increase in domestic demand. Looking
forward, the increasing inflation is forecasted to grow from household consumption during Ramadhan and Eid holidays. However,
Government policies on securing supply of foods is predicted to mitigate volatility of the prices hence inflation will be under control.
Risk of further pressure is emanating from seasonal factor
Inflation – by component
25 Source: Bank Indonesia
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
Jan
Feb
Mar
Ap
r
May Jun
Jul
Au
g
Sep
Oct
No
v
De
c
Jan
Feb
Mar
Ap
r
May Jun
Juli
Au
g
Sep
Oct
No
v
De
c
Jan
Feb
Mar
Ap
r
May Jun
July
2009 2010 2011
%
CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)
Monetary Policy Stance
BI Rate
In the latest Board of Governors’ Meeting convened on August 9, 2011, BI rate decided to be held at 6.75%.
Bank Indonesia is confident that the impact of the recent turmoil in the global financial markets due to the downgrade of US
credit rating to the domestic financial market is limited, and can be contained with continuous monitoring of market development
and coordination with the Government. Bank Indonesia is strongly confident that the implementation of monetary and macroprudential policy mix can secure macroeconomic stability and keep inflation within the targets, that is, 5% +1% in 2011
and 4.5% +1% in 2012.
Source: Bank Indonesia.26
8.25%
6.75%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Sep-08 Apr-09 Nov-09 Jun-10 Jan-11 Aug-11
Sound Financial Sector
Stability in the banking system remains firm alongside steady improvement in credit growth
• On the financial sector, Financial System Stability had been maintained as indicated by the Financial Stability Index which were
well below the threshold of 2 (1.61 on July 2011).
• Within the system, banking industry remains strong and prudently managed with improved intermediary function. This was reflected
in the relatively high level of Capital Adequacy Ratio (CAR) of 17% and subdued Non-Performing Loans (NPL) at below 5% (2.7%)
as of June 2011.
27
Sufficient CAR (%) Sound level of NPLs (%)
Source: Bank Indonesia
19.3 19.1 19.2
17.8
17.4
16.5 16.2
16.4 16.4 16.3
17 17
18
17.617.8
17.4
17
14.5
15.0
15.5
16.0
16.5
17.0
17.5
18.0
18.5
19.0
19.5
20.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Feb-10 Apr-10 Jun-10 Agust-10 Okt-10 Des-10 Feb-11 Apr-11 Jun-11
gross NPL
net NPL
• Further improvement in banking intermediation is also reflected in progressively improving credit growth, recorded in
June 2011 at 23.6% (yoy) on the strength of expansion in all lending categories including credit to SMEs.
• Bank Indonesia will keep monitoring banking sector condition and improve sector efficiency so that the
intermediation function can be optimized.
Banking Intermediation
Steady loan growth
Source: Bank Indonesia
28
674 665 677 676 677 683 703 632 633 684 694 726 759 758 813 818 819 853 880 855 857 870 882 906 940
269 274 280 278 281 286 297289 301
296 307 305336 339
325 327 332 330 348 342 357 357 365 376388391 398 408 411 418 427 436
483 493 475 484 499489 500
501 513 523 523537 548 558 568 577
588603
Working Capital loans Investment Loans Consumption Loans
Banking System Stability remains sound with stable CAR, continuous credit expansion and low NPL
(data as of June 2011)
Main Banking Indicators
Source: Bank Indonesia
29
Indicators Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11
Total Asset (T Rp) 2.563,7 2576,3 2.604,4 2.678,3 2.683,5 2.700,2 2.758,1 2.796,4 2.856,3 3.008,9 2.990,7 2.993,1 3.065,8 3.069,1 3.136,4 3.195,1
Deposits (T Rp) 1.982,2 1.980,5 2.013,2 2.096,0 2.082,6 2.092,8 2.144,1 2.173,9 2.212,2 2.338,8 2.302,1 2.287,8 2.351,4 2.340,2 2.397,2 2.438,0
- Demand Deposits 471,1 462,1 473,7 522,2 506,9 496,4 504,2 497,8 511,9 535,9 530,6 529,8 540,8 528,3 561,2 577,0
- Savings Accounts 576,2 580,5 588,8 610,8 619,5 633,2 653,6 659,7 674,3 733,2 715,8 713,2 722,7 734,5 740,8 753,7
- Time Deposit 934,9 937,8 950,7 963,1 956,2 963,2 986,2 1.016,4 1.026,0 1.069,8 1.055,6 1.044,9 1.087,8 1.077,4 1.095,2 1.107,3
Earning Assets (T Rp) 2.416,4 2419,4 2.452,4 2.528,5 2.531,6 2.547,1 2.591,3 2.647,9 2.643,1 2.778,9 2.746,8 2.749,8 2.813,3 2.799,6 2.859,7 2.912,9
- Loans (T Rp) 1.485,9 1.516,0 1.561,2 1.615,8 1.627,4 1.670,6 1.689,1 1.705,8 1.736,1 1.796,0 1.776,1 1.803,9 1.844,2 1.872,6 1.918,6 1.979,6
- Bank Indonesia Certificates (T Rp) 221,5 255,4 253,6 224,3 190,5 208,7 176,3 147,3 142,6 139,3 143,5 121,3 139,8 133,6 111,4 115,3
- Overnight Placements at BI (T Rp) 82,5 43,2 47,0 97,0 119,2 66,0 132,2 218,1 178,4 277,8 269,9 257,4 262,5 245,5 284,1 282,6
- Securities 350,6 331,7 333,3 327,1 325,7 325,1 326,4 320,7 342,9 324,9 323,1 326,5 337,9 331,8 339,5 334,5
- Inter-bank Placements 264,9 262,7 246,6 252,9 258,3 265,8 256,2 244,7 231,8 228,5 221,6 227,9 216,0 203,9 193,7 188,3
- Equity Investments 11,0 10,4 10,6 11,4 10,5 10,9 11,1 11,3 11,3 12,4 12,6 12,8 12,9 12,2 12,4 12,6
Net Interest Income (Cummulated) 36,1 48,2 60,3 73,1 85,4 98,1 110,6 123,5 136,6 1.765,8 1.746,0 1.773,9 1.814,8 1.843,5 1.889,5 1.950,7
Capital Adequacy Ratio (%) 19,1 19,2 17.8* 17,4 16,5 16,2 16,4 16,4 16,3 17,0 17,0 18,0 17,6 17,8 17,4 17,0
Loans/Earning Assets (%) 61,5 62,7 63,7 63,9 64,3 65,6 65,2 64,4 65,7 64,6 64,7 65,6 65,6 66,9 67,1 68,0
Gross Non Performing Loans (%) 3,8 3,5 3,6 3,3 3,4 3,4 3,0 3,6 3,4 2,9 3,1 3,1 3,2 3,2 3,2 3,0
Net Non Performing Loans (%) 1,0 0,9 1,0 0,8 0,9 0,7 0,7 0,9 1,0 0,7 0,9 0,9 0,9 0,9 1,1 0,9
Return on Assets (%) 3,0 2,9 2,9 2,9 2,9 2,8 2,8 2,9 2,8 2,7 3,0 2,8 3,1 3,0 3,0 3,1
Net Interest Margin (%) 5,0 5,0 5,0 5,0 0,5 0,5 0,5 0,5 0,5 0,5 0,5 0,5 0,6 0,5 0,5 0,5
Ops. Expense/Ops. Income (%) 83,6 84,8 84,3 84,8 78,7 78,7 78,9 79,8 79,4 80,0 83,5 80,5 77,8 78,5 78,2 80,0
Loan to Deposit Ratio (%) 75,0 76,5 77,5 77,1 78,1 79,8 78,8 78,5 78,5 76,8 77,2 78,8 78,4 80,0 80,0 81,2
No. of Banks 121 121 121 121 122 122 122 122 122 122 121 121 121 121 121 121
No. of Bank Office Network 13.067 13.078 13.092 13.106 13.381 13.453 13.514 13.591 13.767 13.971 14.103 14.126 14.202 14.273 14.392 14.454
Prudent Fiscal Management
Fiscal policy overview
Continue tax administration reform agenda
Explore tax potential through intensification (widening tax base) and intensification
Increase the quality of tax inspection and investigation
Strengthen custom and excise supervision
Provide tax incentive and custom facilities
Taxation
Government
Expenditure
Subsidy
Budget
Financing
2011 State budget
Provide non-energy subsidies (food, fertilizer, seeds, credit interest program)
Rely on domestic bond market to finance deficit
Widening domestic and international investors base through financing instrument diversification
Gradually eliminate external debt
Utilize domestic financing sources (Investment Fund Account and assets management)
Provide infrastructure financing, e.g. government investment, guarantee, and liquidity facilities
Boost infrastructure development (roads, bridges, ports, electricity, disaster rehabilitation)
Social security programs, such as health program (Jamkesmas), education (BOS), and society empowerment
program (PNPM) to protect the poor household
Remuneration in order to continue bureaucracy reform agenda
Continued LPG conversion program
Better targeted electricity subsidy
Utilizing alternative energy
Control subsidized fuel usage through close distribution system
Provide subsidy for bio fuel
Source: Ministry of Finance31
Summary of 2011 Revised Budget(IDR Trillion)
Source: Ministry of Finance32
Deficit in Revised Budget 2011 is estimated to increase to 2,1% from 1,8% in Original Budget 2011, whereas increase in government spending is higher than additional revenue and grant. To cover the gap, the Government will use cash surplus balance...
A. PENDAPATAN NEGARA DAN HIBAH 949,7 992,4 995,3 1.104,9 1.169,9 65,0 5,9
I. PENERIMAAN DALAM NEGERI 948,1 990,5 992,2 1.101,2 1.165,3 64,1 5,8
1. PENERIMAAN PERPAJAKAN 742,7 743,3 723,3 850,3 878,7 28,4 3,3
2. PENERIMAAN NEGARA BUKAN PAJAK 205,4 247,2 268,9 250,9 286,6 35,7 14,2
II. PENERIMAAN HIBAH 1,5 1,9 3,0 3,7 4,7 0,9 24,7
B. BELANJA NEGARA 1.047,7 1.126,1 1.042,1 1.229,6 1.320,8 91,2 7,4
I BELANJA PEMERINTAH PUSAT 725,2 781,5 697,4 836,6 908,2 71,7 8,6
A. Belanja K/L 340,1 366,1 332,9 432,8 461,5 28,8 6,6
B. Belanja Non K/L 385,1 415,4 364,5 403,8 446,7 42,9 10,6
II. TRANSFER KE DAERAH 322,4 344,6 344,7 393,0 412,5 19,5 5,0
C. KESEIMBANGAN PRIMER 17,6 (28,1) 41,5 (9,4) (44,3) (34,8) 368,4
D. SURPLUS/ (DEFISIT) ANGGARAN (A - B) (98,0) (133,7) (46,8) (124,7) (150,8) (26,2) 21,0
% Defisit Terhadap PDB (1,6) (2,1) (0,7) (1,8) (2,1) (0,3) 17,5
E. PEMBIAYAAN (I + II) 98,0 133,7 91,6 124,7 150,8 26,2 21,0
I. PEMBIAYAAN DALAM NEGERI 107,9 133,9 96,1 125,3 153,6 28,3 22,6
II. PEMBIAYAAN LUAR NEGERI (neto) (9,9) (0,2) (4,6) (0,6) (2,8) (2,2) 355,6
APBN
2010
ITEMAPBN-P Realisasi APBN
2011
Nominal persen
Selisih thd APBN
APBN-P
A. STATE REVENUES & GRANTS
B. STATE EXPENDITURES
C. PRIMARY BALANCE
E. FINANCING (I+II)
D. SURPLUS/ (DEFICIT) (A-B)
I. DOMESTIC REVENUES
II. GRANTS
II. TRANSFER to REGIONS
I. CENTRAL GOVERNMENT EXPENDITURES
I. DOMESTIC FINANCING
II. FOREIGN FINANCING
B. Non Line Ministries/Agencies
A. Line Ministries/ Agencies
1. TAX REVENUES
2. NON TAX REVENUES
% deficit of GDP
Original Budget
Original Budget
Revised Budget
Revised Budget
Realisation
diferrence
Percent
Deficit in the Revised Budget 2011 is estimated to increase to 2.1% from 1.8% in the Original Budget. An increase
of government spending is higher than additional revenue and grant on the revised budget. To cover the gap, the
Government will use cash surplus balance.
2011 Revised Budget Macroeconomic Assumption
The changes for macroeconomic assumption in the revised budget 2011 is in the following table.
Macroeconomic
Assumption
2010 2011
Revised
BudgetRealization State Budget Revised Budget
Growth (%) 5.8 6.1 6.4 6.5
Inflation (%) 5.3 6.95 5.3 5.65
SBI 3 month or SPN 3 month for 2011
revised budget (%) 6.5 6.57 6.5 5.6
Exchange Rate (RP/US$) 9,200 9,087 9,250 8,700
ICP (US$/bbl) 80 79.4 80 95
Lifting (MCBD) 0.965 0.954 0.970 0.945
Source: Ministry of Finance
Macro Assumption 2010-2011
33
Improved Government Debt Position
Debt Securities Strategy 2011
Prioritizing issuance of government securities in domestic market
Supporting money market and capital market development to strengthen financial system
Promoting the creation of investment-oriented society
Supporting efficient monetary management
Foreign currency government securities issuance is complementary to domestic currency government securities
issuance
Diversification of financing instruments to widen the market
Maintaining the presence of government financial instruments in global market
Avoiding crowding out in domestic market
Government securities issuance is taking into account the support to the implementation of Asset Liability Management with
Bank of Indonesia
Continuing development of government securities program to enhance the depth and liquidity in secondary market
Source: Ministry of Finance35
Debt To GDP
Source: Ministry of Finance
Notes:* = Preliminary, GDP number based on Revised Budget 2011 Assumption
[Outstanding as of June, 2011]
Debt to GDP Ratio Debt Composition
Table of Debt to GDP Ratio
Notes:
Based on debt outstanding as of June 2011
* = Preliminary , GDP Number Based on Revised Budget 2011 Assumption
57%
47%
39%
35%33%
28%26% 25%
2004 2005 2006 2007 2008 2009 2010 2011++
50% 50% 53% 53%48%
53% 54% 56%
50% 50% 47% 47%52%
47% 46% 44%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007 2008 2009 2010 2011++
Domestic Debt External Debt
2004 2005 2006 2007 2008 2009 2010 2011++
GDP 2.295.826,20 2.774.281,00 3.339.480,00 3.949.321,40 4.954.028,90 5.613.441,74 6.422.918,20 6.888.149,80
Debt Outstanding (billion IDR) 1.299.504,02 1.313.294,73 1.302.158,97 1.389.415,00 1.636.740,72 1.590.656,07 1.676.851,19 1.723.896,74
- Domestic Debt (Securities) 653.032,15 658.670,86 693.117,95 737.125,54 783.855,10 836.308,91 902.429,79 958.396,82
- Foreign Debt (Loan+Securities) 646.471,87 654.623,87 609.041,02 652.289,46 852.885,62 754.347,16 774.421,40 765.499,92
Debt to GDP Ratio 56,60% 47,34% 39% 35% 33% 28% 26% 25%
- Domestic Debt to GDP Ratio 28,44% 23,74% 21% 19% 16% 15% 14% 14%
- Foreign Debt to GDP Ratio 28,16% 23,60% 18% 17% 17% 13% 12% 11%
End of Year
61 59 64 69 69 63 62 62 67 65 68 69
6864
7377 71
7182 85 83
104118
132
-
50
100
150
200
250
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011++
Loan Government Securities
Outstanding of Total Central Government Debt
Source: Ministry of Finance
+ Preliminary numbers, as of June, 2011
[in percentage]
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011++
Loan 47% 48% 47% 47% 49% 47% 43% 42% 45% 38% 37% 34%
Government Securities 53% 52% 53% 53% 51% 53% 57% 58% 55% 62% 63% 66%
Total Central Government Debt 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
11.4
7.9
1.4 1.7 2.3
6.6 7.7
12.2
15.7
(2)
3
8
13
18
Peru BBB- Indonesia BB Uruguay BB Colombia BB+ Vietnam BB- Philippines BB Romania BB+ Turkey BB India BBB-
Domestic (% GDP) Foreign (% GDP)
Balanced and contained borrowing needs
Debt maturity profile
2011 Gross borrowing requirements (% GDP)1
Source: Individual Fitch Reports; Ministry of Finance; *Indonesia IMF GDP1 Calculations include debt servicing
Debt profile shows smooth external repayment profile and a balance between domestic and external debt
Source: Ministry of Finance and Bank Indonesia38
-
20
40
60
80
100
120
140
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040-2055
External Loan Securities
[Trillion IDR]
Notes:
• Preliminary, as of June, 2011
• Excluding amortization of Non Tradable Securities (SUN-002, SU-004, and SU-007)
Promissoryto BI
Robust domestic bond market
More diversified government bond holders (IDR trillion) Foreign ownership on longer term securities is dominant
39
The domestic bond market plays an increasing role in financing the budget
287,56 300,17276,65 283,50 281,76
254,36217,27 220,72
101,00 68,58 87,18
116,09 156,33 219,39
228,19 230,59
10,74
31,09 54,92
78,16
87,61
108,00 195,76
248,87
-
100,00
200,00
300,00
400,00
500,00
600,00
700,00
800,00
Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 29-Jul-11
Foreign Holders Domestic Non-Banks Domestic Banks
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 29-Jul-11
Total 194.971 200.405 211.574 221.424 225.319 234.992 248.869
>5 132.550 135.846 140.767 145.158 143.260 148.742 159.348
>2-5 33.855 34.633 33.823 35.065 42.134 40.422 42.309
>1-2 7.736 8.858 12.039 12.454 13.227 17.510 16.747
0-1 20.829 21.069 24.945 28.746 26.698 28.318 30.465
0
50.000
100.000
150.000
200.000
250.000
300.000
[Rp miliar]
IDR Billion
Source: Ministry of Finance
Declining local borrowing rates
IDR Government Bonds : Yield Curve (IDMA)
40
3.00
5.00
7.00
9.00
11.00
13.00
15.00
17.00
19.00
21.00
1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y 30Y
10 Aug '11 3 Aug '11
7 May '10 27 Oct '08
13 Sep '05
[in percentage]
Tenor 10-Aug-11 3-Aug-11 7-May-10 27-Oct-08 13-Sep-05
1Y 4.49 4.25 6.64 19.37
2Y 4.87 5.25 7.10 17.35 14.59
3Y 5.72 5.57 7.45 19.93
4Y 6.16 6.10 8.03 17.17 14.14
5Y 6.24 6.24 8.77 17.46 14.96
6Y 6.54 6.45 8.93 17.05 15.24
7Y 6.80 6.70 9.03 17.06 16.17
10Y 6.89 6.88 9.29 20.91 15.75
15Y 7.82 7.61 9.89 16.65 14.12
20Y 8.16 8.00 10.46 20.27
30Y 8.58 8.41 10.55 20.37
Sources: IDMA, Bloomberg
Bond stabilization framework
Accumulated cash surplus
Funds managed by
Government Investment Unit
Second line of defense
As set in the memorandum of understanding between MoF and Ministry
of SoE, under coordinative framework, SoEs will use their balances to
buy Government bonds
Parliamentary approval is needed prior to the usage of the funds
Government Investment Unit will use its fund to buy Government bonds
in the secondary market for its portfolio
Participating SOEs, ie banks,
insurance company & other
financial institution
Government
cash balance
Balance sheet
SOE
Idle cash Government has the capacity to support the secondary market whenever
needed
First line of defense
The DMO stands ready to support the domestic bond market as required in the event of substantial capital
outflows
41