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REPUBLIC OF INDONESIA

Recent Economic Developments

February, 2011

Published by Investors Relations Unit – Republic of Indonesia

Address Bank IndonesiaInternational Directorate Investor Relations UnitSjafruddin Prawiranegara Building, 5th floorJalan M.H. Thamrin 2Jakarta, 10110 Indonesia

Tel +6221 381 8316+6221 381 8319+6221 381 8298

Facsimile +6221 350 1950E-mail Elsya Chani: [email protected]

Bimo Epyanto: [email protected] Darwis: [email protected]

Website www.bi.go.id

Table of Content

Executive Summary 4

Preserved Macroeconomic Stability to Support Further Growth 10

Balance of Payments: Q4 2010 19

Prudent Fiscal Management 27

Improved Government Debt Position 33

Executive Summary

GDP Growth Inflation

Macroeconomic Overview

5.7%5.5%

6.3%6.0%

4.6%

6.1%

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

-5.00

0.00

5.00

10.00

15.00

20.00

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Juli

Au

g

Se

p

Oct

No

v

De

c

Jan

2009 2010 2011

%

CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)

5

Balance of Payments Foreign Exchange Reserves

2005 2006 2008 2008 2009 2010* -10.00

2009 2010 2011

-

20

40

60

80

100

Billion USD

� The economy continues to chart strong growth which recorded at 6.1%, much higher than previous year (4.55) for the whole 2010.

� On the price level, CPI inflation reached the level of 7.02% (yoy) for January 2010. mainly due to further steep increases in volatile food prices, and in addition to the escalating prices for globally-traded commodities.

� External vulnerabilities continue to decline as Indonesia builds-up comfortable buffers on the back of continuing surge of capital inflows. BoP figrues released earlier this week shows that for the whole 2010, the overall balance of payments surplus reached US$30.3 billion , increased considerably from the surplus in the preceeding year. The capital & financial account posted a surplus of US$26,2 billion, more than five fold of surplus in the previous year, whereas current account recorded a smaller surplus.

� Supported by continued positive international perception, improved business environment, macroeconomic stability and higher credit ratings, FDI is expected to continue accelerating. Cumulatively, for 2010 the total investment realization figure was recorded at Rp208.5 trillion, a 54.2% increase compared to the 2009 figure and exceeded by 30.2% of 2010 original target at Rp160.1 trillion.

� On the fiscal front, Indonesia continue to perform a prudent fiscal management in 2011, with strong commitment to fiscal

Executive Summary

6

� 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,

• reducing funding reliance on international capital market.

� On the financial sector, Financial System Stability had been maintained as indicated by the Financial Stability Index which were well below the treshold of 2 (1.74 on end of 2010).

� Against this backdrop and as an anticipatory measure to curb the renewed onset of increased inflation expectations, the Central Bank at its February Board of Governors Meeting in 2011, decided to increase the BI Rate by 25 basis points (bps) or 0.25% to 6.75%. The rising inflation expectations call for an appropriate response to avert future inflationary pressures, and with the implementation of monetary and macro prudential policy mix and Government actions to bring down high food commodity prices, inflation is believed can be curbed in line with the target of 5% ±1% for 2011 for 2011 and 4.5% ±1% for 2012.

Improving International Perception: Acknowledged by Rating Agencies

Resilient economy, which impressively navigates thr ough the global crisis and continued confidence in economic outlook, the Republic continued to receive good reviews which al ready upgraded by Moody’s in the beginning of 2011

� Moody’s Investors Service (January 17, 2010): upgra ded Republic of Indonesia’s foreign and local-curre ncy 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): up graded Indonesia's sovereign rating to Investment G rade 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 bythe current administration to outline the framework to deal with structural issues such as infrastructure development.the current administration to outline the framework to deal with structural issues such as infrastructure development.

� S & P (March 12, 2010): upgraded Indonesia’s long-term forei gn currency rating to BB from BB- with positive outlook whichindicates that Indonesia has big possibility to be upgraded within a year, even maybe faster. The main factor supporting this decision issteadily improving debt metrics and growing foreign currency reserves which reduced vulnerability to shock with continued cautious fiscalmanagement.

� Fitch Ratings (January 25, 2010): upgraded the Republic of I ndonesia’s sovereign rating to ‘BB+’ from ‘BB’ with stable o utlookThe rating action reflects Indonesia’s relative resilience to the severe global financial stress test of 2008-2009 which has beenunderpinned by continued improvements in the country’s public finances.

7

Sovereign Rating History

6

7

8

9

10

11

6

7

8

9

10

11

6

7

8

9

10

11

BBB

BBB-

BB+

BB

A-

BBB+

Baa2

Baa3

Ba1

Ba2

A3

Baa1

Ra

ting

Histo

ry o

f Ind

on

esia

19

94

(Mo

od

y's)

Ra

tin

g H

isto

ry o

f In

do

ne

sia

19

92

-20

10

(S&

P a

nd

Fit

ch)

Diminished likelihood that the Government

will seek additional debt rescheduling

Sound record of fiscal

management

Fitch’s Rating Upgrade on

February 2008

S&P upgraded from BB- with

a Stable Outlook to BB with a

Positive Outlook in March

2010

Fitch’s Rating

Upgrade on Jan-10

0

1

2

3

4

5

Jan-

92

Oct

-94

Aug

-97

May

-00

Mar

-03

Dec

-05

Oct

-08

0

1

2

3

4

5

Jan-

92

Apr

-94

Jul-9

6

Sep

-98

Dec

-00

Mar

-03

Jun-

05

Sep

-07

Dec

-09

0

1

2

3

4

5

Jan-

92

Dec

-92

Dec

-93

Dec

-94

Dec

-95

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

BB-

B+

B

B-

CCC+

CCC

Ba3

B1

B2

B3

Caa1

Caa2

Ra

ting

Histo

ry o

f Ind

on

esia

19

94

-20

10

(Mo

od

y's)

Ra

tin

g H

isto

ry o

f In

do

ne

sia

19

92

(S&

P a

nd

Fit

ch)

S&P Moody's Fitch

Economic crisis in Asia

Moody’s upgrade to Ba1

in January 17, 2011

Moody’s upgraded in Jun-

10 with a Positive Outlook,

after a one-notch upgrade

in September 2009

Improving International Perception: Significant Raise in Perception Indices

� World Economic Forum – The Global Competitiveness Re port 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 competitiv eness, with Indonesia moving up from 42 nd to 35 nd place among a total of 57 major nations surveyed wo rldwide. For Indonesia, the improvement in 2010 has been achieved through significant gains in economic performance, followed by government efficiency and infrastructure improvement.

Conducive business climate improvement to support o ptimism in FDI inflows

� OECD (April 2, 2010) : upgraded Indonesia’s Credit Risk Classification (CRC ) from category 5 to 4 . This upgrade was a timely acknowledgement by the developed economies of the consistent economic improvement. This upgrade 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.

� Currently, Indonesia is already part of the “Enhance d Engagement” programme of the OECD alongside other BRICs, with a view to possible membership

9

Preserved Macroeconomic Stability

Robust and Stable Economy Continues to Chart Strong Growth

� During 2010 , the economy grew robustly which charted 6.9% level of growth in Q4-2010 , improved significantly compared to the previous quarter. The positive development was mainly due to significant increase in exports (16.1%) and higher realization of import growth which reached 16.9%, in line with the global economic recovery.

� Not only in Q4-2010, export growth also a major

Overall , the economy remains robust and charted higher than predicted growth rate in 2010, supported by a more balanced structure% yoy

Economic Growth

5.7%5.5%

6.3%

6.0%

4.6%

6.1%

0.04

0.05

0.06

0.07

contributor to overall economic growth in 2010. Supported also by high growth of investment, both were contributed to the economy in accomplishing 6.1% growth for the whole 2010, from 4.6% in the previous year.

Source: Bank Indonesia.11

0

0.01

0.02

0.03

2005 2006 2008 2008 2009 2010*

Robust and Stable Economy Continues to Chart Strong Growth

* % yoy

� The economic growth is expected to further accelerate in 2011-2012, estimated to reach the level of 6.3% supported by strong domestic demand along with high consumption growth and high investment as a result of continued promising business prospect.

� Latest market perception survey shown higher consumer confidence index ; to support us to maintain our growth forecast at 6.0-6.5% for 2011, and to further accelerated to 6.1%-6.6% growth rate in 2012.

Economic Growth: Forecast

Component 2008 20092010

2010 2011* 2012*Q1 Q2 Q3 Q4

Gross Domestic Product (GDP) 6,0 4.5 5.7 6.2 5,8 6,9 6,1 6,0 - 6.5 6,1 - 6,6By Expenditures

Private Consumption 5,3 4.9 3.9 5 5.2 4,4 4,6 4,8 - 5,3 4,9 - 5,4Government Consumption 10,4 15.7 (-8,8) (-8,9) 3,0 7,3 0,3 10,3 - 10,8 1,5 - 2,0Gross Fixed Capital Formation 11,9 3,3 7,8 7,8 8.9 8,7 8,5 10,4 - 10,9 12,1 - 12,6

* Bank Indonesia Projection


Economic Growth: Forecast

Sector 20092010

2010* 2011* 2012*Q1 Q2 Q3 Q4

GDP 4.5 5.7 6.2 5.8 6.9 6.1 6.0 - 6.5 6.1 - 6.6Supply Side

Agriculture 4.1 3.0 3.1 1.8 3.8 2.9 2.7 - 3.2 3.1 - 3.6Mining and Quarrying 4.4 3.1 4 2.8 4.2 3.5 3.2 - 3.7 3.4 - 3.9Manufacturing Industry 2.1 3.7 4.4 4.1 5.3 4.5 4.0 - 4.5 4.1 - 4.6Electricity, Gas, and Water Supply 13.8 8.2 4.7 3.2 4.3 5.3 6.4 - 6.9 7.4 - 7.9Construction 7.1 7.1 6.9 6.4 6.7 7.0 7.5 - 8.0 7.8 - 8.3Trade, Hotel, and Restaurant 1.1 9.4 9.7 8.8 8.4 8.7 9.2 - 9.7 9.2 - 9.7Transport and Communication 15.5 11.9 12.9 13.3 15.5 13.5 12.1 - 12.6 10.8 - 11.3Financial, Ownership, and Business 5 5.3 6 6.3 6.3 5.7 6.1 - 6.6 6.1 - 6.6

Services 6.4 4.6 5.3 6.4 7.5 6.0 5.9 - 6.4 6.0 - 6.5

Gross Fixed Capital Formation 11,9 3,3 7,8 7,8 8.9 8,7 8,5 10,4 - 10,9 12,1 - 12,6Export of Goods and Services 9,5 -9.7 20 14.6 11.3 16,1 14,9 7,1 - 7,6 7,9 - 8,4Import of Goods and Services 15,0 -15 22.6 17.7 11 16,9 17,3 9,3 - 9,8 9,4 - 9,9

� CPI inflation in January 2011 reached 0.89% (mtm) o r 7.02% (yoy), mainly due to high volatile foods in flation running at 18.25% (yoy) as a result of further crop losses and disruptions in distribution of rice and seasonings. However, administered prices charted moderate inflation at 5.21% (yoy), while core inflation is relatively subdued at a mild 4.18% (yoy).

� Inflation expectations have begun to climb up triggered by the steep increases in volatile food prices, and also rising global commodity prices and the Government plan to reduce the fuel subsidy.

Inflation: lead by volatile food price increase

Inflation – by component

15.00

20.00

%

CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)

Source: Bank Indonesia13

-10.00

-5.00

0.00

5.00

10.00

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Juli

Au

g

Se

p

Oct

No

v

De

c

Jan

2009 2010 2011

Monetary Policy Stance

BI Rate

� In the latest Board of Governor’s Meeting (4 Februa ry 2011), Bank Indonesia decided to increase the BI rate by 25 bps to 6.75%. The decision represents an anticipatory measure to curb the renewed onset of increased inflation expectations, triggered primarily by further steep increases in volatile food prices, in addition to the escalating prices for globally-traded commodities, including oil, and Government policy planning for strategic commodities.

� With the implementation of monetary and macro prudential policy mix and Government actions to bring down high food commodity prices, the Board of Governors is confident that inflation can be curbed in line with the target of 5% ±1% for 2011 for 2011 and 4.5% ±1% for 2012.

11.75%12%

14%


Feb-11

11.75%

8.75%

6.50%

6.75%

0%

2%

4%

6%

8%

10%

12%

Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10

Balance of Payments Q4-2010

Balance of Payments

� Balance of payment in Q4/2010 posted a surplus of U S$11.3 billion, larger than a surplus of US$7.0 bil lion in the preceding quarter , contributed by surpluses in both the current account, related to buoyant export performance, and the capital & financial account, with a significant increases in the direct investment and government foreign borrowing.

� Consequently, international reserves at end-Q4/2010 mounted to US$96.2 billion, equivalent to 7.0 months of imports and official external debt service payments.

� For the whole 2010, Indonesia’s balance of payments achieved a considerable surplus of US$30.3 billion , up from the precedingyear surplus of US$ 12.5 billion, supported mainly by a surplus in the capital and financial account.

1515

Sound Financial Sector

Stability in the banking system remains firm alongs ide 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 (1.74 on January 2010).

• 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% (2.6%) as of end of December 2010.

Sufficient CAR (%) Sound level of NPLs (%)


-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Dec-06 Dec-08 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10

gross NPL

net NPL20.5

19.3

16.2 17.4

19.3 19.1 19.2 17.8 17.4

16.5 16.2 16.4 16.4 16.317

-

5.0

10.0

15.0

20.0

25.0

Dec-06 Dec-08 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10

• Further improvement in banking intermediation is also reflected in progressively improving credit growth, recorded in 2010 at 22.8% (yoy) on the strength of expansion in all lending categories including credit to MSMEs.

• Credit expansions in 2010 are predominantly used for productive purposes (working capital loans).

Credit Growth Achievement

297.8

307.96

211.5

336.82

-100

-50

0

50

100

150

200

250

300

350

400

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

2007 2008

2009 2010

Rp Triliun

Banking Intermediation

(0.4)

(2.2)

(0.1)

1.1

0.2

2.2

1.5

(0.9)

1.1

14.1

16.8

11.7

1.2

1.14

10.3

12.1

31.3

10.2

5.7

137.2

-35 -20 -5 10 25 40 55 70 85 100 115 130 145

Trade

Manufacturing

Transport

Construction

Agriculture

Business Services

Social Services

Mining

Electricity

Others

YTD

mtm

Growth (Rp T)

-50% 0% 50% 100%

Trade

ManufacturingTransport

Construction

Agriculture

Business ServicesSocial Services

Mining

Electricity

OthersGrowth (%)

YTD mtm

4.8

115.2

142.1

1.9

29.7

49.2

12.0

76.2

101.7

0.6%

16.4%

21.0%

0.6%

10.0%

17.6%

2.4%

17.4%

24.7%

-10%

0%

10%

20%

30%

40%

-40

0

40

80

120

160

mtm ytd yoy mtm ytd yoy

working capital investment consumption

loan growth (Rp T) loan growth (%)

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

Credit Growth - by purposesCredit Growth - by sector

Banking System Stability remains sound with stable CAR, con tinuous credit expansion and low NPL(data as of December 2010)

Main Banking Indicators

Source: Bank Indonesia18

Balance of Payments for Q4-2010

Balance of Payments Q4 and total 2010

The current account in Q4/2010 registered a US$1.2 billion s urplus , determined primarily by an upbeat performance in the non-

oil/gas trade balance, gas trade balance, and the current transfers. The surplus, however, inched down from the previous quarter

surplus (US$1.4 billion) as a result of increased in freight services related to imports activities and income payments associated to

strong capital inflows.

Meanwhile, the capital and financial account in rep orting period recorded a surplus of US$9.9 billion , a jump from the

preceding quarter surplus (US$6.7 billion). This elevated surplus was explained by higher FDI inflows contributed by the more

conducive investment climate and stable macroeconomic conditions and larger net inflows of other investment mainly in the form of

government withdrawal. Portfolio investment inflows, however, were much lesser than that in the previous period due to foreign

investor cautiousness in responding to the possible ramification of Irish debt crisis.

For the whole 2010, the overall balance of payments surplus reached US$30.3 billion , increased considerably from the surplus

20

in the preceeding year. The capital & financial account posted a surplus of US$26,2 billion, more than five fold of surplus in the

previous year, whereas current account recorded a smaller surplus.

Major contributors to such a large financial account surplus were substantial FDI and portfolio investment inflows, despite sizeable

outflows of portfolio investment occurred in May, Nov, and Dec due to external factor (crisis in Europe).

Meanwhile, the current account surplus was lower than the previous year surplus because of higher oil trade deficit as well as the

increased payments for freight and income on foreign investment driven by rising imports and foreign capital inflows.

Source: Bank Indonesia

TOTAL TOTAL Q1 Q2 Q3 Q4 TOTAL

I. CURRENT ACCOUNT 126 10,192 2,093 1,603 1,374 1,224 6,294

A. Goods, net 22,916 30,147 7,045 6,961 7,807 9,279 31,093

1. Non Oil & Gas, net 15,130 25,541 5,777 5,852 6,677 9,132 27,437

2. Oil, net -8,362 -4,796 -1,544 -2,004 -1,856 -2,860 -8,264

3. Gas, net 16,147 9,402 2,812 3,113 2,987 3,008 11,920

B. Services, net -12,998 -9,675 -2,129 -2,307 -2,286 -2,770 -9,491

C. Income, net -15,155 -15,140 -3,993 -4,262 -5,385 -6,619 -20,258

D. Current transfers, net 5,364 4,861 1,169 1,210 1,238 1,334 4,950

ITEMS 2008 2009 2010*

milion USD

Balance of Payments 2010

21

II. CAPITAL & FINANCIAL ACCOUNT -1,832 5,002 5,013 4,661 6,669 9,874 26,218

A. CAPITAL ACCOUNT 294 96 18 0 0 14 32

B. FINANCIAL ACCOUNT -2,126 4,906 4,995 4,661 6,669 9,861 26,186

1. Direct investment 3,419 2,628 2,484 2,298 1,615 3,439 9,8361.1 Abroad -5,900 -2,249 -427 -982 -1,191 -300 -2,900

1.2 In Indonesia 4) 9,318 4,877 2,911 3,280 2,806 3,739 12,736

2. Portfolio investment 1,764 10,336 6,159 1,089 5,994 1,964 15,2052.1 Assets -1,294 -144 -409 -152 -121 190 -4922.2 Liabilities 3,059 10,480 6,569 1,241 6,114 1,773 15,697

3. Other Investment -7,309 -8,058 -3,648 1,274 -939 4,458 1,1453.1 Assets -10,755 -11,852 -4,078 1,641 -2,288 2,608 -2,1183.2 Liabilities 3,446 3,794 430 -367 1,349 1,850 3,263

III. TOTAL (I+II) -1,706 15,194 7,106 6,264 8,044 11,098 32,512

IV. NET ERRORS & OMISSIONS -238 -2,688 -485 -843 -1,089 191 -2,227

V. OVERALL BALANCE (III+IV) -1,945 12,506 6,621 5,421 6,955 11,289 30,285

* Provisional figures

Trade Balance: Non-Oil & Gas


-40,000

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

50,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Trade Balance of Non-Oil & GasMillion USD

Trade Balance: Oil & Gas

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000


Trade Balance of Oil & GasMillion USD

22

Non-oil and gas trade balance posted an increased surplus ofUS$9.1 billion in Q4-2010 (Q3-2010: US$6.7 billion surplus).

The strong world demand for resource-based export commoditiesand a hike on Indonesia’s major export commodity prices wereamong the factors that boosted the non-oil and gas trade balanceperformance.The non-oil and gas exports recorded a robust growthof 31.2% (y.o.y) in Q4-2010.

Meanwhile, non-oil and gas imports (fob) grew at 39.9%, driven bystrong domestic demand.


2007 2008 2009 2010*

Exports Imports Non Oil & Gas Trade Balance

The oil & gas trade balance surplus dropped from pr eceding

quarter as a surplus in gas trade balance was counterbalanced by

an increased deficit in oil trade balance.

The higher oil trade balance deficit resulted from combination of

rising world oil price in response to a harsh winter in Europe and the

US and declining domestic oil production. These factors lead to

decreased export volume and increased import volume. On the

contrary, the expected larger gas trade balance surplus was as a

consequence of increase in gas price in line with oil price hike.


2007 2008 2009 2010*

Oil Trade Balance Gas Trade Balance Oil & Gas Trade Balance

• The services account deficit was higher than the

deficit in Q3-2010 primarily due to an increased deficit

in transportation (freight) in line with import activity and

travel. The latter was especially related to tourist

outbound activities (hajj seasons).

• The income account deficit in Q4/2010 registered at

around $6.6 billion in correspondence with higher profit

transfers/devidend payment due to higher FDI inflows,

Services, Income, and Current Transfers


-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

Services, Incomes & Current TransfersMillion USD

23

transfers/devidend payment due to higher FDI inflows,

while interest payment declined due to a substantial

drop in domestic securities held by foreigners.

• Meanwhile, current transfers surplus slightly

increased mainly due to higher workers’ remittances

inflows.

Source: Bank Indonesia

-8,000

-7,000

-6,000

-5,000


2007 2008 2009 2010*

Services, Net Income, Net Current Transfer, Net

Financial Account: Total


-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000


Financial AccountMillion USD

Financial Account: Assets

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000


Financial Account (Assets)Million USD

24

The financial account achieved a surplus of US$9.9 billion i n Q4-

2010, a jump from the preceding quarter surplus.

This significant increase came from higher inflows of direct

investment in response to more conducive investment climate and

stable macroeconomic conditions, as well as increased inflows of

other investment in the form of government borrowing and offshore

deposit withdrawal. Those increases surpassed a substantial drop in

portfolio investment inflows, related to foreign investors’

cautiousness following the Irish debt crisis.


2007 2008 2009 2010*

Direct Investment Portfolio Investment

Other Investment Financial Account

The residents’ investment abroad (the financial account - assets)

posted a net inflows of US$2.5 billion in Q4-2010, compared to a

substantial net outflows of US$3.6 billion in Q3-2010. This is

primarily explained by mounted drawing on resident deposits in

overseas banks, especially in October and November 2010, in

response to foreign exchange liquidity need in domestic market.


2007 2008 2009 2010*

Direct Investment Portfolio Investment

Other Investment Financial Account

Financial Account Liabilities: Foreign Direct Investment (FDI)

In line with the more conducive investment climate and stable

macroeconomic conditions, a higher Foreign Direct

Investment (FDI) inflows of US$3.7 billion achieved in Q4-

2010, both in oil/gas and non-oil/gas sectors, related to

expanding operational and investment activities in these

sectors.


-7,500

-5,000

-2,500

0

2,500

5,000

7,500

10,000

Foreign Direct Investment (FDI)Million USD

25 Source: Bank Indonesia

-7,500


2007 2008 2009 2010*

Inflow (Equity & Loan Disb) Outflow (Equity & Debt Repayment) Total

Financial Account Liabilities: Foreign Portfolio Investment


-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000Foreign Portfolio Investment

Million USD

Financial Account: Foreign Other Investment

-2,500

-1,500

-500

500

1,500

2,500

3,500

4,500

5,500Foreign Other Investment

Million USD

26

Foreign portfolio investment recorded a US$1.8 billion

surplus in Q4-2010 , plunged from US$6.1 billion surplus in

the preceding period. A significant outflow resulted from

foreign investor withdrawal from rupiah denominated

instruments during November-December 2010 in response to

Irish debt crisis was the main factor behind the downturn in

foreign portfolio investment.

-6,000


2007 2008 2009 2010*

Equity, net Debt Securities, net Total

Foreign other investment booked a US$1.9 billion surplus

in Q4-2010, higher than a US$1.3 billion surplus in Q3-2010.

This upturn was mainly caused by higher foreign debt

disbursement by government. In the private sector, corporate

sectors also showed an increase foreign loans drawdown.

However, debt repayments scheduled to be paid by the private

sector were also higher during the period.

-2,500


2007 2008 2009 2010*

Public Sector Private Sector Total

Prudent Fiscal Management

� In the year of 2010, the realization of the State Budget was as follow:

� Revenue and Grant achieved 102.2%, driven by high non-tax revenue collection which was 108%. Tax revenuerealization was 100.1%

� Central Government Expenditure up to December 2010 was IDR 708.7 trilion (90.7%), it was nominally higher than2009 realization at the same periode which was IDR645.4 T (89.9%)

� 2010 deficit was 0.6%, lower than stated on 2010 Revised Budget at 2.1%.

� We continue to perform a prudent fiscal management in 2011 with strong commitment to fiscal consolidation , aiming on:

- continue declining debt-to-GDP ratio

Prudent Fiscal Management

- diversifying government debt profile,

- reducing funding reliance on international capital market.

� The 2011 budget is directed to achieve better prosperity through Pro-Growth, Pro-Job, Pro-Poor, Pro-Environment.

� Public debt is generally balanced between domestic and external sources with continued declining proportion of externaldebt since 2004 .

� With strong macroeconomic fundamental and sustainable state budget, we are confident on achieving the 2011 economicand fiscal targets

28

State Budget 2011: Macroeconomic Indicator Projection

Indicators2010 2011

Revised Budget

Realization Budget

Economic Growth (%) 5,8 6,0 6,4

Inflation (%) 5,3 6,96 5,3

Exchange Rate (IDR/US$) 9.200 9.087 9.250

Interest Rate (3-Month) (%) 6,5 6,57 6,5

ICP (US$/barrel) 80 80 80

29

Macro Economic Policy Target 2011: • Unemployment: 7,0%

• Poverty: 11,5% - 12,5%

• Economic growth: 6,4%

• Minimum investment requirement IDR 2.191,5 Trillion

Source: Ministry of Finance

ICP (US$/barrel) 80 80 80

Oil Lifting (MBCD) 0,965 0,954 0,970

State Budget 2010 and 2011

Revised Budget 2010

Realization of Revised

Budget 2010*

% of Revised

Budget 2010Budget

2011992.4 1,014.0 102.2 1,104.9743.3 744,1 100.1 850.3247.2 267.5 108.2 250.9

1,126.1 1,053.5 93.5 1,229.6781.5 708.7 90.7 836.6144.0 140.0 97.2 136.6

i. Fuel 88.9 82.4 92.6 95.9

(IDR Trillions) ITEMS A. Revenue and Grant

1. Tax

-Energy Subsidies

2. Non tax revenue B. Expenditure

I. Central Government

As of Dec 31 2010

30

i. Fuel 88.9 82.4 92.6 95.9 55.1 57.6 104.5 40.7

344.6 344.7 100.0 393.0-133.7 -39.5 29.5 -124.7

-2.1 -0.6 -1.8133.7 86.6 64.7 -124.7133.9 95.0 71.0 125.3-0.2 -8.4 -0.6 II. Foreign (net)

ii. Electricity II. Transfer to Region

C. Surplus/(Deficit) Budget (A -B) % GDP

D. Financing I. Domestic

In trillion IDR

State Budget 2010: Deficit & Financing

A s s u m p t i o n s :

G D P ( t r i l l i o n ) 7 , 0 1 9 . 9

G r o w t h ( % ) 6 . 4

I n f l a t i o n ( % ) 5 . 3

3 - m o S B I ( % a v g ) 6 . 5

R p / U S D ( a v g ) 9 , 2 5 0 . 0

O i l P r i c e ( U S D / b a r r e l ) 8 0 . 0

O i l L i f t i n g ( M B C D ) 0 . 9 7 0

31 Source: Ministry of Finance

The Government’s funding plans are well on-track with realized net financing at 5.615.61% of gross issuance required in the 2011 Budget

� Issuance in the domestic market will be prioritized

� Issuance of a variety of domestic government securities

– Fixed-rate

– Variable rate

– T-Bills

– Zero coupon

Net Issuance Realization as of Jan 27, 2011

2011 Funding Strategy Progress

2011 Budget

Government Securities Net Financing: 126.65

Redemption + Buyback (1) (74.00)

Net Realization (Jan 27, 2010) 8.73

Gross Issuance: 11.25

Coupon GDS (2) 11.25

Retail bonds 0.00 – Zero coupon

– Retail bonds

– Syariah securities – Sukuk and Retail Sukuk

� International bonds

Source: Ministry of Finance1. Redemption and buyback amount subject to change2. GDS stands for Government Debt Securities (SUN)

Retail bonds 0.00

Retail Sukuk 0.00

Zero coupon GDS (2) 0.00

T’bill for Local Govt 0

Domestic Sukuk 0.00

International Sukuk 0

International bonds 0.00

Redemption + Buyback (2.52)

Improved Government Debt Position

34Debt Securities Strategy 2011

� Prioritizing issuance of government securities in do mestic 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 secu rities issuance

� Diversification of financing instruments to widen the market

� Maintaining the presence of government financial instruments in global 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

Debt To GDP

Notes:*) Based on budget 2010 realization

50% 50% 53% 53%48%

53% 55%

50% 50% 47% 47%52%

47% 45%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004 2005 2006 2007 2008 2009 Nov 10*

Domestic Debt External Debt

Debt to GDP Ratio Debt Composition

57,5%

47,3%

39,0%35,2% 33,1%

28,3% 26,3%

0%

10%

20%

30%

40%

50%

60%

70%

2004 2005 2006 2007 2008 2009 2010*


Notes:* = Preliminary, GDP number based on Budget 2010 Assumption

[Outstanding as of Nov, 2010]

*) Based on budget 2010 realization

2004 2005 2006 2007 2008 2009

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 6,253,789.50

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 1,652,312.17

- Domestic Debt (Securities) 653,032.15 658,670.86 693,117.95 737,125.54 783,855.10 836,308.91 904,778.77

- Foreign Debt (Loan+Securities) 646,471.87 654,623.87 609,041.02 652,289.46 852,885.62 754,347.16 747,533.41

Debt to GDP Ratio 56.60% 47.34% 39% 35% 33% 28% 26%

- Domestic Debt to GDP Ratio 28.44% 23.74% 21% 19% 16% 15% 14%

- Foreign Debt to GDP Ratio 28.16% 23.60% 18% 17% 17% 13% 12%

Nov 10*End of Year

Table of Debt to GDP Ratio

Maturity Profile of Tradable Government Securities as of Jan 27, 2010

10

20

30

40

50

60

70

trill

ion

rupi

ah


ZCB : Zero Coupon bond SPN : T’bills IFR : Islamic Fixed Rate BondIB : International Bond ORI : Retail Bond SR : Retail SukukVR : Variable Rate Bond FR : Fixed Rate Bond RIJPY : Samurai Bond

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 … 2034 2035 2036 2037 2038

Total 65. 60. 56. 56. 51. 42. 40. 47. 55. 68. 25. 25. 21. 18. 27. 6.3 14. 20. - 25. 15. - - 14. - 19. 33.

SNI - - - 5.8 - - - - - - - - - - - - - - - - - - - - - - -

SR - 5.5 8.0 - - - - - - - - - - - - - - - - - - - - - - - -

IFR - - 0.5 - 5.3 - 0.5 1.9 - 0.2 - - - - 1.2 - - - - 2.1 - - - - - - -

RIJPY - - - - - - - - 3.8 6.5 - - - - - - - - - - - - - - - - -

ZC - 1.2 1.2 - - - - - - - - - - - - - - - - - - - - - - - -

SPN 27. - - - - - - - - - - - - - - - - - - - - - - - - - -

IB - - - 20. 9.0 8.1 9.0 17. 18. 18. - - - - - - - - - - - - - 14. - 13. 18.

ORI 8.7 21. 10. - - - - - - - - - - - - - - - - - - - - - - - -

VR 6.0 4.3 - 13. 17. 18. 16. 17. 22. 25. - - - - - - - - - - - - - - - - -

FR 22. 27. 35. 15. 19. 15. 14. 10. 10. 17. 25. 25. 21. 18. 26. 6.3 14. 20. - 23. 15. - - - - 6.4 15.

0

10

Foreign Ownership of Government Securities

Developments in the Domestic Market

150,000

200,000

[Rp miliar]

67,04% 67,16%

[Trillion IDR]

37

Dec-07 Dec-08 Dec-09 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 26-Jan-11

Total 78,156 87,606 107,997 162,055 172,221 177,991 182,265 191,991 191,199 195,755 189,761

>5 52,294 61,055 76,702 116,675 118,854 122,199 125,956 128,489 128,257 131,232 127,439

>2-5 17,243 20,374 21,361 28,632 31,737 32,503 33,274 38,375 38,143 35,511 34,559

>1-2 4,374 4,491 5,119 6,742 8,345 8,689 5,462 4,623 5,811 9,077 7,383

0-1 4,246 1,687 4,816 10,006 13,284 14,601 17,573 20,505 18,988 19,935 20,380

0

50,000

100,000

18,14%

4,64%

18,21%

3,89%

10,18% 10,74%

Loan Disbursement

Outstanding External Debt: Conducive Level to Support the Economy

Foreign Debt Indicators

38

REPUBLIC OF INDONESIA Recent Economic Developments · 2013-09-30 · Fitch Ratings (January 25,...

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