ECONOMIC OUTLOOK : THE YEAR AHEAD FOR INDONESIA

Transcription

1 INDONESIA RENDEZVOUS 2018 ECONOMIC OUTLOOK : THE YEAR AHEAD FOR INDONESIA Azka Subhan A. Deputy of Director to Bank Indonesia Representative Office for Bali Province Bali, October 25, 2018

2 Slide 1 JBW1 Economic and Monetary Policy Department Juli Budi Winantya, 10/4/2018 DAKBDD1 done Dewa Ayu Komang Bintari Dewi Darmaputri, 10/4/2018

3 RECENT ECONOMIC DEVELOPMENT Global Domestic AGENDA ECONOMIC OUTLOOK

4 RECENT ECONOMIC DEVELOPMENT Global Domestic AGENDA ECONOMIC OUTLOOK FINANCIAL MARKET DEVELOPMENT AND THE ROLE OF INSURANCE

5 GLOBAL ECONOMIC UNCERTAINTY HEIGHTENED AMID UNEVEN ECONOMIC GROWTH US economy remains strong while Euro Area, Japan & China tend to decline. Global uncertainty is increasing, caused by the Fed Fund Rate (FFR) hike, trade tensions between the US and its trading partners, and the spreading risk of economic turmoil in Turkey and Argentina. THE IMPROVEMENT OF THE WORLD ECONOMIC GROWTH WAS DRIVEN BY THE STRENGTH OF THE US ECONOMY US INTEREST RATES RISE WHILE OTHER COUNTRY'S INTEREST RATES ARE LOW... 4 Trillion USD Source : WEO July 2018 US BUDGET DEFICIT CONTINUES TO INCREASE Source : Bloomberg, WIRP calculated USD STRENGTHENING OF THE WORLD CURRENCIES WIDELY Trump Tax Reform CBO Baseline Deficit Source : Congressional Budget Office, USA Source : Bloomberg, calculated Data as of October 2, 2018

6 ENCOURAGE FOREIGN CAPITAL OUTFLOW & BROAD-BASED USD APPRECIATIONS 5 USD COMPOSITION IN EM PUBLIC DEBT WENT UP.. CAPITAL FLEW OUT OF EM... Source: Bloomberg, calculated Data as of 2 October 2018 STOCK MARKETS ALSO WEAKENED... Source : IIF YIELDS PICKED UP... YTD 2018 Source : Bloomberg, calculated Data as of October 2, 2018 Source : Bloomberg, calculated Data as of October 2, 2018

7 MONETARY POLICY CONTINUES TO TIGHTEN The risk of global economic uncertainty triggered monetary policy tightening by raising policy rates to attract foreign capital. 6 AE Rate Hike Current Rate bps bps bps QI QII QIII* QIV** Euro Area 0.00% USA 2.25% Dec 18 UK 0.75% Japan 0.10% Canada 1.50% Oct 18 Australia 1.50% New Zealand 1.75% Sweden 0.50% Oct 18 Norway 0.50% Dec ** First Depo Rate Hike EM Mexico 7.75% Turkey 24.00% bps 6 China 2.55% bps Thailand 1.50% South Korea 1.50% Oct 18 Malaysia 3.25% Philippines 4.00% bps 50 bps India 6.50% South Africa 6.50% Source : ING, Goldman Sachs, HSBC, ANZ, diolah *Data as of September 22, 2018 **projected 6

8 RECENT ECONOMIC DEVELOPMENT Global Domestic AGENDA ECONOMIC OUTLOOK FINANCIAL MARKET DEVELOPMENT AND THE ROLE OF INSURANCE

9 DOMESTIC ECONOMY IS EXPECTED TO REMAIN STRONG In2017,GDPgrowthisthehighestgrowthinthelast4years.IntheQ2 2018, GDP growth was recorded at 5.27% (yoy), the fastest since Growth was supported by strong domestic demand coming from private consumption and investment. Investment growth was driven by infrastructure projects as well as non buildinginvestment to expand productioncapacity. ECONOMIC GROWTH BY EXPENDITURE (%, YOY) Components I II III IV I II Household Consumption Non Profit Institution Serving Household (NPISH) Government Consumption Investment (GFCF) Building Investment NonBuilding Investment Export Import GDP *Source: BPS HOUSEHOLD CONSUMPTION ECONOMIC RECOVERY PATH (%, YOY) Source: BPS, calculated CAPITAL GOODS IMPORT 8 Source: BPS, calculated Source: BPS, calculated

10 BROAD-BASED ECONOMIC GROWTH Most of the regions recorded higher growth, with Sumatera, Kalimantan and Papua as the key drivers. Source: BPS, calculated 9

11 INDONESIA ECONOMIC EXPANSION PHASE IS EXPECTED TO CONTINUE Improved economic growth was mainly supported by domestic demand stemming from strong household consumption in line with fiscal stimulus, general election and solid investment, such as infrastructure. HOUSEHOLD CONSUMPTION GROWTH IS SUPPORTED BY IMPROVED INCOME HOUSEHOLD CONSUMPTION REMAINS STRONG ALSO SUPPORTED BY FISCAL STIMULUS... Source: BPS, calculated; *Data July August 2018 NPISH* IS EXCPECTED TO PICK UP IN LINE GENERAL ELECTION... Source: Financial Ministry. Data as of July 2018 INVESTMENT INCREASE AS THE IMPROVEMENT OF INVESTMENT CLIMATE & INFRASTRUCTURE DEVELOPMENT... Source: BPS, calculated * Non profit Institution Serving Household Source: BCI. Data as of July 2018

12 EXPORT GROWTH RESTRAINED WHILE IMPORT REMAINS HIGH Restrained export growth is driven by lower growth in trade volume and weak agricultural exports, amid improving manufacturing exports such as chemicals as well as iron and steel. Meanwhile, solid domestic demand has stimulated a surge in non oil & gas import, particularly in the form of capital goods, consumption goods, and raw materials. CONTRIBUTION OF OIL & GAS AND NON OIL & GAS EXPORT NON OIL & GAS EXPORT (REAL VALUE) 11 Source: BPS, calculated Source: Bank Indonesia CONTRIBUTION OF OIL&GAS AND NON OIL&GAS IMPORT NON OIL AND GAS IMPORT (REAL VALUE) % Consumer Goods Raw Materials Capital Goods Others % Source: BPS, calculated 20 I II III IV I II III IV I II III IV I II III Source: Bank Indonesia 20

13 Slide 11 JBW19 Grafik di sesuaikan as discussed Juli Budi Winantya, 10/4/2018 DAKBDD14 done Dewa Ayu Komang Bintari Dewi Darmaputri, 10/5/2018

14 INFLATION REMAINED WITHIN THE TARGET CORRIDOR OF 3.5±1% Inflation is expected to stay within the target on the back of maintained inflation expectations, adequate production capacity, limited impact of rupiah depreciation, and strong coordination between the Government and Bank Indonesia. INFLATION IS WITHIN THE TARGET RANGE AND STAYED WITHIN THE TARGET FOR 3 CONSECUTIVE YEARS... INFLATION EXPECTATIONS REMAIN ANCHORED IN THE INFLATION TARGET RANGE Source : Bank Indonesia THE IMPACT OF EXCHANGE RATE DEPRECIATION ON INFLATION IS LIMITED... INFLATION SEPTEMBER 2018 : 2,88% (YOY) Source : BPS, calculated Source: Bank Indonesia

15 REGIONAL INFLATION WAS KEPT UNDER CONTROL Most regions charted relatively low inflation. Lowest inflation was recorded in Maluku Papua (2.82%, yoy), Sulawesi (3.06%, yoy), and Sumatra (3.07%, yoy). 13 Source: BPS, calculated

16 RESERVE ASSET REMAINED HIGH Indonesia s official reserve assets at the end of September 2018 stood at USD114.8 billion, lower than August 2018 position at USD117.9 billions. The reserve asset position at the end of September 2018 was sufficient to cover 6.5 months of imports, or to cover 6.3 months of imports and to service government external debt, which is well above the international standard of three months. FOREIGN EXCHANGE RESERVES 14 Source : Bank Indonesia, calculated

17 Slide 14 JBW17 update angka september Juli Budi Winantya, 10/4/2018 DAKBDD13 done Dewa Ayu Komang Bintari Dewi Darmaputri, 10/5/2018

18 RECENT ECONOMIC DEVELOPMENT Global Domestic AGENDA ECONOMIC OUTLOOK FINANCIAL MARKET DEVELOPMENT AND THE ROLE OF INSURANCE

19 DOMESTIC ECONOMY PROSPECT Indonesia s economic growth in remain solid albeit potential downside risk from external factors due to heightened global economic uncertainty. 16 GDP Inflation CAD Credit Deposit % 3.5±1% % GDP 10-12% 8-10% % 3.5±1% ± 2.5% GDP GDP Growth Fan Chart Inflation Fan Chart Source: Bank Indonesia Projection Source: Bank Indonesia Projection

20 INDONESIA'S ECONOMY REMAINS ON A STRONG FOOTING 17 Turkey Argentina South Africa Brazil Russia Thailand India China Indonesia 2017 Latest Read 2017 Latest Read 2017 Latest Read 2017 Latest Read 2017 Latest Read 2017 Latest Read 2017 Latest Read 2017 Latest Read 2017 Latest Read GDP (% yoy) 7,4 7,4 3,9 3,6 1,3 0,8 1,0 1,2 1,5 1,8 3,9 4,6 6,7 7,7 6,9 6,7 5,1 5,3 Inflation (% yoy) 11,9 24,5 24,8 34,4 4,7 4,9 2,9 4,2 2,5 3,1 0,8 1,33 4,3 3,69 1,8 2,3 3,6 2,88 Policy Rate (%) 8,0 24,00 28,75 65,0 6,8 6,5 7,0 6,5 7,75 7,50 1,5 1,5 6 6,5 4,4 4,35 4,3 5,75 CAD (% of GDP) 5,5 7,2 4,56 5,17 2,3 4,8 0,5 0,7 1,9 2,2 10,8 7,7 1,9 2,5 1,4 0,1 1,7 3 Foreign Exchange Reserves (USD Billion) Exchange Rate (% of change)* ,6 50,11 46, , , , , , , ,8 7,4 37,0 14,73 51, ,1 1,8 18,2 5,4 11,9 9,2 0,5 6,1 12,4 6,3 5,2 0,7 9,8 Foreign Debt/GDP 53,2 36,2 48,8 15,1 12,6 32,7 20,5 14,0 34,8 Fiscal Deficit/GDP 1,5 3,9 3,3 7,8 1,5 2,7 3,5 3,7 2,5 *) data as of October Source: various sources

21 ECONOMIC RISKS 18 External Risks Widening divergence in global economic growth, tight monetary policy stance in emerging markets to offset US tight monetary policy Continuing broad based US dollar appreciation Increasing tensions in trade relations between the United States and its trading partner Capital flows from emerging markets to developed countries Slowing world trade volume and higher oil prices. Domestic Risks Widening current account deficit Continuing pressure on the Rupiah

22 THANK YOU