Adaptive Responses to Rapid Economic Change

Transcription

1 Indonesia Economic Outlook 218 Adaptive Responses to Rapid Economic Change Hendri Saparini, Ph.D Senior Economist and Founder of CORE Indonesia Presented at KEB Hana Bank Economic Outlook 218 November 16, 217

2 Global Economic Growth 218 Weak recovery in advanced economies; solid pickup in developing countries Eurozone China USA ,3% ,6% ,3% Japan World 6.7 India ,3% ,4% share of GDP Source: IMF, WEO October 217

3 Feb-8 Oct-8 Jun-9 Feb-1 Oct-1 Jun-11 Feb-12 Oct-12 Jun-13 Feb-14 Oct-14 Jun-15 Feb-16 Oct-16 Jun-17 Modest Rebound of Commodity Prices Price increases are not supported by solid and sustained demand 16 Commodity Price Index (28=1) Global GDP growth 14 Wheatear OPEC production decision 12 1 Agricultural Raw Materials Metals Price 8 6 Investment/ speculation OIL PRICE Non-OPEC Production 4 Fuel (Energy) 2 Geopolitical Risk Source: IMF

4 Changes in Commodity prices Commodity Prices % change Oil (US$/bl) % Natural Gas (US$/mmbtu) % Coal (US$/mt) % Palm Oil (US$/mt) % Rubber (US$/kg) % Cocoa (US$/kg) % Coffee (Arabica) (US$/kg) % Copper (US$/mt) 6,5 6, % Nickel (US$/mt) 1,1 1, % Tin (US$/mt) 2,225 2,426 1.% Commodity price increase marginally in 218 Oil Price US$53--US$56 (+) strong global demand increase (+) OPEC production cut agreement (-) recovery in U.S. shale oil production (-) expanding output of oil producers like Iran, Libya, and Venezuela Natural Gas US$5,6 US$5,7 (+) strong demand especially from chemical and fertilizer industries (+) China gov. encouragement to coal-to-gas switching to reduce emissions Coal US$ 89--U$ 7 (-) Weak demand from China as it tackle its air pollution (-) increase of supply from producers countries Palm Oil U$ 72--U$732 (+) Strong demand of India and China (+) lower soybean production in Brazil and Argentina (-) Increase production of palm oil in Indonesia and Malaysia Source: World Bank

5 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 INDEX, 21=1 INDEXK, 21=1 High Growth of Financial Sector Low pressure of monetary policies on financial stability 25 Stock Market Indices of developed countries 25 Stock Market Indices of developing countries Japan United Kingdom United States Euro area (19 countries) China India Indonesia Russia Source: OECD

6 GDP Growth and Distribution Driven by exports and investment GDP Distribution (Q1-Q3 217) GDP Growth (Q1-Q3 217) 9.53% 7% 3% 4.99% 5.5% 4.36% 5.77% 6.79% 33% 57% 1.97% 1.28% Private Consumption Fixed Investment Government Consumption Net Export Private Consumption Government Consumption -3.71% -4.1% Investment Export Import Q1-Q3 216 Q1-Q3 217 Source: BPS

7 GDP by Sectors and Its Distribution Supported by non-tradable sectors Manufacturing Industries 23% Financial Service 4% Transportation 4% Information & Communicatio n 5% Information & Communication Transportation GDP Growth by Its Sectors 9.8% 9.2% 8.3% 8.2% Mining 6% Construction 6.7% 5.7% Financial Service 6.1% 7.% Agriculture 14% Construction 11% Accomodation; Food & Beverage Trade Agriculture Manufacturing Industries 4.9% 4.6% 4.8% 3.7% 4.3% 2.8% 4.2% 4.6% Q1-Q3 217 Q1-Q3 216 Trade 14% Others 19% Real Estate Mining 1.2%.1% 3.7% 3.7% Source: BPS

8 Consumer s Purchasing Power Decline? Growth of Vehicle Sales Mobil 2.38% 2.67% Sepeda Motor 7.82% Growth of Power Sales 6.36% 2.4% -.26% Jan-Sep 216 Jan-Sep % Semester Semester Semester Growth of Cement Consumption Growth of Retail Sales (yoy, %) Jan-Sep ,9% Jan-Sep 217 6,6% Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

9 Weakening Purchasing Power of Low Income Consumers Expenditure Distribution by group of income 46,6% 17,1% Rp 4% lowest 36,3% Rp 4% middle Rp 2% highest Index, Farmer Exchange Rate (21=1) 11 Food Holticulture Plantation Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Index 216= Wage Real Index Housemaid Construction worker 16 % Administered Price Annual Inflation (yoy) Volatile Food Headline Farmworker 4 2 Core 97. Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul Source: BPS

10 Low Growth Sales for Retailers and Manufacturers Retail Trade Sales Growth, (9M,yoy) Food and Household Sales Growth, (9M, yoy) 25% 3% 2% 2% 25% 24% 15% 1% 5% % 13% 1% 7% 1% % 2% 15% 1% 1% 8% 9% 6% -5% -4% -4% -5% 5% 3% 4% 3% -1% Sumber Alfaria Trijaya Matahari Putra Prima Ramayana Lestari Sentosa % Hero Supermarket Matahari Department Store % Indofood CBP Sukses Makmur Mayora Indah Unilever Indonesia Tbk. Ultrajaya Milk Industry & Trading

11 Rapid decline of Fast Moving Consumer Goods (FMCG) sales Fast Moving Consumer Goods has been growing very slowly at 2,7% in 217 (ytd) while annual average was 11% % Inflation 17% +14.3% +13.8% +17.7% Inflation 11% +21.1% +4.7% +11% Inflation 8.4% +11.1% +9.6% +14% +1.5% +11.5% 7.7% YTD +2.7% 45% 4% 35% 3% 25% 2% 15% 1% 5% Total Key Account 75 Festive Categories 38.7% 29.8% 2.6% 16.3% 13.4% 5.% % Fest 212 Fest 213 Fest 214 Fest 215 Fest 216 Fest 217 Source : Nielsen

12 % % Impact of E-commerce Expansion? Market share of online sales is below 4% in Growth of Retail E-Commerce Sales in Indonesia Number of people purchasing via e-commerce E-commerce penetration (number of purchaser vs total population) Jan 217 Total value of national e-commerce 216 (US$) Average annual e- commerce revenue per user in 216 (US$) Million 9 % $5.6 Billion $ * 218* 219* 22* 221* 7.8% 7.1% 5.8% Europe China United States Percent of Retail Sales Mode Online (214, % of total retail sales) 4.5% around or below 1% Singapore Malaysia Thailand Philippines Indonesia Vietnam Share of E-commerce from Total Retail Sales In Indonesia * 217* 218* 219* Sumber: Statista, Wearesocial.org, Asosiasi E-Commerce Indonesia (IdEa)

13 Triliun Rp Upper-Middle Class Holding Back Consumption Third party deposit for above Rp 2 billion accounts grows faster Third Party Deposit by Nominal % usage Composition of income household usage 3,5 3, 2,5 2, N>2B 1,5 1, N<2B Growth of Third Party Deposit By Nominal Segment 26% 24% 22% 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % N<2B N>2B Source : LPS dan BI

14 Direct Investment Growth Domestic investment grows faster, mostly supported by government expenditure 4.% 35.% Domestic & Foreign Direct Investment Growth 36.5% FDI DDI Highest Direct Investment Sectors Realization (Q1-Q3 217) Mining % Metal, Machinery & Electronic Industry % 21.7% 2.% 18.6% 17.1% 16.3% 16.9% 16.7% Food Industry % 1.% 7.8% 7.8% 1.5% 12.% Chemical and Pharmaceutical Industry %.9% Food Crops & Plantation % Q1-216 Q2-216 Q3-216 Q1-217 Q2-217 Q3-217 Triliun Rupiah

15 Triliun Rp Triliun Rp Investment in manufactures is slowing down DDI Growth by Sector (yoy) DDI by Sector (in Trillions Rupiah) 7% 6% 5% 4% 3% 2% 1% % -1% 61% 41% 42% 2% 12% Primary Secondary Tertiary -3% Jan-Sep 216 Jan-Sep Primary Secondary Jan-Sep 216 Jan-Sep Tertiary 89.1 FDI Growth by Sector (yoy) FDI by Sector (in Trillions Rupiah) 8% 6% 4% 2% % -2% -4% 65% 5% 58% -3% -22% -25% Primer Primary Sekunder Secondary Tersier Tertiary Jan-Sep 216 Jan-Sep Primary Primer Secondary Sekunder Tersier Tertiary Jan-Sep 216 Jan-Sep 217

16 Triliun Rupiah % GOVERNMENT AND SOE Capital Expenditure Capital Expenditure by Government and SOEs Realization of Government Capital Expenditure Jun-17 Aug Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q Gov. Capital Exp. BUMN Capital Exp. Realization (in Trillions Rp) Realization (in %)

17 Indonesia Export Rebound Supported by increased commodity prices Export growth by Sectors Import Growth by Broad Economy Categories 37,8% 18,4% 14,5% Consumption Goods 12,8% 12,4% Jan-Sep 217 Raw Material Goods -9,8% 15,21% Agriculture Manufacture Mining -12,6% Jan-Sep 216-3,5% Capital Goods 9,2% -17,4% -18,% Jan-Sep 216 Jan-Sep 217 Source: BPS, IMF

18 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 TRILIUN RUPIAH Next Year Goverment Budget Increased allocation for infrastructure, minimum short-term impacts on economy 48 Budget Allocation for Infrastructure 7% Index 216=1 Average Index of Riil Labour Wage % % 5% Housekeeper Construction Labour 4% % % 3% 2% % 14% 9% 6% 1% 98. Farmer Labour F 218F % 97. Goverment Infrastructure Budget Growth (%YoY)

19 Tn Rupiah Better Targeting Subsidies Improving the accuracy of electricity subsidy (9 VA) 45 Goverment Subsidy Spending Energy Subsidy Rp 95 Tn Fuel And LPG Subsidy Rp 46,9 Tn Electricty Subsidy Rp 47,7 Tn Total Energy Subsidy Total Non Energi Subsidy

20 Tn Rupiah Increased Allocation for Social Assistance Require close supervision to improve effectiveness 12 Social Assistance Spending 6% Program Keluarga Harapan 1 Million Family % 16% 28% -7% 4% 6% 22% 6% -1% 17% 23% % Contribution for the poor in JKN 92,4 Million Family % -6% Program Indonesia Pintar 19,7 Million Student Social Assistance Growth (YoY)

21 Trlion Rupiah Axis Title Revenue Target for 218 Increased target will require extra efforts Tax Revenue 3.3% % % Revenue realization increase due to Lower Target and Tax Amnesty Program % 3% 8.2% 24% 3.5% 14.6% APBNP Okt 14 Okt 15 Okt 16 Okt 17 Realization Remaining Target Target Realization Remaining Target Target

22 Trillions Rupiah % of GDP Tn Rupiah Higher risk for budget deficit leading to increased debts High foreign ownership in government bonds is vulnerable to sudden capital outflow 4 Budget Surplus/Deficit Foreign Holding in Goverment Bonds Percentage Value 3 15 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul % APBN-P 216 Outlook 217 RAPBN 218 Primary balance Surplus/Deficit % of GDP Meksiko Afrika Selatan Indonesia Polandia Rusia Hungaria Malaysia Turki Thailand Filipina Korea Brazil Israel Cina % Foreign Holding in Goverment Bonds by Country

23 Trilion Rupiah Millions People % Redesign Fiscal Policy to Reduce Income Inequality Poverty Line Poverty budget VS poverty reduction Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar Number Percentage

24 Continued low inflation rate since 216 Lower volatile foods inflation, but higher administered prices in 217 % Core Administered Price Annual Inflation (yoy) Volatile Food Headline -4 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Inflation Rate According to Expenditure Group General Transportation, Education, Recreation and Sports Health Clothing Housing, Water, Electricity, Gas, Finished food, beverages, Food material Jan-Okt 217 % Jan-Okt 216

25 Billion USD Bil. US$ Balance of payment Improved export performance and increased capital flows Balance of Payment Current Account 2 8 Goods Services Primary Income Secondary Income 15 1 Financial Transaction Balance of Payment Current Account

26 Stable Exchange Rate in 217 Foreign pressures decline, domestic economy is relatively stable 15 Rupiah/US$ Index 215:1 13 Exchange Rate of Asian Currency Average S1-16 Rp Average S1-17 Rp Yuan Ringgit Rupiah Won Bath Yen 12 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 8 Source: IMF

27 LOW Impact of Monetary Policy on Bank Lending Rate Time lag in monetary policy transmission BI 7 Repo Rate, Lending Rate, Deposito Rate Average of Bank Interest Rate Δ Ags 16 - Oct 17 % BI Rate Deposit Facility Lending Facility BI 7 Day RR Rate 14 % Lending Rate Deposit Rate Spread Reference Rate 1 bps Lending rate 62 bps Deposit Rate 67 bps 2 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Source : Bank Indonesia

28 Banking Credit Growth & Non Performing Loan Credit continues to grow one digit in 217 due to high NPL and low demand Construction Financial Intermediaries Electricity, gas and water Annual Credit Growth (yoy) 23% 18% 17% 9% 13% 29% Annual Credit Growth Ags % Ags % Mining Trade Transportation, warehousing Bank NPL 4.4% 4.1% 8% Agriculture 11% 16% Consumption Acomodation Provision 4.1% Real Estate 7% 13% Manufacturing 3.7% Acomodation Provision 6% 16% Construction 3.6% Manufacturing Mining Trade Transportation, warehousing and communication -2% -1% -2% 5% 3% 5% 4% 6% -3% -2% -1% % 1% 2% 3% 4% Aug-17 Aug-16 Ags % Investment Ags-17 7% Credit Working Capital Ags % Ags % Real Estate 3.2% Agriculture 1.9% Electricity, gas and water 1.5% Aug-17 Financial Intermediaries.8% % 2% 4% 6% 8% 1% Source : OJK

29 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Trilion Rp Incentive System by Bank Indonesia Important factors that causes ineffectiveness of monetary transmission Placement of Banking Funds in Bank Indonesia Instruments % 25% 2% 15% 1% 5% Growth of Third Party Fund Valas Rupiah % -5% -1% Total DPK 1-15% -2% Source : Bank Indonesia

30 Bank Health Indicators 23.4 (Aug-16) 23.3 (Aug-17) 81.3 (Aug-16) 78.9 (Aug-17) CAR BOPO NIM LDR 5.6 (Aug-16) 5.3 (Aug-17) 9. (Aug-16) 89.2 (Aug-17) Source : OJK

31 Thank You