1. Macroeconomic Highlights

Transcription

1 1. Macroeconomic Highlights ht

2 Macroeconomic Highlights Resilient growth over the last 2 years, despite the global economic slowdown Banking industry robust with high level of CAR and low NPLN. In 2008 banks CAR was 16.2% with gross NPL 3.8%/net 1.5% Balance of Payments remains sound amid current global turbulence, however lower exports due to slowing global demand have gradually put pressure on the current account. Foreign exchange reserves decreased compared to last year s figure but still considered sufficient at above USD 50 billion Since Q4 2008, the Rupiah exchange rate, like other regional currencies, has been under pressure; nevertheless it is still at a manageable level Falling prices for domestic non-subsidized gasoline and various commodities have eased domestic inflationary pressure. Inflation has been trending down since Oct 2008, recorded at 8.6% (y-o-y) y) at the end of February 2008 Going forward, global financial uncertainties pose significant challenges to the economy Measures are taken to ensure sustainability of the 2009 Budget At the March 2009 Board of Governors meeting, the Central Bank (BI) Rate was lowered by 50 bps to 7.75% (fourth consecutive rate decreases since December 2008)

3 Economic Growth Sustained Resilient growth over the last 2 years, despite the global economic slowdown and oil price surge in the first half of 2008 as well as increases in domestic fuel prices Indonesian economy had generally performed well in the first three quarters of However, the economic landscape was subsequently reshaped by the intensifying downturn in the global financial market in the last quarter Real GDP Growth 2003 FY: 4.78% 2004 FY: 5.03% 2005 FY: 5.69% 2006 FY: 5.50% 2007 FY: 6.28% 2008 FY: 6.06% Source: Bank Indonesia, BPS.

4 Consumption Still the Main Source of Growth Domestic demand is still the main source of growth in 2008 mainly supported by the growth of consumption (5.9%) and investment (11.7%). Exports declined significantly in the 4th quarter of Source: Bank Indonesia, BPS.

5 Banking Sector Remains Robust Banking industry robust with high CAR level of 16.2% and gross NPL 3.8%/ net 1.5%. In January 2009, the NPL, as expected, was slightly increasing to gross NPL 4.2%/ net 1.6%. On the other hand, the banks CAR increased to 17.6% Rapid Bank Credit Growth Despite Global Liquidity Crunch Loan-to-Deposit Ratio Rising to Post Crisis Record 50% 45% 40% 35% 30% Working Capital Investment Consumption 85% 80% 75% 70% 65% 60% 55% Jan May Sep Jan May Sep Jan 25% 20% 10% Non-Performing Loans Ratio is Trending Down 15% 8% 10% 6% 5% 4% 0% Jan Source: Bank Indonesia. 2% Jan May Sep Jan May Sep Jan Source: Bank Indonesia.

6 BOP Under Pressure with Improved Performance in Current Account Balance of Payments remains sound amid current global turbulence, however lower export due to slowing global demand have gradually put pressure on the current account. The current account in Q improved and posted a smaller deficit (US$0.2 billion) than the deficit in the previous period (US$0.9 billion) Furthermore, current global turbulence has also affected Indonesia s capital and financial account as it shifted investors appetite The instability in global financial markets and growing risk aversion towards emerging market assets during Q led to significant depreciation in the rupiah International reserves declined from US$51.7 billion in Q to US$51.6 billion in Q (equivalent to 4.0 months of imports and official debt repayment). Reserves stabilized at US$53.9 billion at end of February 2009, covering 5.4 months of imports & short term official debt repayment Balance of Payments US$bn 7 Overall Balance Reserve Assets (RHS) US$bn Current Account Balance Trade Balance (RHS) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q * Source: Bank Indonesia.

7 Exchange Rate At a Manageable Level Rupiah was stable through Q3 2008, but has been volatile since Q began. At the end of February 2009, Rupiah reached Rp per US$ Rupiah remains competitive compared to other currencies in the region Rupiah Exchange Rate Exchange Rate Volatilities Rp/USD Kurs Harian Rata rata Bulanan Rata rata Tahunan 11, , Vol harian Rata2 Vol Bulanan Kurs Harian (Rp/USD) rhs , Jan 08 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Dec 08 Jan 09 Feb 09 (1.00) 3/ /1/2008 5/ /1/2008 7/ /1/2008 9/ /1/ / /1/2008 1/ /1/ Source: Bank Indonesia.

8 Inflation has Been Trending Downward Decrease in domestic non-subsidized gasoline prices and falling international commodities prices have eased domestic inflationary pressure. Inflation has been trending down since October 2008, recorded at 11.06% in The downward inflation trend underway since October 2008 expected to carry forward into Monthly CPI inflation for February 2009 underwent 0.21% (m-t-m). Annual inflation in February 2009 reached 8.60%, down from 9.17% annual inflation in the previous month 20% Headline Inflation Trending Down from Peak 15% 10% 5% Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct jan

9 Equity and Currency Markets Have Stabilised at New Levels While the financial sector performed well during the first three quarters, intensifying global deleveraging and repricing started to hit the domestic financial sector since the beginning of the last quarter Stock index fell by 50.4% from 2,732 in early 2008 to 1,355 at the end of 2008 Equity and Currency Markets 13,500 IDR/USD Jakarta Composite Index 3,000 2,800 12,500 2,600 2,400 11,500 2,200 2,000 10,500 1,800 1,600 9,500 1,400 1,200 8,500 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 1,000 Source: Ministry of Finance, Bank Indonesia, Bloomberg.

10 Global Financial Uncertainties Pose Significant Challenges to the Economy 2009 Forecast Main Factors Behind The Forecast GDP Growth is forecasted at 4.0% Lower external demand leads to lower growth in all sectors Economic growth for 2009 is estimated to moderate as external demand falls, but resilience in domestic demand could moderate the adverse effect of external demand d Private Consumption is expected to weaken Shrinking purchasing power as exports decline (income effect) & plunging financial asset prices (wealth effect) Credit constraint in consumer sector. Credit is estimated to grow by 15% in 2009 Precautionary saving as increasing uncertainty on future economic conditions and rising worker layoffs Rising Provincial Minimum Wage and civil servants salary The general election historically boosts consumption Private Consumption Growth is expected to still grow by 3.7% Government policies: Simplify corporate income tax structure, including small & medium enterprises and pre-listing corporate Simplify personal income tax structure Reduction in corporate dividend Increasing the Non-taxable amount of gross income Increasing social expenditure: 1) National Program for Community Empowerment 2) Public Health Expenditure 3) Conditional Cash Transfer

11 Global Financial Uncertainties Pose Significant Challenges to the Economy (Cont d) 2009 Forecast Main Factors Behind The Forecast Investment Outlook is to grow lower as compared to last year to 6% Export Growth is projected to fall Lower export growth Lower private consumption Financing constraints on investment However, some progress on infrastructure projects is expected to be a driver of investment as well as to sustain public purchasing power by creating more jobs for unemployed workers from other sectors Recession in Indonesia s s major trading partner & slower economic growth in emerging markets Plummeting export commodity price Constraint on trade financing The deficit of current account is projected to be relatively moderate (0.11% GDP); slowing import growth performance will also take place due to weakening domestic demand Balance of Payments The continued deleveraging process and bank recapitalization needs in the advanced countries are expected to put some pressure on global liquidity At end 2009 international reserves are forecasted to reach USD 51 billion equivalent to 4 7 At end-2009, international reserves are forecasted to reach USD 51 billion, equivalent to 4.7 months of imports and servicing of official foreign debt

12 Measures Taken to Ensure Sustainability of the 2009 Budget Indonesia is Moving from a Defensive to Offensive Stance While Maintaining Fiscal Sustainability Defensive Measures (Existing) Offensive (Counter-Cyclical) Measures (New Initiatives) Earmark expenditure on lower priority projects and imports Provide more direct subsidy for medium and low income households Cutting tax rate by 2% for Corporate and Individual income tax Additional expenditure on infrastructure projects which have greater impact on employment creation and Redefine emergency situation ti in State t Budget Law 2009 poverty reduction (Article 23) to create stimulus package and contingencies deficit financing Increase fiscal risk provision in response to possible economic slow down Shift financing sources from marketable securities to contingencies financing facilities Prepare crisis protocol through the implementation of the Financial System Stability Committee Introduce Tax Saving measures for Business through: Additional 5% tariff reduction for >= 40% listed companies Introduce tax incentives for selected sectors and regions Reduce tariffs for selected sectors e.g. crude palm oil Tax Subsidy on various product & Sectors/industry Provide discount on electricity i peak-hour charge for industries and reduction of diesel fuel price Upsizing budget financing from bilateral and multilateral organisations

13 Monetary Policy Stance Against the backdrop of a downward trend of inflation and the significant slowdown of the economy going forward, BI decided to lower the BI Rate 25 bps to 9.25% in December 2008, 50 bps to 8.75% in January 2009, 50 bps to 8.25% in February 2009 and another 50 bps to 7.75% in March 2009 BI Rate