MACROECONOMIC INDICATORS FORECASTING SURVEY Quarter II 2017 Economic Growth Predicted to Gain Momentum in 2017 The Bank Indonesia Macroeconomic Indicators Forecasting Survey (MIFS) revealed that the respondents were upbeat on economic performance in 2017, predicting GDP growth at 5.12% (yoy) for the year. Respondents expected inflation to remain under control in 2017, despite accelerating to 4.17% (yoy), which is still within the target corridor of 4±1%. Respondents pointed to a number of inflation drivers in 2017, including reductions to energy subsidies by the Government as well as rising international commodity prices. Respondents were optimistic that the rupiah would track an appreciatory trend, averaging Rp13,380/USD. Respondents were upbeat on the strength of the rupiah due to solid BOP performance and robust domestic economic growth. Expectations of Macroeconomic Conditions in Quarter III-2017 national economic growth at 5.10% (yoy) in the second quarter of 2017. Respondents predicted domestic economic growth to accelerate from 5.01% (yoy) to 5.10% (yoy) in the second quarter of 2017. The upbeat economic performance expected to persist at 5.12% (yoy) in the third quarter and 5.13% (yoy) in the fourth quarter of 2017 (Graph 1). Graph 1. GDP Expectation Methodology : Macroeconomic Indicator Forecasting Survey (previously Market Perception Survey) is a quartely survey started from Quarter IV-2001 with economists, economic researchers, capital/money market analyts, and academia societies as reposdents. Respondents are selected based on purposive sampling method. Data are collected online using the web-based surveys application or by mail, facsimile and e-mail. The methodology used is polling method (the percentage of respondents providing the majority of response) and mean point estimates (mpe). 1
Macroeconomic Indicators Forecasting Survey Respondents expected a build-up of inflationary pressures in the third quarter of 2017, accelerating from 4.37% (yoy) in the previous period to 4.40% (yoy). Inflation predicted to decelerate to 4.17% (yoy) towards the end of the year and then to 3.96% (yoy) at the beginning of 2018 (Graph 2). The Macroeconomic Indicators Forecasting Survey (MIFS) also revealed that respondents predicted depreciation of the rupiah. The exchange rates expected to fall 0.4% (qtq) from Rp13,319/USD to Rp13,367/USD in the third quarter of 2017 (Graph 3). Graph 2. Inflation Expectation Graph 3. Exchange Rate Expectation Table 1. Expectation for Quarterly Economic Indicators 2
Macroeconomic Indicators Forecasting Survey Expectations on Macroeconomic Conditions in 2017 Respondents expected economic growth to accelerate in 2017. economic growth to accelerate from the 5.02% (yoy) achieved in 2016 to 5.12% (yoy) in 2017 (Table 2), which remains within the range projected by Bank Indonesia at 5.0-5.4% (yoy) 1 and slightly higher than the macroeconomic assumption of 5.1% (yoy) 2 used for the 2017 state budget. Respondents cited buoyant investment, global growth and a favourable trade balance as the main drivers of growth in 2017. Economists expected inflation to accelerate in 2017 but remain under control. 2017 inflation at 4.17% (yoy), up from the 3.02% (yoy) realised in 2016 but still within the target corridor for 2017 at 4.0±1% 3 and above the macroeconomic assumption of 4.0% (yoy) 4 used for the 2017 state budget. Respondents pointed to a number of inflation drivers in 2017, including reductions to energy subsidies by the Government as well as rising international commodity prices. exchange rates at Rp13,380 per USD in 2017. Respondents were optimistic that the rupiah would remain stable throughout 2017 and track an appreciatory trend, averaging Rp13,380/USD. Respondents were upbeat on the strength of the rupiah due to expectations of stronger domestic and global economic growth, controlled inflation in 2017 and international market expectations concerning the sound domestic economic outlook. Table 2. Expectation for Economic Indicators in 2017 and 2018 Outlook for Macroeconomic Conditions in 2018 the national economy to continue gaining momentum in 2018. Respondents expected the national economy to continue gaining momentum in 2018. Domestic economic growth predicted to accelerate 5.34% (yoy) on the back of buoyant investment, global economic dynamics and maintained public purchasing power. 1 Monetary Policy Review, June 2017 2 Ministry of Finance 3 Monetary Policy Review, June 2017 4 Ministry of Finance 3
Macroeconomic Indicators Forecasting Survey Graph 4. GDP Expectation for 2017 and 2018 Graph 5. Inflation Expectation for 2017 and 2018 Respondents also predicted greater control over inflation in 2018, with the rate expected to decelerate to 4.12% (yoy). This deceleration due to abundant supply supported by uninterrupted distribution and lower international commodity prices. the rupiah to close at a level of Rp13,337/USD at the end of 2018. Respondents were optimistic that the rupiah would remain stable in 2018. Rupiah predicted to appreciate to a level of Rp13,337 against the US dollar, with improving global and national economic dynamics considered the main drivers. Graph 6. Exchange Rate Expectation 4
ECONOMIC INDICATORS EXPECTATION BASED ON MIFS QUARTER II-2017 Graph 1. Expectation of Economic Growth in Quarter III-2017 Graph 2. Expectation of Inflation in Quarter III-2017 Most respondents predicted third quarter growth above 5.00% (yoy) in 2017. Graph 3. Expectation of Exchange Rate in Quarter III-2017 Third quarter inflation was predicted in the 4.26-4.50% (yoy) range. Graph 4. Expectation of GDP Growth in 2017 ( % Respondent ) 100 94.7 80 60 40 20 0 5.3 5.00-5.24% > =5.25% ( %, yoy ) 95% of respondents predicted the value of the rupiah Rp13,500/USD. Most respondents predicted GDP growth above 5.00% (yoy). 5
ECONOMIC INDICATORS EXPECTATION BASED ON MIFS QUARTER II-2017 Graph 5. Expectation of Inflation in 2017 Graph 6. Expectation of Exchange Rate in 2017 Inflation in 2017 was predicted at 4.17% (yoy). Graph 7. Expectation of GDP Growth in 2018 the value of the rupiah below Rp13,500/USD in 2017. Graph 8. Expectation of Inflation in 2018 GDP in 2018 was predicted above 5.25% (yoy). Graph 9. Expectation of Exchange Rate in 2018 Inflation in 2018 was predicted in the 4.01-4.45% (yoy) range. The rupiah exchange rate against the USD was predicted below Rp13,500/USD. 6