Indonesia Economic Prospects and Investment Opportunities Anton H Gunawan Chief Economist ...

64 Pages·2016·3.15 MB·English

by  Rizki Aulia

Presentation Material
Indonesia Economic Prospects and Investment Opportunities
Anton H Gunawan
Chief Economist of Bank Mandiri
November, 2016
0
Will Indonesian economy keep growing?
• The consumption gradual rebound, but still subdued economic growth
• Low inflation and relatively small CA Deficit reflect the weak economy
• BI has started to ease her monetary policy stance – room to further ease is small
• Main risks: tax shortfall, thus widening deficit, but still within fiscal rule
1
Indonesian macroeconomic indicators are mostly better among the EMs
average average Current Gov. Bond
Country Fiscal Inflation
GDP growth GDP growth Account CDS spread to
Balance (YoY)
in 5 years in 10 years Balance UST (bps)
Indonesia 5.5% 5.8% -2.4% -1.9% 3.3% 153.7 551
Malaysia 5.3% 4.9% 3.4% -3.3% 1.5% 123.0 180
Thailand 2.9% 3.3% 9.5% -0.4% -0.9% 93.5 33
India 6.7% 7.5% -1.3% -7.0% 4.3% 128.6 501
Turkey 4.4% 3.8% -4.0% -1.9% 7.2% 271.4 840
Brazil 1.0% 2.8% -1.1% -8.7% 9.0% 270.3 954
South Africa 2.1% 2.6% -3.9% -3.7% 4.6% 232.0 686
2
source: IMF world economic outlook, IIF, Bloomberg
Global economy is still at risk vs uncertainty,
Indonesian economy slow recovery

T he global economic growth is still ... Drives for further monetary easing in
Commodity price will stay flat to 2017
fragile... major central banks, except for the US.

(RM/MT)
(%, YoY) (%)
2016F 2017F 2017F :
2016F 2017F 2016F 2017F (USD/bbl)
2,54
2017F : 51.3
World 3.1 3.4 2.4 2.8 US - Fed Funds Rate 0.65 1.20 2016F : 48.8 2016F :
2,59

US 2.2 2.5 1.9 2.2 EU - ECB Rate 0.00 0.00
EU 1.6 1.4 1.6 1.6 UK - BOE Rate 0.10 0.15 (USD/MT)
2017F : 52.3
(USD/KG)
Japan 0.3 0.1 0.5 0.5 Japan - BoJ Rate -0.1 -0.2 2016F : 53.4
2017F : 1.23
China 6.6 6.2 6.7 6.5 India - RBI Rate 6.35 6.25 2016F : 1.05
Indonesia is more affected by China than the US
Indonesia’s economic growth will only
slightly better next year…
Country /
Elasticity
(%, YoY) 2016F 2017F
1.72 1.45 2.15
4.9 - 5.3 5.1 - 5.5
Bank Indonesia
5.1 5.1 1.10 0.81 0.90
Min. of Finance
IMF 4.8 5.3 0.88 0.77 0.85
World Bank 5.1 5.3
0.60 0.49 0.27
Bank Mandiri 5.0 5.1
0.05 0.06 0.11
3
Source: OJK, IMF, World Bank, Bloomberg
Indonesian macroeconomic indicators are mostly better among the EMs
average average Current Gov. Bond
Country Fiscal Inflation
GDP growth GDP growth Account CDS spread to
Balance (YoY)
in 5 years in 10 years Balance UST (bps)
Indonesia 5.5% 5.8% -2.4% -1.9% 3.3% 153.7 551
Malaysia 5.3% 4.9% 3.4% -3.3% 1.5% 123.0 180
Thailand 2.9% 3.3% 9.5% -0.4% -0.9% 93.5 33
India 6.7% 7.5% -1.3% -7.0% 4.3% 128.6 501
Turkey 4.4% 3.8% -4.0% -1.9% 7.2% 271.4 840
Brazil 1.0% 2.8% -1.1% -8.7% 9.0% 270.3 954
South Africa 2.1% 2.6% -3.9% -3.7% 4.6% 232.0 686
4
source: IMF world economic outlook, IIF, Bloomberg
Cabinet Reshuffle gives more support for economic reform push
• Economic Slowdown along with low and declining productivity  Lacking ease of
doing business and industry strategy
Three domestic
• Food Inflation: reducing purchasing power, although headline inflation still benign 
concerns
confusing database and a combination of El Nino (2015)/La Nina (2016) problems
• Financial Sector Stability: volatile markets & weakening banks’ asset quality
• Archipelagic Concept: inter-connectivity and regional development are key parts of
Four changes in the country’s development
Paradigm • Reducing Dependency on Raw Commodities: including looking for (i) areas of
exports & domestic demand expansions, and (ii) new sources of fiscal revenues
• Reallocation of Scarce Resources: transforming general price subsidy program into
directly targeted subsidy program (fuel, fertilizer, electricity)
• Promoting Maritime Economy: fishery and tourism services?
• Fiscal Policy: Expansionary (intention), but relatively Neutral (in reality, thus far).
Four policy Potential moderate fiscal risks ahead. Need a less restrictive fiscal rule?
responses • Monetary Policy: Start Easing (lowering rates, injecting liquidity, macro-prudential
policies not having a significant impact yet). Transmission channel not fully working yet.
• De-regulation/-bureaucratization and Structural Reform Policies: Can support growth
by cutting costs of doing business, and speed up investments.
• Promoting Agglomeration to Develop Special Economic Zones: may need
manufacturing based transmigration policy?
5
Key words are archipelagic concept and inter-connectivity, and SEZ
New seaport facilities will improve trade China will build “silk road” through
the sea, connecting China - Europe
Kuala Tanjung
Bitung Port
SEZ Palu, SEZ Bitung,
SEZ Tanjung Api-api, Central North
1 South Sumatera Sulawesi Sulawesi
SEZ Morotai,
North Maluku
5
SEZ Sei
Mangkai, North
2
Sumatera 4
3
SEZ Tanjung Lesung,
Banten
SEZ Mandalika, North Belawan Makassar
1 4
Nusa Tenggara
Tanjung Priok
2 Sorong
5
SEZ : special economic zone
Tanjung Perak
Sea toll route 3
Source : Coordinating Ministry of Economy
6
Commodity producing regions got the hardest hit by
commodity price bust, which came with a time lag
Economic Growth By Province, 2Q16 (% yoy)
Aceh
3.54
Sumut Kaltara
5.67 2.26
Kepri Sulut
Riau 5.40 Gorontalo 6.14 Malut
2.40 Kaltim 5.40 6.64
Kalbar
-1.30
Sumbar 4.21
Sulteng
5.78 Pabar
Jambi 15.52
Babel Kalteng 3.38
3.57 Sulbar
3.67 5..72
4.57
Sumsel
Bengkulu Kalsel Maluku
5.13 Sultra
5.41 3.98 6.48 Papua
Lampung Sulsel 6.82
-5.91
5.21 DKI 8.02
5.86
Jateng
Banten Jabar
5.75
5.13 5.88 Bali
Jatim NTB
DIY 6.53 NTT
5.62 9.92
> 7 5.57 5.29
5.5 - 7
4 - 5.49
<4
Source: BPS
7
21
Government’s development program will have to cut the disparity between Western
and Eastern part of Indonesia
% to national GDP
North Sumatera
Average GDP growth
Riau
East Kalimantan
1983 - 1993 5.1 8.3
Papua
1983 - 1993 8.7 3.7
1994 - 2003 5.8 4.2 1983 - 1993 5.5 5.1
2004- 2010 2.7 6.1 1994 - 2003 5.1 3.7 1994 - 2003 5.2 4.9 1983 - 1993 NA NA
2011- 2015 4.8 5.9 2004- 2010 2.3 4.1 2004- 2010 2.7 3.2 1994 - 2003 NA NA
2011- 2015 5.0 2.9 2011- 2015 5.5 3.2 2004- 2010 1.34 5.9
2011- 2015 1.29 3.55
Aceh
1983 - 1993 5.1 7.0
1994 - 2003 2.5 -1.2
2004- 2010 0.9 -1.4
2011- 2015 1.2 2.1
Jakarta West Java
Central Java
East Java
1983 - 1993 11.8 8.3 1983 - 1993 15.7 8.0 1983 - 1993 10.7 7.0 1983 - 1993 15.1 6.6
1994 - 2003 15.3 3.1 1994 - 2003 15.3 1.9 1994 - 2003 10.1 3.1 1994 - 2003 14.5 2.8
2004- 2010 9.2 6.1 2004- 2010 7.5 5.4 2004- 2010 4.4 5.6 2004- 2010 8.0 6.2
2011- 2015 16.0 6.2 2011- 2015 13.3 5.9 2011- 2015 8.9 5.3 2011- 2015 14.7 6.1 8
Source : CEIC
Formulating industrial policy (1)  Map of manufacturing and employment
Peta Kontribusi Industri Manufaktur, JumlahTenaga Kerja
dan Tingkat Pengangguran Terbuka (2015)
Aceh
2,05 jt; 8,13%
Sumut
6,17jt; 6,49%
Riau
2,84jt; 5,94% Sulut
Gorontalo 1,09jt; 7,82%
Kepri
0,54jt; 3,88% Malut
0,83jt; 9,03% Kaltim
Kalbar 1,5jt; 8,86% 0,51jt; 3,43% Pabar
Jambi 2,31jt; 4,58% 0,41jt; 5,73%
1,62jt, 4,66% Sulteng
Sumbar Kalteng 1,44jt; 3,46%
2,43jt; 5,41% Babel 1,24jt; 3,67%
Sulbar
0,65jt; 6,17%
0,62jt; 2,72%
Sumsel Kalsel
Sultra Papua
3,89jt; 3,94% 1,98jt; 3,63% Maluku
Bengkulu Sulsel 1,17jt; 3,78% 1,69jt; 2,97%
0,68jt; 6,98%
0,96jt; 3,84% 3,58jt; 5,11%
DKI Jateng
Lampung 5jt; 5,77% 17,16jt; 4,2% Jatim
19,65jt; 4,14%
3,85jt; 4,54%
NTB
Banten 2,3jt; 3,66%
NTT
5,23jt; 7,95% Jabar 2,36jt; 3,59%
20,28jt; 8,57%
DIY Bali Keterangan:
2,04jt; 2,81% 2,33jt; 2,12% (i) Share industri manufaktur per provinsi
> 20% (9 provinsi)
>10% – ≤ 20% (13 provinsi)
≤10 (12 provinsi)
(ii) An gka di tiap provinsi menunjukkan jumlah
tenaga kerja (juta) dan tingkat pengangguran
terbuka (%),
9
Sumber: BPS,