5
Economic Growth ... Demand Supply Side
Demand side: Indonesia s economic performance in
Q42006 shows an improving trend
In the first half of 2007, private consumption will be the primary engine
of economic activity
Stronger economic activity is forecast for the second half of 2007, buoyed by
significant investment growth
Supply side: Economic growth on the production side
is forecast higher in 2007 than in 2006, in line with expectations of stronger
domestic demand
Robust growth is expected in the manufacturing, trade, hotels and
restaurants sectors
Highlights
Projection
GDP Growth - Supply Side 2007
I II
III IV
I II
III IV
Total
1 Agriculture
-0.4 2.2
3.6 5.6
6.4 1.5
2.2 1.8
3.2 2
Mining and Quarrying 5.1
1.1 2.8
3.5 2.7
4.0 1.6
0.7 2.6
3 Manufacturing Industry
6.3 4.8
4.4 2.9
2.9 3.7
5.9 5.9
5.6 4
Electricity, Gas and Water Supply 6.4
6.9 6.6
5.4 5.1
4.5 5.8
8.1 6.4
5 Construction
7.5 8.3
6.9 7.0
7.4 8.7
9.3 10.4
7.9 6
Trade, Hotel Restaurant 9.7
9.7 8.4
5.8 4.4
5.5 7.5
7.0 7.1
7 Transport and Communication
14.3 14.1
13.0 10.8
11.5 13.3
13.6 15.9
13.5 8
Financial, Ownership and Business 6.3
8.2 7.7
5.1 5.7
5.3 4.7
6.8 5.8
9 Services
4.7 4.5
5.3 5.7
5.8 6.1
6.8 6.0
6.6
Gross Domestic Product 6.1
5.9 5.8
5.0 5.0
5.0 5.9
6.1 6.0
2005 2006
GDP Growth - Demand Side 2007
I II
III IV
I II
III IV
Total 1
Consumption 2.0
2.6 5.5
6.7 3.8
5.6 2.8
3.5 4.8 - 5.7
2 Private
3.4 3.8
4.4 4.2
2.9 3.0
3.0 3.8
4.2 - 4.7 3
Government 9.6
6.7 14.7
24.9 11.5
28.8 1.7
2.2 9.4 - 13.3
4 InvestmentGross Fixed Capital Formation
14.9 16.7
10.3 2.5
1.1 1.1
1.3 8.2
11.6 - 14.6
5 Domestic Demand
5.9 6.5
7.0 1.9
1.9 3.2
1.9 6.0
6 Exports
22.0 17.4
12.0 15.2
11.6 11.3
8.2 6.1
8.0 - 8.6 7
Imports 22.0
23.5 17.0
7.2 2.8
7.5 10.1
9.7 10.2 - 11.4
Gross Domestic Product 6.1
5.9 5.8
5.0 5.0
5.0 5.9
6.1 5.7 - 6.3
2005 2006
6
Prudent Monetary Measures
Source: Bloomberg BI
Within the inflation targeting framework, BI continues to maintain inflation at a moderate medium-term level, against a background of accelerating economic growth
CPI inflation yoy: Q42006: 6.60 Q12007: 6.52
Core inflation yoy: Q42006: 6.03 Q12007: 5.87
Inflation easing toward targeted level Key factors : stabilized exchange rate,
improved inflation expectations minimum impact from administered
prices volatile foods BI Rate gradually reduced to 9.00.
Key considerations: continued macroeconomic stability, greater
confidence for achieving 2006 and 2007 inflation targets and renewed market
confidence
9 . 4 0 12 . 6 0
5 . 10 6 . 4 0
14 . 5 3 17 . 6 2
13 . 0 2 17 . 11
6 . 5 2 6 . 6 0
15 . 5 3 15 . 7 4
10 . 0 0 14 . 5 5
9 . 0 0 9 . 7 5
11. 2 5 12 . 5 0
12 . 7 3 12 . 2 5
8 . 3 1 7 . 4 3
0.00 5.00
10.00 15.00
20.00
2000 2001 2002 2003 2004 2005 1Q06 2Q06 3Q06 4Q06 1Q07 Inflation y-o-y
1-month SBI
3 5
7 9
11 13
15
20 03
20 04
Ju n-0
5 Ju
l-0 5
Au g-0
5 Se
p-0 5
Oc t-0
5 No
v-0 5
De c-0
5 Ja
n-0 6
Fe b-0
6 Ma
r-0 6
Ap r-0
6 Ma
y-0 6
Ju n-0
6 Ju
l-0 6
Au g-0
6 Se
p-0 6
Oc t-0
6 No
v-0 6
De c-0
6 Ja
n 0 7
Fe b0
7 Ma
r0 7
SBI 1 month BI Rate
7
Exchange Rate Modest Appreciation - Low Volatility
In Q12007, the Rupiah maintained an appreciating trend with declining volatility compared to previous quarter. The level of the Rupiah was bolstered by improved performance in the Balance of
Payments, enhanced risk management and continued attractiveness of yields on Rupiah instruments
Calculated as an average, the Rupiah strengthened from Rp 9,132USD in Q42006 to Rp 9,102USD in Q12007, with volatility as low as 0,57 in Q12007
Average Exchange Rate Highlights
8,000 8,500
9,000 9,500
10,000 10,500
11,000
J u
l- 5
A u
g -0
5 S
e p
-0 5
O c
t- 5
N o
v -0
5 D
e c
-0 5
J a
n -0
6 F
e b
-0 6
M a
r- 6
A p
r- 6
M a
y -0
6 J
u n
-0 6
J u
l- 6
A u
g -0
6 S
e p
-0 6
O c
t- 6
N o
v -0
6 D
e c
-0 6
J a
n -0
7 F
e b
-0 7
M a
r- 7
- 1.0
2.0 3.0
4.0 5.0
6.0 7.0
8.0
Daily Exchange Rate Volatility
Average Volatility
RpUSD Volatility,
8500 9000
9500 10000
10500 11000
1-Jun-05 22-Jun-05
13-Jul-05 3-Aug-05
24-Aug-05 14-Sep-05
5-Oct-05 26-Oct-05
16-Nov-05 7-Dec-05
28-Dec-05 18-Jan-06
8-Feb-06 1-Mar-06
22-Mar-06 12-Apr-06
3-May-06 24-May-06
14-Jun-06 5-Jul-06
26-Jul-06 16-Aug-06
6-Sep-06 27-Sep-06
18-Oct-06 8-Nov-06
29-Nov-06 20-Dec-06
11-Jan-07 1-Feb-07
22-Feb-07 15-Mar-07
2 4
6 8
10 12
14
ID R LHS BI
rate RH S .
8
Balance of Payments is Improving
The current account recorded a surplus of US2.1 billion in Q4, contributed to a record high surplus of US9.6 billion 2.6 of GDP for the whole 2006.
The capital and financial account recorded a surplus of US2.2 billion in Q4 and US2.5 billion for 2006. Global liquidity and stable domestic macroeconomic
environment contributed to the larger surplus in capital and financial account.
Strong BOP performance contributed to a steady increase in official reserves. By the end of March 2007, international reserves reached US 47.2 billion, equivalent with
4.7 months of imports and official debt repayments.
Record high current account surplus Official Reserves Increased Significantly
-10,000 -5,000
5,000 10,000
15,000
2001 2002
2003 2004
2005 2006
current account overall balance
capital financial account
43 35
36 36
32 28
47 7.1
4.7 5.7
4.3 4.5
6.6 6
10 20
30 40
50
2001 2002
2003 2004
2005 2006
Q107 1
2 3
4 5
6 7
8
FX reserves . Months of import and official debt repayment LHS
Millions of USD Billions of USD
Months
9
Buoyant Exports Supported By Strong External Demand
Strong export performance driven by high world commodity prices and
continued robust growth in the world s economy and international
trade
Non Oil-Gas Exports by Group of Commodities
millions of USD
Highlights
Overall, non-oil gas exports grew by 20.7 in 2006, slightly higher than
previous estimate 19.
Non-oil gas exports in Q1 2007 grew by 22.2 y-o-y
Non-oil gas exports for Q1 2007 is higher
than initial
forecast, supported by continued growth of
world commodity prices as reflected in rising commodity prices.
1000 2000
3000 4000
5000 6000
7000 8000
1 3
5 7
9 1
1 1
3 5
7 9
1 1
1 3
5 7
9 1
1 1
3 5
7 9
1 1
1 3
5 7
9 1
1 1
3 2002
2003 2004
2005 2006
2007 1000
2000 3000
4000 5000
6000
Total LA Agriculture
Mineral Manufacturing
10
Imports Start to Expand but at Slower Rate than Exports
Low import growth linked mainly to weakening domestic demand
Non Oil-Gas Imports by Group of Commodities millions of USD
Highlights
Imports picked up in Q4-2006, especially for raw materials and
capital goods. However, the growth of non-oil gas imports for the whole
2006 still stood at a low 7.1.
During Q1 2007, non oil-gas imports CF grew at 11.6
Import growth in Q1 2007 is higher than initial forecast in line with
growth in domestic production and consumption
1000 2000
3000 4000
5000 6000
7000
1 3
5 7
9 1
1 1
3 5
7 9
1 1
1 3
5 7
9 1
1 1
3 5
7 9
1 1
1 3
5 7
9 1
1 1
3 2002
2003 2004
2005 2006
2007 500
1000 1500
2000 2500
3000 3500
4000 4500
5000
Total LA Consumption Goods
Raw Material Aux. Goods Capital Goods
11
Fiscal Policy 2007
-2.4 -1.3
-1.7 -1.3
-0.5 -1
-1.1
-3 -2.5
-2 -1.5
-1 -0.5
2001 2002
2003 2004
2005 2006
2007
Key highlights Continued fiscal discipline
In order to stimulate growth the Government decided to combine fiscal policy between consolidation and
stimulate.
Government support on infrastructure financing and establishment RMU for anticipated risk
Improve efficiency effectiveness of government expenditure to stimulate growth infrastructure, social
expenditure through education and health, subsidies
Possibility of 2007 Budget Deficit widening to anticipate some additional urgent spending i.e. natural disaster,
government
target on
agriculture and
energy alternative program
Preparations under way for medium-term Budget and treasury
reforms, including
performance and
multi-year budget, treasury single account, accrual basis
Consolidation of fiscal decentralization
Improved fiscal balance Regional borrowing and municipal bonds, subj ect t o
Minister of Finance approval Regional f inancial inf ormat ion syst em t o support
decent ralizat ion
based on
t ransparency and
accountability
1 Based on 2007 budget
Consolidation Stimulate
Consolidate
Budget Deficit, of GDP
2001 2002
2003 2004
2005 2006
2007 2.8
3.4 1.5
1.7 1.7
1.4 1.3
Primary balances of GDP
12
Source: Ministry of Finance
Fiscal consolidation and sustainability Outperformed deficit at 1.0 GDP,
below target of 1.3 Total debtGDP ratio at 39 less than
estimated 43.1 Capital spending exceeded initial budget
Budget financing to rely more on domestic
sources primarily government debt Increase expenditures for the regions
2006 State Budget
IDR trillion Realization
of GDP Total revenues grants
Rp. 637.8 19.1
Tax revenues 409
12.3 Non-tax revenues
