ProdukHukum BankIndonesia
REPUBLIC OF INDONESIA
Recent Economic Developments
October, 2010
Published by Investors Relations Unit – Republic of Indonesia
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Bank Indonesia
International Directorate
Investor Relations Unit
Sjafruddin Prawiranegara Building, 5th floor
Jalan M.H. Thamrin 2
Jakarta, 10110 Indonesia
+6221 381 8316
+6221 381 8319
+6221 381 8298
+6221 350 1950
Elsya Chani: [email protected]
Firman Darwis: [email protected]
Dyah Miranti Wulandari: [email protected]
www.bi.go.id
Table of Content
Executive Summary
4
Improving International Perception
8
Sustainable Economic Growth
11
Financial Development and Current Policies
20
Prudent Fiscal Management
26
Executive Summary
Executive Summary: Strong Growth Continued
One of the only 3 economies which generate positive growth in 2009
The overall picture shows that economic growth remains robust bolstered by a more balanced
growth structure which lead to a strong growth prospect for overall 2010
The economy maintained brisk growth throughout Q3-2010, driven mainly by household consumption and exports.
Export growth is supported mainly by strong demand from China and India and rising international commodity prices.
For the whole 2010, economic growth is projected in the range of 6.0%-6.3%. Going forward in 2011, growth is
forecasted at 6.0%-6.5%, driven by continued robust household consumption, improved external sector performance as
the global economy charts further recovery and higher investment.
The cumulative investment realization up to the 1st semester of 2010 is Rp92.9 trillion or grew by 39.9% (yoy).
Investment is expected to accelerate from the 2nd half of 2010 as demand for additional production capacity
materializes.
The current surge of capital inflows is attributable to continued improvements in the investor’s sentiment regarding
Indonesia’s promising growth prospects. As a precautionary measures, a policy mix has been implemented and is
sufficient to maintain monetary and financial system stability, amid the surge in capital flows.
Strengthening performance in exports continues to produce current account surplus in Q3-2010, despite in smaller
amount as compared to the preceding quarter. The capital and financial account again produced a sizeable surplus on
the back of heavy capital inflows that have bolstered the value of rupiah. Taken together, the balance of payments is
expected to chart a hefty surplus in Q3-2010
International reserves at end of September 2010 rising to USD86.5 billion or equivalent to 6.5 months of imports and
servicing of official debt.
5
Executive Summary: Preserved Macroeconomic Stability
CPI Inflation in September 2010 reached 0.44% (mtm) or 5.80% (yoy). Pressure mostly stemmed from the surge in the
volatile foods from seasonal effect of recent festivities. Even so, core inflation held at a modest 4.02% (yoy), supported in part
by the appreciating trend in exchange rate.
BI decided to hold the reference rate at 6.5% in October 2010. The current level of BI Rate is still consistent with
achievement of the inflation target and remains conducive in safeguarding financial stability and promoting bank intermediation
for supply-side response to accelerated demand. Nonetheless, BI has taken note of the rise inflationary pressure amid heavy
inflows of foreign capital and considerable levels of excess liquidity. At this condition, BI regards the economic liquidity
management as a priority.
Stability in the banking system remains firm alongside steady improvement in credit growth. The solid condition is reflected
in high CAR and subdued level of gross NPLs at below 5%.
Banking intermediation has strengthened further, as evident in credit growth up to September 2010 which reached 21.2%
(yoy). Up to September 2010, working capital credit has expanded at a faster rate than consumption credit, and looking
forward, credit growth will continue to be channelled into productive sectors. Therefore credit growth for overall 2010 is
forecasted at 22%-24%, in line with the business plans prepared by banks.
Up to September 2010, almost 90% of the funding requirement for state budget financing has been completed which focused
on domestic source of financing.
6
Executive Summary: Prudent Fiscal Management
With strong foundation of economic fundamental and budgetary achievement in 2009, we are confident
toward the fiscal targets for 2010.
We continue to perform a prudent fiscal management in 2010 with strong commitment to fiscal consolidation, aiming on:
- continue declining debt-to-GDP ratio
- diversifying government debt profile,
- reducing funding reliance on international capital market.
In May 2010, the parliament approved the revised budget deficit of US$14.5 billion or 2.1% of GDP which allows for
adequate subsidies due to rising commodity prices and lower tax revenue in line with the tax incentive program to various
sectors
On the financing front, we continue to diversify our sources of financing requirement and up to September 2010, we have
completed almost 90% of our funding requirement.
Public debt is generally balanced between domestic and external sources with continued declining proportion of external
debt since 2004.
7
Improving International Perception
Improving International Perception: Acknowledged by Rating Agencies
Resilient economy, which impressively navigates through the global crisis and with growing confidence in economic outlook, the
Republic continued to receive good reviews, especially from Rating agencies
9
Japan Credit Rating Agency, Ltd (July 13, 2010): upgraded Indonesia's sovereign rating to Investment Grade from BB+ to BBBwith stable outlook. The first upgrade to reach investment grade in the last 13 years reflects enhanced political and social stability,
sustainable economic growth , alleviated public debt burden as a result of prudent fiscal management, reinforced resilience to external
shocks stemming from the foreign reserves accumulation and an improved capacity for external debt management and efforts made by
the current administration to outline the framework to deal with structural issues such as infrastructure development.
Moody’s Investors Service (June 21, 2010): revised the outlook of Indonesia’s foreign and local-currency Ba2 sovereign debt
ratings to positive from stable. The positive outlook broadly reflects the country's capacity for sustained strong growth, the overall
stability and effectiveness of its fiscal and monetary policies, and expectations of further improvements in the government's financial and
debt position.
S & P (March 12, 2010): upgraded Indonesia’s long-term foreign currency rating to BB from BB- with positive outlook which
indicates that Indonesia has big possibility to be upgraded within a year, even maybe faster. The main factor supporting this decision is
steadily improving debt metrics and growing foreign currency reserves which reduced vulnerability to shock with continued cautious fiscal
management.
Fitch Ratings (January 25, 2010): upgraded the Republic of Indonesia’s sovereign rating to ‘BB+’ from ‘BB’ with stable outlook
The rating action reflects Indonesia’s relative resilience to the severe global financial stress test of 2008-2009 which has been
underpinned by continued improvements in the country’s public finances.
Improving International Perception: Significant Raise in Perception Indices
10
World Economic Forum – The Global Competitiveness Report 2010 – 2011 (September 15, 2010) reported that Indonesia posts
an impressive gain of 10 places, mainly driven by a healthier macroeconomic environment and improved education indictors.
Indonesia considered to successfully maintain a relatively healthy macroeconomic environment throughout the crisis. While most other
countries saw their budget deficits surge, Indonesia kept its deficit under control”
The IMD Competitive Center (May 19, 2010) reports a major improvement in Indonesia's global competitiveness, with
Indonesia moving up from 42nd to 35nd place among a total of 57 major nations surveyed worldwide. For Indonesia, the
improvement in 2010 has been achieved through significant gains in economic performance, followed by government efficiency and
infrastructure improvement.
OECD (April 2, 2010): upgraded Indonesia’s Credit Risk Classification (CRC) from category 5 to 4. This upgrade was a timely
acknowledgement by the developed economies of the consistent economic improvement. This upgrade would significantly improve
Indonesia’s credit standing in front of the creditor countries especially the credit exports creditor countries which eventually would
decrease the debt burden.
Sustainable Economic Growth
Real Sector: Indonesia Development Policy
Indonesia Development Policy is based on a ‘Triple Track Strategy’
1st
2nd
Pro-Growth:
Increase Growth by prioritizing export and investment
Pro-Job :
Boost up the real sector in order to create jobs
Pro-Poor:
3rd
12
Revitalize agriculture, forestry, maritime, and rural economy
to reduce poverty
Source: Coordinating Ministry for Economic Affairs
13
Strong Growth Prospect Continues
2010 Forecast
Main Factors Behind The Forecast
With more upbeat confidence to the economy, exports and investment are expected to keep climbing, providing
additional boost to higher consumption in support of higher levels of economic growth.
Looking forward, steady improvement is predicted in global and domestic economic developments. Therefore in
2011, the forecasted rate of growth is 6.0%-6.5%. This growth will be driven by continued robust household
consumption, improved external sector performance as the global economy charts further recovery and higher
investment in tandem with mounting domestic and external demand.
Global economic recovery will produce renewed acceleration in exports. The global economy is predicted to enter
an expansionary phase in 2010. Renewed momentum is predicted in the economies of Indonesia’s major trading
partners. The recovery will induce higher volume of international trade which will accelerate Indonesia’s export. This
strengthened performance will position exports as one of the main engines of economic growth in 2010.
Indonesian exports characteristics which is based on primary commodities has also supported export growth
acceleration.
Household consumption is forecasted to remain strong. The strengthening global economic outlook for 2010 will
given added momentum to Indonesia’s exports, which in turn will produce an overall increase in private incomes.
will remain strong
Higher investment will also contribute to rising incomes, thus paving the way for stronger public purchasing power.
Inflation
Signs of future inflationary pressures until end of 2010 are noted, which mainly predicted from administered prices
and volatile food seasonal uncertainties. However, BI is positive to contain the inflation level within the target
range, and will keep a close watch on the rising inflationary pressure and make the necessary adjustments to
monetary policy responses to ensure that inflation remains on track with the established targeting range at 5%
1% in 2010 and 2011.
GDP Growth
is forecasted to be at
the upper limit of 6.0%6.3% projection
Export
is expected to chart
higher growth
Private
Consumption
is estimated to be on
the upper limit of
target range of 5.0%
1%
13
Source: Bank Indonesia.
Robust and Stable Economy Continues to Chart Positive Growth
Optimistic on high growth prospects
The Indonesian economy grew by 6.2% in Q2-2010 amid persistent risks of global uncertainties, particularly in regard to the slowdown in
China's economy and the outlook for US economic recovery. The major improvement was a result from increase in exports and investment,
while private consumption remained strong.
The Indonesian economy maintained brisk growth throughout Q3-2010, driven mainly by household consumption and exports.
The buoyant level of household consumption has been fuelled by widespread availability of consumer financing, mounting consumer
optimism and low import prices. Alongside this, export growth is driven mainly by strong demand from China and India and rising
international commodity prices. With consumption and exports forging ahead, investment has begun to pick up, as indicated by increased
imports of machinery and raw materials and rising levels of working capital credit.
Looking forward, steady improvement is predicted in global and domestic economic developments. In 2010, economic growth is
projected in the range of 6.0%-6.3%. For 2011, the forecasted rate of growth is 6.0%-6.5%. This growth will be driven by continued robust
household consumption, improved external sector performance as the global economy charts further recovery and higher investment in
tandem with mounting domestic and external demand.
Sustainable Economic Growth
% yoy
6.3
7.0
6.0
6.2
6.0
5.5
4.5
5.0
4.0
3.0
2.0
1.0
0.0
2006
14
(*): Preliminary
Source: Ministry of Finance, BPS.
2007
2008
2009
2010-Q2
Source: Bank Indonesia.
Inflation: Noted Pressure But Core Is Stable
The monetary policy stance is directed towards maintaining consistently low inflation while making adequate provision for
measures to strengthen economic recovery.
Inflation
Inflation Expectation – Consensus Forecast
CPI inflation in September 2010 reached 0.44% (mtm) or 5.80% (yoy). Pressure mostly stemmed from the surge in volatile foods inflation from
seasonal effect of recent festivities. Nevertheless, inflationary pressure reflected in core inflation held at a modest 4.02% (yoy), supported in part by
the appreciating trend in the exchange rate. Similarly, inflationary pressure from administered prices was comparatively low at 5.60% (yoy), due to
the absence of strategic decisions affecting government-set prices during September 2010.
Going forward, BI recognized of the risks that may fuel inflation up to 2011:
•
The escalating trend in demand, which is growing faster than supply.
•
Anomalies in weather conditions may persist, with potential to disrupt production and distribution of staple needs.
•
The possibility of planned increases in administered prices.
BI is keeping a close watch on this potential inflationary pressure and is strengthening policy coordination with the Government at both the central
and regional levels. BI will respond with the policy mix necessary to keep inflation on track with the established target at 5% 1% in 2010 and 2011
and 4.5% + 1% in 2012
15
Source: Bank Indonesia
Monetary Policy Stance
In the Board of Governors' Meeting convened on 5 October 2010, Bank Indonesia decided to hold the BI Rate at 6.50%.
The decision is based on a comprehensive evaluation of the performance and outlook for the Indonesian economy, which is
showing overall improvement. BI has taken note of the rise inflationary pressure amid heavy inflows of foreign capital and
considerable levels of excess liquidity. BI put the economic liquidity management as higher priority.
The current level of BI Rate is consistent with achievement of the inflation target and remains conducive in safeguarding financial
stability and promoting bank intermediation for supply-side response to accelerated demand.
BI Rate and Inter
%
10.5
BI Rate
10
Interbank O/N Rate
9.5
9
8.5
8
7.5
7
6.5
6
Sep-10
Aug-10
Jun-10
Jul-10
Apr-10
May-10
Feb-10
Mar-10
Jan-10
Nov-09
Dec-09
Sep-09
Oct-09
Aug-09
Jun-09
Jul-09
Apr-09
May-09
Feb-09
Mar-09
Jan-09
Nov-08
Dec-08
Sep-08
Oct-08
Aug-08
Jun-08
Jul-08
5.5
16
Source: Bank Indonesia.
Balance of Payments: Preliminary Estimates for Q3-2010
• Current account in Q3/2010 is estimated to post a surplus. However, the surplus will fall short of the Q2/2010 surplus
primarily due to faster pace of import growth compared to export growth as a result of vigorous domestic economic activity, rupiah
appreciation, and lower oil & gas prices. The downturn in the current account is projected to be covered by a significant surplus in
the capital and financial account. The bulk of the surplus will come from portfolio investment in response to abundant global
liquidity and attractive investment yield. In addition, the surplus will also be boosted by FDI inflows in line with sound
macroeconomic outlook and relatively low labor cost.
• With those prospects, overall balance of payments in Q3/2010 is estimated to post a higher surplus than preceding
quarter.
• Accordingly, international reserves at end of Q3/2010 (September) mounted to US$ 86.55 billion (equivalent to 6.5 months of
imports and official external debt service payments).
Official BOP statistics for Q3-2010 will be released on November 2010.
Balance of Payments
Million USD
Million M
USD
Indonesia's BOP
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
6,000
4,000
2,000
0
-2,000
-4,000
-6,000
-8,000
Q1
Q2
Q3
Q4
Q1
2007
Curren t Acc.
Q2
Q3
Q4
Q1
Q2 Q3* Q4* Q1* Q2* Q3*
2008
Cap . & Fin . Acc
2009
2010
Reserve Assets (RHS)
17
Source: Bank Indonesia
Balance of Payments Q2–2010
Indonesia's Balance of Payments
The current account in Q2/2010 posted
a surplus of about US$1.8 billion,
boosted by upbeat performance in nonoil/gas trade balance, the gas trade
balance and the current transfers. The
surplus was nevertheless down from the
previous quarter (US$2.1 billion surplus)
due to the increased deficit in the oil trade
balance and the income account.
The capital and financial account in
Q2/2010 recorded a surplus at US$3.3
billion. All major components of the
capital and financial account,
encompassing direct investment, portfolio
investment and other investment,
recorded surplus. Despite this, the overall
capital and financial account surplus was
down from the preceding quarter (US$4.3
billion surplus), mainly as a result of
negative spillover effects from the debt
crisis in Europe that have led to reduced
inflows of portfolio investment.
(million US$)
ITEMS
Q1
Q2
2010
Q4*
Total
Q1*
Q2*
I. CURRENT ACCOUNT
A. Goods, net
1. Non-Oil & Gas, net
2. Oil & Gas, net
B. Services, net
C. Income, net
D. Current Transfers, net
126
22,916
15,130
7,786
-12,998
-15,155
5,364
2,508
6,884
5,335
1,549
-2,743
-2,742
1,109
2,480
8,365
6,436
1,928
-3,310
-3,776
1,201
2,157
8,488
6,647
1,842
-3,509
-4,072
1,248
3,602
11,395
8,388
3,007
-4,546
-4,551
1,303
10,746
35,133
26,806
8,326
-14,108
-15,140
4,861
2,068
8,418
6,460
1,958
-3,595
-3,922
1,168
1,834
8,985
7,037
1,948
-3,697
-4,642
1,188
II. CAPITAL & FINANCIAL ACCOUNT
A. Capital Account
B. Financial Account
1. Direct Investment
a. Abroad
b. in Indonesia
2. Portfolio Investment
a. Assets
b. Liabilities
3. Other Investment
a. Assets
b. Liabilities
-1,832
294
-2,126
3,419
-5,900
9,318
1,764
-1,294
3,059
-7,309
-10,755
3,446
1,593
19
1,574
453
-1,451
1,904
1,950
133
1,817
-829
-307
-522
-1,822
29
-1,851
400
-1,047
1,447
1,893
362
1,532
-4,144
-2,271
-1,873
2,507
34
2,474
472
-515
987
2,972
-331
3,303
-970
-6,325
5,355
1,270
14
1,255
604
64
540
3,521
-307
3,828
-2,869
-3,702
833
3,548
96
3,453
1,928
-2,949
4,877
10,336
-144
10,480
-8,812
-12,605
3,793
4,274
18
4,256
1,745
-627
2,372
6,159
-409
6,569
-3,648
-4,080
432
3,334
0
3,334
1,171
-1,328
2,499
1,142
-99
1,241
1,021
1,388
-367
III. TOTAL (I+II)
IV. NET ERRORS & OMISSIONS
V. OVERALL BALANCE (III+IV)
-1,706
-239
-1,945
4,101
-146
3,955
658
394
1,052
4,664
-1,118
3,546
4,872
-918
3,954
14,294
-1,788
12,506
6,342
279
6,621
5,168
253
5,421
*)
18
2008
2009
Q3*
: provisional figures
Source: Bank Indonesia
Main Banking Indicators
Banking system stability held firm amid the onset of renewed credit expansion (data as of August 2010)
* Preliminary figures, operational risk is calculated in August 2010 figures
19
Source: Bank Indonesia
Financial Development and Current Policies
Sound Financial Sector
Stability in the banking system remains firm alongside steady improvement in credit growth.
Sufficient CAR (%)
Sound level of NPLs (%)
5.0
25.0
4.5
20.5
20.0
19.3
19.3
17.4
16.2
19.1
19.2
17.8
17.4
4.0
16.5
16.3
gross NPL
net NPL
3.5
3.0
15.0
2.5
2.0
10.0
1.5
1.0
5.0
0.5
-
-
Dec-06 Dec-07 Dec-08 Dec-09 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10
Dec-06 Dec-07 Dec-08 Dec-09 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10
• Financial system stability up to August 2010 is well maintained, confirmed by Financial Stability Index (FSI) which remain
unchanged at 1.84 well below the threshold (2.00) set as an early warning indicator. This indicate the robustness of the Indonesian
financial system. By the end of 2010, we expect FSI to be ranged between 1.45 to 2.02 with a 1.74 baseline, owing to the positive
macroeconomic outlook.
• Banking industry remains in a stable condition and convinced to be run prudently, which is reflected in the well-maintained Capital
Adequacy Ratio (16.3%, as of end of August 2010) and safe level of gross Non-Performing Loans at 3%, as of end of August
2010.
21
Source: Bank Indonesia.
Banking intermediation has strengthened further
•
Banking Intermediation continues to improve. Loan extensions as of September 2010 recorded at Rp1.6 trillion. Hence,
loan growth has reached 21.2% (yoy). Third party deposits increased, although not as rapidly, with a 14.30% (yoy) growth.
•
Up to September 2010, working capital credit has expanded at a faster rate than consumption credit, and looking
forward, credit growth will continue to be channelled into productive sectors. Therefore credit growth for overall 2010 is
forecasted at 22%-24%, in line with the business plans prepared by banks. Key to the credit expansion is enhanced
confidence on the economic prospect.
LoanGrowth
Growth (yoy)
Loan
(yoy)
60%
50%
40%
30%
20%
10%
-20%
W.Cap
Inv
Cons.
2010
2009
2008
2007
2006
2005
2004
2003
-10%
2002
0%
Total
-30%
22
Source: Bank Indonesia.
Manageable Capital Flows
• The surge of capital inflows is attributable to continued improvements in the investor’s sentiment regarding
Indonesia’s promising growth prospects.
• The stock market continues to improve with the JSX composite
price index exceeding 3,500 at the end of September 2010.
• The price of SUN has continued to increase in line with strong
demand. Such conditions subsequently lowered the SUN yield to a
range of 7.6% at the end of September 2010.
4000
24.0
Govt Bond Benchmark (%)
3,501
25,000
20,000
15,000
10,000
5,000
-
SUN
SBI
Portfolio Flows:
Government Securities (SUN) and BI Certificates (SBI) and Equity
Portfolio Flows:
Government Securities (SUN) and BI Certificates (SBI) and Equity
Jakarta Composite Index (RHS)
million USD
30,000
6,762
10,918
5,444
11,654
2,179 11,285
608 9,282
565 7,459
752 7,795
947 7,745
6726,840
1,3986,743
1,385 7,585
2,233 8,569
2,034 8,553
3,587 9,061
2,438 9,139
3,708
9,457
4,490
10,691
4,883
11,050
4,674
11,417
5,332
12,392
6,314
12,895
6,890
14,412
9,190
16,357
3,966
15,684
4,574
17,698
4,672
19,003
6,131
19,792
7,202
20,297
• Foreign holdings in SBI by end of September 2010 reached $7.2
billion, which is approximately 25% of total SBI, and in SUN
reached $20.2 billion or around 29% of total SUN.
Foreign Holdings on
Government Securities (SUN) and BI Certificates (SBI)
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
• The influence of such positive perceptions was, among others,
illustrated by the upward trend in capital flows to all financial
market instruments like BI certificates, stock, and government
securities.
USD Milion
IDR/USD
6000
8,900
4000
9,400
3500
19.0
3000
2500
14.0
2000
0
10,400
-2000
2000
-4000
9.0
7.62
1500
9,900
-6000
Equity
Central Bank Bill
IDR/USD
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
1000
23
-8000
11,400
11,900
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
4.0
10,900
Government Bond
Source: Bank Indonesia, Bloomberg, Ministry of Finance.
Policy Response to Cope the Challenge in Financial Sector
•
Stimulating intermediary function through macro and micro-prudential regulatory incentives. In order to
balance growth of the banking sector and the economy as well as financial system stability, Bank Indonesia has and
will enact several policy responses, which covers both macro and micro prudential regulatory incentives as follows:
A.
Regulatory policy concerning Net Open Position
Given the large influx of investment in foreign exchange, Bank Indonesia has relaxed its regulatory stance
with regards to net open position maintenance. In its new policy, Bank Indonesia will allow banks to offset
foreign exchange exposures in their on-balance sheet with the exposures in the off-balance sheet. Hence the
net exposures will be the ones used in the calculation of net open position limit which is 20% of bank’s
capital. Prior to the easing, the limit was calculated separately for on and off balance sheet.
B.
Regulatory policy concerning Minimum Holding Period for SBI and widening the Interbank Market
Corridors
In order to deepen the financial market as well as lessen the volatility of foreign capital flow, BI has widen the
interest rate corridor of the interbank market. The enacment of this policy is expected to deepen the interbank
market as well as to be resulted in a more in tune market rate and aligned to BI rate.
Whilst the policy to introduce the minimum holding period is to lessen the volatility of foreign capital flows
especially with respect to invested foreign portfolio in BI Sertificates (SBI).
24
Source: Bank Indonesia.
Policy Response to Cope the Challenge in Financial Sector
C.
Regulatory policy concerning Rupiah Statutory Reserve
Bank Indonesia decided to raise the primary statutory reserve requirement for rupiah funds to 8% and to
introduce an LDR-based reserve requirement. This policy is intended to curb mounting inflationary pressure
through management of excess banking liquidity. The new reserve requirement has been set in consideration of
the present condition of banking liquidity, hence, does not diminish the capacity of banks to pursue credit
expansion in line with existing bank business plans while upholding prudential banking principles. The LDRbased reserve requirement is established with a range that will promote the banking intermediation function while
upholding prudential banking principles
D.
Policy for Micro, Small, and Medium Enterprises (MSME)
Aside form regulatory policy, Bank Indonesia has also strive to make effort to push the intermediation function
and financial deepening especially targeted for MSME. This policy is conducted through various program such
as:
25
•
linkage program with rural banks,
•
establishing business data and information facilities for sectors with high potential, as well as financial
education programs;
•
Simplification of the Uniform Classification System on Asset Quality for MSME
•
In cooperation with the Govt. Credit Guarantee Agency, and Several Commercial Banks, Setting up a credit
guarantee scheme for MSME and KUR;
•
Lowering of Risk Weights for CAR calculation for exposures on certain MSME loans that has been backed
by insurance
Source: Bank Indonesia.
Prudent Fiscal Management
State Budget 2010 and Revised Budget 2010
In IDR trillion
Budget 2010
949.6
742.7
Revised Budget 2010
992.4
743.3
205.4
247.2
1,047.7
1,126.1
725.2
781.5
-Departm ental / Line Minis tries
340.1
366.2
-Non-Departm ental / non Line Minis tries
385.1
415.3
-Energy Subs idies
i. Fuel
106.5
68.7
143.9
88.9
37.8
55.1
322.4
344.6
C. Surplus/(Deficit) Budget (A -B)
% GDP
-98.0
(1.6)
-133.7
(2.1)
D. Financing
I. Dom es tic
II. International (net)
98.0
107.9
-9.8
133.7
133.9
-0.1
ITEMS
A. Revenue and Grant
1. Tax
2. Non tax revenue
B. Expenditure
I. Central Government
ii. Electricity
II. Transfer to Region
MACRO ASSUMPTIONS 2010
NO
27
Budget
1
Growth
2
Inflation
3
Exc hange rates (/USD)
4
SBI
5
Oil Pric e (USD/Barrel)
6
Oil Lifting (mil.Barrel/Day
Rev ised Budget
5,5%
5,8%
5%
5,3%
10.000
9.200
6,50%
6,5%
65
80
0,965
0,965
Source: Ministry of Finance
Budget Deficit / GDP
Public Finances is a fundamental strength of the Indonesian economy; most of Indonesian ratios are strong or
stronger than its peers; Fiscal Budget deficit has traditionally been limited and remained contained in 2009. Fiscal Stimulus
did not impact much on fiscal deficit in 2009
Budget Deficit / GDP (%)
28
Budget Deficit / GDP 2009* vs. Emerging Markets Countries
Source: Ministry of Finance
Financing Trend 2005-2010
Budget Deficit Financing
29
Source: Ministry of Finance
Debt Figure, 2004 - 2010
Debt Composition
Debt to GDP Ratio (% of GDP)
60%
100%
57.5%
47.3%
50%
75%
39.0%
40%
35.2%
50%
50%
47%
47%
50%
50%
53%
53%
2004
2005
2006
2007
52%
47%
45%
53%
55%
2009
Aug-10
33.1%
28.3%
30%
27.0%
50%
20%
25%
10%
48%
0%
2004
2005
2006
2007
2008
2009
2010
Notes:
* = Preliminary
** = Very Preliminary
*** = Very Very Preliminary, GDP Number Based on Revised Budget 2010 Assumption
0%
Domestic Debt
2008
External Debt
Notes:
^ = Based on debt outstanding as of Aug 2010
Table of Debt to GDP Ratio
2004
2005
GDP
2,295,826.20
2,774,281.00
3,339,480.00
3,949,321.40
4,954,028.90
5,613,441.74
6,253,789.50
Debt Outstanding (billion IDR)
- Domestic Debt (Securities)
- Foreign Debt (Loan+Securities)
1,299,504.02
653,032.15
646,471.87
1,313,294.73
658,670.86
654,623.87
1,302,158.97
693,117.95
609,041.02
1,389,415.00
737,125.54
652,289.46
1,636,740.72
783,855.10
852,885.62
1,590,656.07
836,308.91
754,347.16
1,654,193.71
905,619.60
748,574.11
Debt to GDP Ratio
- Domestic Debt to GDP Ratio
- Foreign Debt to GDP Ratio
30
End of Year
2006
2007
2008*
2009**
Aug 10***
56.60%
47.34%
38.99%
35.18%
33.04%
28.34%
26.45%
28.44%
28.16%
23.74%
23.60%
20.76%
18.24%
18.66%
16.52%
15.82%
17.22%
14.90%
13.44%
14.48%
11.97%
Notes:
* = Preliminary
** = Very Preliminary
*** = Very Very Preliminary, GDP number based on Budget 2010 Assumption
[Outstanding as of Aug, 2010]
Source: Ministry of Finance
Healthier Maturity Profile of Government Debt
Maturity profile has been improving over time towards a more balanced structure.
External bonds are longer dated, with the shortest ones coming due in 2014
Tradable Government Securities – Maturity Profile (As of 30 September 2010)
31
Source: Ministry of Finance, Bloomberg.
Note: EIU estimates used for exchange rates.
Holders of Tradable Government Securities
Increasing proportion of non-bank domestic holders of government securities reflects development in the market
base
Holders of Tradable Domestic Gov’t Securities
Foreign Holdings by Maturity, September 28, 2010
(US$ billion)
75
0 - 1 year
10% 0 - 2 years
3%
60
19%
25% 24% 27% 28%
19% 20% 21%
2 - 5 years
18%
17%
16%
45
3%
8% 13%
25% 17%
21%
34%
24%
34% 35% 35%
30%
>5 years
69%
34% 34% 37% 36%
30
Development in Domestic Market
15
72% 75% 66% 59% 54% 48%
47% 45% 44% 41%
42% 36% 36%
Domestic Banks
Domestic Non-Banks
Sep-10
Jul-10
Jul-10
Jun-10
Feb-10
Jan-10
Dec-09
Mar-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
0
Foreign Holders
Source: Ministry of Finance. As of September 28, 2010. Assume exchange rate of Rp 9,200 / US$.
32
Yearly issuance schedule publicly available
Established primary dealership infrastructure
Benchmark series
Active communication with market participants
Variety of domestic securities available
-
T-Bills, fixed rate, floating rate, variable rate, zero coupon,
retail bonds and Sukuk
Macroeconomic Indicator Projection 2011
2010
Indicators
2011
Budget
Revised
Budget
Proposed
Economic Growth (%)
5,5
5,8
6,4
Inflation (%)
5,0
5,3
5,3
Exchange Rate (IDR/US$)
10.000
9.200
9.250
Interest Rate (3-Month) (%)
6,5
6,5
6,5
ICP (US$/barrel)
65
80
80
0,965
0,965
0,970
Oil Lifting (MBCD)
Macro Economic Policy Target 2011:
33
•
Unemployment: 7,0%
•
Poverty: 11,5% - 12,5%
•
Economic growth: 6,4%
•
Minimum investment requirement IDR 2.243,8 Trillion
•
1% economic growth will absorb 400 thousand work force
Source: Ministry of Finance
Recent Economic Developments
October, 2010
Published by Investors Relations Unit – Republic of Indonesia
Address
Tel
Facsimile
Website
Bank Indonesia
International Directorate
Investor Relations Unit
Sjafruddin Prawiranegara Building, 5th floor
Jalan M.H. Thamrin 2
Jakarta, 10110 Indonesia
+6221 381 8316
+6221 381 8319
+6221 381 8298
+6221 350 1950
Elsya Chani: [email protected]
Firman Darwis: [email protected]
Dyah Miranti Wulandari: [email protected]
www.bi.go.id
Table of Content
Executive Summary
4
Improving International Perception
8
Sustainable Economic Growth
11
Financial Development and Current Policies
20
Prudent Fiscal Management
26
Executive Summary
Executive Summary: Strong Growth Continued
One of the only 3 economies which generate positive growth in 2009
The overall picture shows that economic growth remains robust bolstered by a more balanced
growth structure which lead to a strong growth prospect for overall 2010
The economy maintained brisk growth throughout Q3-2010, driven mainly by household consumption and exports.
Export growth is supported mainly by strong demand from China and India and rising international commodity prices.
For the whole 2010, economic growth is projected in the range of 6.0%-6.3%. Going forward in 2011, growth is
forecasted at 6.0%-6.5%, driven by continued robust household consumption, improved external sector performance as
the global economy charts further recovery and higher investment.
The cumulative investment realization up to the 1st semester of 2010 is Rp92.9 trillion or grew by 39.9% (yoy).
Investment is expected to accelerate from the 2nd half of 2010 as demand for additional production capacity
materializes.
The current surge of capital inflows is attributable to continued improvements in the investor’s sentiment regarding
Indonesia’s promising growth prospects. As a precautionary measures, a policy mix has been implemented and is
sufficient to maintain monetary and financial system stability, amid the surge in capital flows.
Strengthening performance in exports continues to produce current account surplus in Q3-2010, despite in smaller
amount as compared to the preceding quarter. The capital and financial account again produced a sizeable surplus on
the back of heavy capital inflows that have bolstered the value of rupiah. Taken together, the balance of payments is
expected to chart a hefty surplus in Q3-2010
International reserves at end of September 2010 rising to USD86.5 billion or equivalent to 6.5 months of imports and
servicing of official debt.
5
Executive Summary: Preserved Macroeconomic Stability
CPI Inflation in September 2010 reached 0.44% (mtm) or 5.80% (yoy). Pressure mostly stemmed from the surge in the
volatile foods from seasonal effect of recent festivities. Even so, core inflation held at a modest 4.02% (yoy), supported in part
by the appreciating trend in exchange rate.
BI decided to hold the reference rate at 6.5% in October 2010. The current level of BI Rate is still consistent with
achievement of the inflation target and remains conducive in safeguarding financial stability and promoting bank intermediation
for supply-side response to accelerated demand. Nonetheless, BI has taken note of the rise inflationary pressure amid heavy
inflows of foreign capital and considerable levels of excess liquidity. At this condition, BI regards the economic liquidity
management as a priority.
Stability in the banking system remains firm alongside steady improvement in credit growth. The solid condition is reflected
in high CAR and subdued level of gross NPLs at below 5%.
Banking intermediation has strengthened further, as evident in credit growth up to September 2010 which reached 21.2%
(yoy). Up to September 2010, working capital credit has expanded at a faster rate than consumption credit, and looking
forward, credit growth will continue to be channelled into productive sectors. Therefore credit growth for overall 2010 is
forecasted at 22%-24%, in line with the business plans prepared by banks.
Up to September 2010, almost 90% of the funding requirement for state budget financing has been completed which focused
on domestic source of financing.
6
Executive Summary: Prudent Fiscal Management
With strong foundation of economic fundamental and budgetary achievement in 2009, we are confident
toward the fiscal targets for 2010.
We continue to perform a prudent fiscal management in 2010 with strong commitment to fiscal consolidation, aiming on:
- continue declining debt-to-GDP ratio
- diversifying government debt profile,
- reducing funding reliance on international capital market.
In May 2010, the parliament approved the revised budget deficit of US$14.5 billion or 2.1% of GDP which allows for
adequate subsidies due to rising commodity prices and lower tax revenue in line with the tax incentive program to various
sectors
On the financing front, we continue to diversify our sources of financing requirement and up to September 2010, we have
completed almost 90% of our funding requirement.
Public debt is generally balanced between domestic and external sources with continued declining proportion of external
debt since 2004.
7
Improving International Perception
Improving International Perception: Acknowledged by Rating Agencies
Resilient economy, which impressively navigates through the global crisis and with growing confidence in economic outlook, the
Republic continued to receive good reviews, especially from Rating agencies
9
Japan Credit Rating Agency, Ltd (July 13, 2010): upgraded Indonesia's sovereign rating to Investment Grade from BB+ to BBBwith stable outlook. The first upgrade to reach investment grade in the last 13 years reflects enhanced political and social stability,
sustainable economic growth , alleviated public debt burden as a result of prudent fiscal management, reinforced resilience to external
shocks stemming from the foreign reserves accumulation and an improved capacity for external debt management and efforts made by
the current administration to outline the framework to deal with structural issues such as infrastructure development.
Moody’s Investors Service (June 21, 2010): revised the outlook of Indonesia’s foreign and local-currency Ba2 sovereign debt
ratings to positive from stable. The positive outlook broadly reflects the country's capacity for sustained strong growth, the overall
stability and effectiveness of its fiscal and monetary policies, and expectations of further improvements in the government's financial and
debt position.
S & P (March 12, 2010): upgraded Indonesia’s long-term foreign currency rating to BB from BB- with positive outlook which
indicates that Indonesia has big possibility to be upgraded within a year, even maybe faster. The main factor supporting this decision is
steadily improving debt metrics and growing foreign currency reserves which reduced vulnerability to shock with continued cautious fiscal
management.
Fitch Ratings (January 25, 2010): upgraded the Republic of Indonesia’s sovereign rating to ‘BB+’ from ‘BB’ with stable outlook
The rating action reflects Indonesia’s relative resilience to the severe global financial stress test of 2008-2009 which has been
underpinned by continued improvements in the country’s public finances.
Improving International Perception: Significant Raise in Perception Indices
10
World Economic Forum – The Global Competitiveness Report 2010 – 2011 (September 15, 2010) reported that Indonesia posts
an impressive gain of 10 places, mainly driven by a healthier macroeconomic environment and improved education indictors.
Indonesia considered to successfully maintain a relatively healthy macroeconomic environment throughout the crisis. While most other
countries saw their budget deficits surge, Indonesia kept its deficit under control”
The IMD Competitive Center (May 19, 2010) reports a major improvement in Indonesia's global competitiveness, with
Indonesia moving up from 42nd to 35nd place among a total of 57 major nations surveyed worldwide. For Indonesia, the
improvement in 2010 has been achieved through significant gains in economic performance, followed by government efficiency and
infrastructure improvement.
OECD (April 2, 2010): upgraded Indonesia’s Credit Risk Classification (CRC) from category 5 to 4. This upgrade was a timely
acknowledgement by the developed economies of the consistent economic improvement. This upgrade would significantly improve
Indonesia’s credit standing in front of the creditor countries especially the credit exports creditor countries which eventually would
decrease the debt burden.
Sustainable Economic Growth
Real Sector: Indonesia Development Policy
Indonesia Development Policy is based on a ‘Triple Track Strategy’
1st
2nd
Pro-Growth:
Increase Growth by prioritizing export and investment
Pro-Job :
Boost up the real sector in order to create jobs
Pro-Poor:
3rd
12
Revitalize agriculture, forestry, maritime, and rural economy
to reduce poverty
Source: Coordinating Ministry for Economic Affairs
13
Strong Growth Prospect Continues
2010 Forecast
Main Factors Behind The Forecast
With more upbeat confidence to the economy, exports and investment are expected to keep climbing, providing
additional boost to higher consumption in support of higher levels of economic growth.
Looking forward, steady improvement is predicted in global and domestic economic developments. Therefore in
2011, the forecasted rate of growth is 6.0%-6.5%. This growth will be driven by continued robust household
consumption, improved external sector performance as the global economy charts further recovery and higher
investment in tandem with mounting domestic and external demand.
Global economic recovery will produce renewed acceleration in exports. The global economy is predicted to enter
an expansionary phase in 2010. Renewed momentum is predicted in the economies of Indonesia’s major trading
partners. The recovery will induce higher volume of international trade which will accelerate Indonesia’s export. This
strengthened performance will position exports as one of the main engines of economic growth in 2010.
Indonesian exports characteristics which is based on primary commodities has also supported export growth
acceleration.
Household consumption is forecasted to remain strong. The strengthening global economic outlook for 2010 will
given added momentum to Indonesia’s exports, which in turn will produce an overall increase in private incomes.
will remain strong
Higher investment will also contribute to rising incomes, thus paving the way for stronger public purchasing power.
Inflation
Signs of future inflationary pressures until end of 2010 are noted, which mainly predicted from administered prices
and volatile food seasonal uncertainties. However, BI is positive to contain the inflation level within the target
range, and will keep a close watch on the rising inflationary pressure and make the necessary adjustments to
monetary policy responses to ensure that inflation remains on track with the established targeting range at 5%
1% in 2010 and 2011.
GDP Growth
is forecasted to be at
the upper limit of 6.0%6.3% projection
Export
is expected to chart
higher growth
Private
Consumption
is estimated to be on
the upper limit of
target range of 5.0%
1%
13
Source: Bank Indonesia.
Robust and Stable Economy Continues to Chart Positive Growth
Optimistic on high growth prospects
The Indonesian economy grew by 6.2% in Q2-2010 amid persistent risks of global uncertainties, particularly in regard to the slowdown in
China's economy and the outlook for US economic recovery. The major improvement was a result from increase in exports and investment,
while private consumption remained strong.
The Indonesian economy maintained brisk growth throughout Q3-2010, driven mainly by household consumption and exports.
The buoyant level of household consumption has been fuelled by widespread availability of consumer financing, mounting consumer
optimism and low import prices. Alongside this, export growth is driven mainly by strong demand from China and India and rising
international commodity prices. With consumption and exports forging ahead, investment has begun to pick up, as indicated by increased
imports of machinery and raw materials and rising levels of working capital credit.
Looking forward, steady improvement is predicted in global and domestic economic developments. In 2010, economic growth is
projected in the range of 6.0%-6.3%. For 2011, the forecasted rate of growth is 6.0%-6.5%. This growth will be driven by continued robust
household consumption, improved external sector performance as the global economy charts further recovery and higher investment in
tandem with mounting domestic and external demand.
Sustainable Economic Growth
% yoy
6.3
7.0
6.0
6.2
6.0
5.5
4.5
5.0
4.0
3.0
2.0
1.0
0.0
2006
14
(*): Preliminary
Source: Ministry of Finance, BPS.
2007
2008
2009
2010-Q2
Source: Bank Indonesia.
Inflation: Noted Pressure But Core Is Stable
The monetary policy stance is directed towards maintaining consistently low inflation while making adequate provision for
measures to strengthen economic recovery.
Inflation
Inflation Expectation – Consensus Forecast
CPI inflation in September 2010 reached 0.44% (mtm) or 5.80% (yoy). Pressure mostly stemmed from the surge in volatile foods inflation from
seasonal effect of recent festivities. Nevertheless, inflationary pressure reflected in core inflation held at a modest 4.02% (yoy), supported in part by
the appreciating trend in the exchange rate. Similarly, inflationary pressure from administered prices was comparatively low at 5.60% (yoy), due to
the absence of strategic decisions affecting government-set prices during September 2010.
Going forward, BI recognized of the risks that may fuel inflation up to 2011:
•
The escalating trend in demand, which is growing faster than supply.
•
Anomalies in weather conditions may persist, with potential to disrupt production and distribution of staple needs.
•
The possibility of planned increases in administered prices.
BI is keeping a close watch on this potential inflationary pressure and is strengthening policy coordination with the Government at both the central
and regional levels. BI will respond with the policy mix necessary to keep inflation on track with the established target at 5% 1% in 2010 and 2011
and 4.5% + 1% in 2012
15
Source: Bank Indonesia
Monetary Policy Stance
In the Board of Governors' Meeting convened on 5 October 2010, Bank Indonesia decided to hold the BI Rate at 6.50%.
The decision is based on a comprehensive evaluation of the performance and outlook for the Indonesian economy, which is
showing overall improvement. BI has taken note of the rise inflationary pressure amid heavy inflows of foreign capital and
considerable levels of excess liquidity. BI put the economic liquidity management as higher priority.
The current level of BI Rate is consistent with achievement of the inflation target and remains conducive in safeguarding financial
stability and promoting bank intermediation for supply-side response to accelerated demand.
BI Rate and Inter
%
10.5
BI Rate
10
Interbank O/N Rate
9.5
9
8.5
8
7.5
7
6.5
6
Sep-10
Aug-10
Jun-10
Jul-10
Apr-10
May-10
Feb-10
Mar-10
Jan-10
Nov-09
Dec-09
Sep-09
Oct-09
Aug-09
Jun-09
Jul-09
Apr-09
May-09
Feb-09
Mar-09
Jan-09
Nov-08
Dec-08
Sep-08
Oct-08
Aug-08
Jun-08
Jul-08
5.5
16
Source: Bank Indonesia.
Balance of Payments: Preliminary Estimates for Q3-2010
• Current account in Q3/2010 is estimated to post a surplus. However, the surplus will fall short of the Q2/2010 surplus
primarily due to faster pace of import growth compared to export growth as a result of vigorous domestic economic activity, rupiah
appreciation, and lower oil & gas prices. The downturn in the current account is projected to be covered by a significant surplus in
the capital and financial account. The bulk of the surplus will come from portfolio investment in response to abundant global
liquidity and attractive investment yield. In addition, the surplus will also be boosted by FDI inflows in line with sound
macroeconomic outlook and relatively low labor cost.
• With those prospects, overall balance of payments in Q3/2010 is estimated to post a higher surplus than preceding
quarter.
• Accordingly, international reserves at end of Q3/2010 (September) mounted to US$ 86.55 billion (equivalent to 6.5 months of
imports and official external debt service payments).
Official BOP statistics for Q3-2010 will be released on November 2010.
Balance of Payments
Million USD
Million M
USD
Indonesia's BOP
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
6,000
4,000
2,000
0
-2,000
-4,000
-6,000
-8,000
Q1
Q2
Q3
Q4
Q1
2007
Curren t Acc.
Q2
Q3
Q4
Q1
Q2 Q3* Q4* Q1* Q2* Q3*
2008
Cap . & Fin . Acc
2009
2010
Reserve Assets (RHS)
17
Source: Bank Indonesia
Balance of Payments Q2–2010
Indonesia's Balance of Payments
The current account in Q2/2010 posted
a surplus of about US$1.8 billion,
boosted by upbeat performance in nonoil/gas trade balance, the gas trade
balance and the current transfers. The
surplus was nevertheless down from the
previous quarter (US$2.1 billion surplus)
due to the increased deficit in the oil trade
balance and the income account.
The capital and financial account in
Q2/2010 recorded a surplus at US$3.3
billion. All major components of the
capital and financial account,
encompassing direct investment, portfolio
investment and other investment,
recorded surplus. Despite this, the overall
capital and financial account surplus was
down from the preceding quarter (US$4.3
billion surplus), mainly as a result of
negative spillover effects from the debt
crisis in Europe that have led to reduced
inflows of portfolio investment.
(million US$)
ITEMS
Q1
Q2
2010
Q4*
Total
Q1*
Q2*
I. CURRENT ACCOUNT
A. Goods, net
1. Non-Oil & Gas, net
2. Oil & Gas, net
B. Services, net
C. Income, net
D. Current Transfers, net
126
22,916
15,130
7,786
-12,998
-15,155
5,364
2,508
6,884
5,335
1,549
-2,743
-2,742
1,109
2,480
8,365
6,436
1,928
-3,310
-3,776
1,201
2,157
8,488
6,647
1,842
-3,509
-4,072
1,248
3,602
11,395
8,388
3,007
-4,546
-4,551
1,303
10,746
35,133
26,806
8,326
-14,108
-15,140
4,861
2,068
8,418
6,460
1,958
-3,595
-3,922
1,168
1,834
8,985
7,037
1,948
-3,697
-4,642
1,188
II. CAPITAL & FINANCIAL ACCOUNT
A. Capital Account
B. Financial Account
1. Direct Investment
a. Abroad
b. in Indonesia
2. Portfolio Investment
a. Assets
b. Liabilities
3. Other Investment
a. Assets
b. Liabilities
-1,832
294
-2,126
3,419
-5,900
9,318
1,764
-1,294
3,059
-7,309
-10,755
3,446
1,593
19
1,574
453
-1,451
1,904
1,950
133
1,817
-829
-307
-522
-1,822
29
-1,851
400
-1,047
1,447
1,893
362
1,532
-4,144
-2,271
-1,873
2,507
34
2,474
472
-515
987
2,972
-331
3,303
-970
-6,325
5,355
1,270
14
1,255
604
64
540
3,521
-307
3,828
-2,869
-3,702
833
3,548
96
3,453
1,928
-2,949
4,877
10,336
-144
10,480
-8,812
-12,605
3,793
4,274
18
4,256
1,745
-627
2,372
6,159
-409
6,569
-3,648
-4,080
432
3,334
0
3,334
1,171
-1,328
2,499
1,142
-99
1,241
1,021
1,388
-367
III. TOTAL (I+II)
IV. NET ERRORS & OMISSIONS
V. OVERALL BALANCE (III+IV)
-1,706
-239
-1,945
4,101
-146
3,955
658
394
1,052
4,664
-1,118
3,546
4,872
-918
3,954
14,294
-1,788
12,506
6,342
279
6,621
5,168
253
5,421
*)
18
2008
2009
Q3*
: provisional figures
Source: Bank Indonesia
Main Banking Indicators
Banking system stability held firm amid the onset of renewed credit expansion (data as of August 2010)
* Preliminary figures, operational risk is calculated in August 2010 figures
19
Source: Bank Indonesia
Financial Development and Current Policies
Sound Financial Sector
Stability in the banking system remains firm alongside steady improvement in credit growth.
Sufficient CAR (%)
Sound level of NPLs (%)
5.0
25.0
4.5
20.5
20.0
19.3
19.3
17.4
16.2
19.1
19.2
17.8
17.4
4.0
16.5
16.3
gross NPL
net NPL
3.5
3.0
15.0
2.5
2.0
10.0
1.5
1.0
5.0
0.5
-
-
Dec-06 Dec-07 Dec-08 Dec-09 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10
Dec-06 Dec-07 Dec-08 Dec-09 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10
• Financial system stability up to August 2010 is well maintained, confirmed by Financial Stability Index (FSI) which remain
unchanged at 1.84 well below the threshold (2.00) set as an early warning indicator. This indicate the robustness of the Indonesian
financial system. By the end of 2010, we expect FSI to be ranged between 1.45 to 2.02 with a 1.74 baseline, owing to the positive
macroeconomic outlook.
• Banking industry remains in a stable condition and convinced to be run prudently, which is reflected in the well-maintained Capital
Adequacy Ratio (16.3%, as of end of August 2010) and safe level of gross Non-Performing Loans at 3%, as of end of August
2010.
21
Source: Bank Indonesia.
Banking intermediation has strengthened further
•
Banking Intermediation continues to improve. Loan extensions as of September 2010 recorded at Rp1.6 trillion. Hence,
loan growth has reached 21.2% (yoy). Third party deposits increased, although not as rapidly, with a 14.30% (yoy) growth.
•
Up to September 2010, working capital credit has expanded at a faster rate than consumption credit, and looking
forward, credit growth will continue to be channelled into productive sectors. Therefore credit growth for overall 2010 is
forecasted at 22%-24%, in line with the business plans prepared by banks. Key to the credit expansion is enhanced
confidence on the economic prospect.
LoanGrowth
Growth (yoy)
Loan
(yoy)
60%
50%
40%
30%
20%
10%
-20%
W.Cap
Inv
Cons.
2010
2009
2008
2007
2006
2005
2004
2003
-10%
2002
0%
Total
-30%
22
Source: Bank Indonesia.
Manageable Capital Flows
• The surge of capital inflows is attributable to continued improvements in the investor’s sentiment regarding
Indonesia’s promising growth prospects.
• The stock market continues to improve with the JSX composite
price index exceeding 3,500 at the end of September 2010.
• The price of SUN has continued to increase in line with strong
demand. Such conditions subsequently lowered the SUN yield to a
range of 7.6% at the end of September 2010.
4000
24.0
Govt Bond Benchmark (%)
3,501
25,000
20,000
15,000
10,000
5,000
-
SUN
SBI
Portfolio Flows:
Government Securities (SUN) and BI Certificates (SBI) and Equity
Portfolio Flows:
Government Securities (SUN) and BI Certificates (SBI) and Equity
Jakarta Composite Index (RHS)
million USD
30,000
6,762
10,918
5,444
11,654
2,179 11,285
608 9,282
565 7,459
752 7,795
947 7,745
6726,840
1,3986,743
1,385 7,585
2,233 8,569
2,034 8,553
3,587 9,061
2,438 9,139
3,708
9,457
4,490
10,691
4,883
11,050
4,674
11,417
5,332
12,392
6,314
12,895
6,890
14,412
9,190
16,357
3,966
15,684
4,574
17,698
4,672
19,003
6,131
19,792
7,202
20,297
• Foreign holdings in SBI by end of September 2010 reached $7.2
billion, which is approximately 25% of total SBI, and in SUN
reached $20.2 billion or around 29% of total SUN.
Foreign Holdings on
Government Securities (SUN) and BI Certificates (SBI)
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
• The influence of such positive perceptions was, among others,
illustrated by the upward trend in capital flows to all financial
market instruments like BI certificates, stock, and government
securities.
USD Milion
IDR/USD
6000
8,900
4000
9,400
3500
19.0
3000
2500
14.0
2000
0
10,400
-2000
2000
-4000
9.0
7.62
1500
9,900
-6000
Equity
Central Bank Bill
IDR/USD
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
1000
23
-8000
11,400
11,900
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
4.0
10,900
Government Bond
Source: Bank Indonesia, Bloomberg, Ministry of Finance.
Policy Response to Cope the Challenge in Financial Sector
•
Stimulating intermediary function through macro and micro-prudential regulatory incentives. In order to
balance growth of the banking sector and the economy as well as financial system stability, Bank Indonesia has and
will enact several policy responses, which covers both macro and micro prudential regulatory incentives as follows:
A.
Regulatory policy concerning Net Open Position
Given the large influx of investment in foreign exchange, Bank Indonesia has relaxed its regulatory stance
with regards to net open position maintenance. In its new policy, Bank Indonesia will allow banks to offset
foreign exchange exposures in their on-balance sheet with the exposures in the off-balance sheet. Hence the
net exposures will be the ones used in the calculation of net open position limit which is 20% of bank’s
capital. Prior to the easing, the limit was calculated separately for on and off balance sheet.
B.
Regulatory policy concerning Minimum Holding Period for SBI and widening the Interbank Market
Corridors
In order to deepen the financial market as well as lessen the volatility of foreign capital flow, BI has widen the
interest rate corridor of the interbank market. The enacment of this policy is expected to deepen the interbank
market as well as to be resulted in a more in tune market rate and aligned to BI rate.
Whilst the policy to introduce the minimum holding period is to lessen the volatility of foreign capital flows
especially with respect to invested foreign portfolio in BI Sertificates (SBI).
24
Source: Bank Indonesia.
Policy Response to Cope the Challenge in Financial Sector
C.
Regulatory policy concerning Rupiah Statutory Reserve
Bank Indonesia decided to raise the primary statutory reserve requirement for rupiah funds to 8% and to
introduce an LDR-based reserve requirement. This policy is intended to curb mounting inflationary pressure
through management of excess banking liquidity. The new reserve requirement has been set in consideration of
the present condition of banking liquidity, hence, does not diminish the capacity of banks to pursue credit
expansion in line with existing bank business plans while upholding prudential banking principles. The LDRbased reserve requirement is established with a range that will promote the banking intermediation function while
upholding prudential banking principles
D.
Policy for Micro, Small, and Medium Enterprises (MSME)
Aside form regulatory policy, Bank Indonesia has also strive to make effort to push the intermediation function
and financial deepening especially targeted for MSME. This policy is conducted through various program such
as:
25
•
linkage program with rural banks,
•
establishing business data and information facilities for sectors with high potential, as well as financial
education programs;
•
Simplification of the Uniform Classification System on Asset Quality for MSME
•
In cooperation with the Govt. Credit Guarantee Agency, and Several Commercial Banks, Setting up a credit
guarantee scheme for MSME and KUR;
•
Lowering of Risk Weights for CAR calculation for exposures on certain MSME loans that has been backed
by insurance
Source: Bank Indonesia.
Prudent Fiscal Management
State Budget 2010 and Revised Budget 2010
In IDR trillion
Budget 2010
949.6
742.7
Revised Budget 2010
992.4
743.3
205.4
247.2
1,047.7
1,126.1
725.2
781.5
-Departm ental / Line Minis tries
340.1
366.2
-Non-Departm ental / non Line Minis tries
385.1
415.3
-Energy Subs idies
i. Fuel
106.5
68.7
143.9
88.9
37.8
55.1
322.4
344.6
C. Surplus/(Deficit) Budget (A -B)
% GDP
-98.0
(1.6)
-133.7
(2.1)
D. Financing
I. Dom es tic
II. International (net)
98.0
107.9
-9.8
133.7
133.9
-0.1
ITEMS
A. Revenue and Grant
1. Tax
2. Non tax revenue
B. Expenditure
I. Central Government
ii. Electricity
II. Transfer to Region
MACRO ASSUMPTIONS 2010
NO
27
Budget
1
Growth
2
Inflation
3
Exc hange rates (/USD)
4
SBI
5
Oil Pric e (USD/Barrel)
6
Oil Lifting (mil.Barrel/Day
Rev ised Budget
5,5%
5,8%
5%
5,3%
10.000
9.200
6,50%
6,5%
65
80
0,965
0,965
Source: Ministry of Finance
Budget Deficit / GDP
Public Finances is a fundamental strength of the Indonesian economy; most of Indonesian ratios are strong or
stronger than its peers; Fiscal Budget deficit has traditionally been limited and remained contained in 2009. Fiscal Stimulus
did not impact much on fiscal deficit in 2009
Budget Deficit / GDP (%)
28
Budget Deficit / GDP 2009* vs. Emerging Markets Countries
Source: Ministry of Finance
Financing Trend 2005-2010
Budget Deficit Financing
29
Source: Ministry of Finance
Debt Figure, 2004 - 2010
Debt Composition
Debt to GDP Ratio (% of GDP)
60%
100%
57.5%
47.3%
50%
75%
39.0%
40%
35.2%
50%
50%
47%
47%
50%
50%
53%
53%
2004
2005
2006
2007
52%
47%
45%
53%
55%
2009
Aug-10
33.1%
28.3%
30%
27.0%
50%
20%
25%
10%
48%
0%
2004
2005
2006
2007
2008
2009
2010
Notes:
* = Preliminary
** = Very Preliminary
*** = Very Very Preliminary, GDP Number Based on Revised Budget 2010 Assumption
0%
Domestic Debt
2008
External Debt
Notes:
^ = Based on debt outstanding as of Aug 2010
Table of Debt to GDP Ratio
2004
2005
GDP
2,295,826.20
2,774,281.00
3,339,480.00
3,949,321.40
4,954,028.90
5,613,441.74
6,253,789.50
Debt Outstanding (billion IDR)
- Domestic Debt (Securities)
- Foreign Debt (Loan+Securities)
1,299,504.02
653,032.15
646,471.87
1,313,294.73
658,670.86
654,623.87
1,302,158.97
693,117.95
609,041.02
1,389,415.00
737,125.54
652,289.46
1,636,740.72
783,855.10
852,885.62
1,590,656.07
836,308.91
754,347.16
1,654,193.71
905,619.60
748,574.11
Debt to GDP Ratio
- Domestic Debt to GDP Ratio
- Foreign Debt to GDP Ratio
30
End of Year
2006
2007
2008*
2009**
Aug 10***
56.60%
47.34%
38.99%
35.18%
33.04%
28.34%
26.45%
28.44%
28.16%
23.74%
23.60%
20.76%
18.24%
18.66%
16.52%
15.82%
17.22%
14.90%
13.44%
14.48%
11.97%
Notes:
* = Preliminary
** = Very Preliminary
*** = Very Very Preliminary, GDP number based on Budget 2010 Assumption
[Outstanding as of Aug, 2010]
Source: Ministry of Finance
Healthier Maturity Profile of Government Debt
Maturity profile has been improving over time towards a more balanced structure.
External bonds are longer dated, with the shortest ones coming due in 2014
Tradable Government Securities – Maturity Profile (As of 30 September 2010)
31
Source: Ministry of Finance, Bloomberg.
Note: EIU estimates used for exchange rates.
Holders of Tradable Government Securities
Increasing proportion of non-bank domestic holders of government securities reflects development in the market
base
Holders of Tradable Domestic Gov’t Securities
Foreign Holdings by Maturity, September 28, 2010
(US$ billion)
75
0 - 1 year
10% 0 - 2 years
3%
60
19%
25% 24% 27% 28%
19% 20% 21%
2 - 5 years
18%
17%
16%
45
3%
8% 13%
25% 17%
21%
34%
24%
34% 35% 35%
30%
>5 years
69%
34% 34% 37% 36%
30
Development in Domestic Market
15
72% 75% 66% 59% 54% 48%
47% 45% 44% 41%
42% 36% 36%
Domestic Banks
Domestic Non-Banks
Sep-10
Jul-10
Jul-10
Jun-10
Feb-10
Jan-10
Dec-09
Mar-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
0
Foreign Holders
Source: Ministry of Finance. As of September 28, 2010. Assume exchange rate of Rp 9,200 / US$.
32
Yearly issuance schedule publicly available
Established primary dealership infrastructure
Benchmark series
Active communication with market participants
Variety of domestic securities available
-
T-Bills, fixed rate, floating rate, variable rate, zero coupon,
retail bonds and Sukuk
Macroeconomic Indicator Projection 2011
2010
Indicators
2011
Budget
Revised
Budget
Proposed
Economic Growth (%)
5,5
5,8
6,4
Inflation (%)
5,0
5,3
5,3
Exchange Rate (IDR/US$)
10.000
9.200
9.250
Interest Rate (3-Month) (%)
6,5
6,5
6,5
ICP (US$/barrel)
65
80
80
0,965
0,965
0,970
Oil Lifting (MBCD)
Macro Economic Policy Target 2011:
33
•
Unemployment: 7,0%
•
Poverty: 11,5% - 12,5%
•
Economic growth: 6,4%
•
Minimum investment requirement IDR 2.243,8 Trillion
•
1% economic growth will absorb 400 thousand work force
Source: Ministry of Finance