Indonesian Economy in

the Midst of Gobal

Uncertainty

M. Chatib Basri

The Mandiri Institute

Australian National University

and
University of Indonesia
2
 0.000
2.000
4.000
6.000
8.000

-8.000
-6.000
-4.000
-2.000
03/2013
04/2013
05/2013
06/2013
07/2013

Australia
08/2013
09/2013
10/2013

Source: CEIC, OECD (2016)

11/2013

Brazil
12/2013
01/2014
02/2014
03/2014
04/2014
05/2014

Indonesia
06/2014
07/2014
08/2014
09/2014
10/2014
11/2014

Malaysia
12/2014
GDP Growth

01/2015
02/2015
03/2015
04/2015
05/2015
least unattractive countries

06/2015
South Africa

07/2015
08/2015
GDP growth: Indonesia, one of the

09/2015
10/2015
11/2015
Mexico

12/2015
01/2016
02/2016
03/2016
Nigeria

04/2016
05/2016
06/2016
 4

New normal growth?

 Success story of East Asia: Industrialization and
trade

 A world with creeping protectionism

 Services is not a perfect substitute to

manufacturing
 The macroeconomic impact of the
global volatility

Negative Exchange Trade balance/

interest
capital
rate current account
rate inflow ? deficit

Risks of assets commodity

Trump Effect
re pricing price (?)

Short fall of
Economic
Government
growth
Revenue

5
 10
15
20
25

-5
0
5

-15
-10
03/2011
05/2011
07/2011
09/2011
11/2011
01/2012
03/2012
05/2012

Private Consumption
07/2012
09/2012
11/2012
01/2013
03/2013
05/2013
07/2013
09/2013
11/2013

Government Consumption
01/2014
(%)

03/2014
Y.O.Y (%)

05/2014
07/2014
09/2014

Investment
11/2014
GDP Growth by expenditure

01/2015
03/2015
05/2015

Exports
07/2015
09/2015
11/2015
01/2016
Imports

03/2016
05/2016
07/2016
GDP growth by expenditure

09/2016
11/2016
GDP (RHS)
0
1
2
3
4
5
6
7
6
 7

Can we grow more than 6%?

 ICOR=6.4 (ratio Investment/GDP)
Current Account Goods
(USD billion) Services
 1% GDP growth will require Primary Income
Investment/GDP 6.4% 8 Transfer
Current Account

 S=I 4

 The Indonesia Gross Domestic 0

Savings/GDP 34.8% (World Bank) Sep-13 Sep-14 Sep-15 Sep-16
-4
 Thus GDP Growth more or less 5-
5.5% -8

 If Indonesia wants to achieve 6% -12

GDP growth:

 I/GDP should be 6%x6.4%=38.4 %

 S/GDP=35%  S-I= 3.4% (current

account deficit).

 To get higher growth: we should

increase S or lower ICOR (improve
productivity and efficiency)
Banking sector indicators Deposit Growth 8
(Monthly, percent) (yoy growth, percent)
100 5
Loan to deposit ratio 30
Demand Deposit
80 4 25
Return on assets (RHS)
20
60 3 Saving Deposit
15
40 2
10
Non performing loans (RHS)
20 1 5

Capital adeqacy ratio -

0 0
Sep-14 Sep-15 Sep-16
Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 -5 Time Deposit

Credit Growth Real Interest Rate

(yoy growth, percent) total credit
(Monthly, Gov.Bond 10y, %)
18
7
16
6 Indonesia
14 Investment 5
12 4
China United States
10 Consumption 3
2 India
8
Working Capita 1 German
6
0
4
May-14

May-15

May-16
Sep-13
Nov-13
Jan-14
Mar-14

Jul-14
Sep-14
Nov-14
Jan-15
Mar-15

Jul-15
Sep-15
Nov-15
Jan-16
Mar-16

Jul-16
Sep-16
-1
2 -2
0 -3
Japan
Sep-14 Sep-15 Sep-16 -4

Source: CEIC (2016)

Indonesian Government Debt: maturity schedule 9
 10

Some risks

 Fiscal risk due to the short fall

of tax revenue

 NPL is rising

 Liquidity tightening
 11
Government Budget
2015 2016 Growth
Rp trillion Rp trillion %
Government Revenue 1508 1551.8 2.90
Domestric Revenue 1496 1546 3.34
1. Tax Revenue 1240.4 1283.6 3.48
Tax incl oi and gas 1060.8 1104.9 4.16
2.Import duty and excise 179.6 178.7 -0.50
Non Tax Revenue 255.6 262.4 2.66

Grant 12 5.8 -51.67

Government Spending 1806.4 1859.5 2.94

Central Govt. 1183.3 1148.6 -2.93
Transfer to region and villag fund 623.1 710.9 14.09

Primary Balance -142.5 124.9

Surplus/Deficit -298.4 -307.7
2.46% of GDP
 12
Tax revenue and tax amnesty

 Non oil Tax revenue 2016 : Rp 1069 T (incl. TA)

 TA as of Dec 31, 2016: 107 T

 Tax Revenue 2016 (without TA): Rp 962 T

 Tax revenue, 2015: Rp1011.2 T

 The economy still posts a positive growth,

however growth of tax revenue (without TA)
was -4.5% in 2016
 13

What about 2017?

 Total assets declared Rp 4296 T

 Domestic Rp 3143 T

 Overseas Rp 1013 T

 Assuming all assets are income generating

 ROA 5%

 Average tax 25%

 Outlook 2016 and 2017 14
 Private consumption: bottoming out, may slightly improve,
thanks to some rebound in commodity prices

 Exports: Exports: may improve thanks to higher commodity

prices, but global environment remain fragile

 Investments: remain sluggish

 Government spending: no much room for fiscal stimulus due

to short fall in the revenue

 Interest rate: not much room for BI to cut the rate

 Inflation: will increase but managable

 Capital inflows: remain

 Exchange rate: tend to weaken ?

 Fiscal risk: revenue tends to decline unless there is a significant

reform on tax and re focusing on spending quality
 15

Thank you