Indonesian

Economic Outlook
2015
FADHIL HASAN
INSTITUTE FOR DEVELOPMENT OF ECONOMICS AND FINANCE (INDEF)

New government, new initiative: Nawa Cita

Theme is "Strong Development, Inclusive and Sustainable"

ECONOMICS
DEVELOPMENT
AGENDA

NATURAL RESOURCES/ ENVIRONTMENTAL

Strengthening food security, energy and water
Accelerating the marine development
Improvement of environmental quality
Addressing climate change (Mitigation and adaptation)
ECONOMY
Development and technological innovation system
Increased investment and financial sectors
Increase workforce competitiveness and State-Owned Enterprises
Increase the contribution of small and medium enterprises in the economy
Preparation of natural resources for industrial sector
Development of processing industry
Efficiency of national logistics and distribution
Increase in non-oil exports and high value-added services
FACILITIES AND INFRASTRUCTURE
Improving connectivity and synergy between sectors
Meeting the needs of basic infrastructure
Creating mass transportation

Source:RPJMN 2015-2019

Four main priorities of economic

agendas
Achieving energy security

Development of infrastructures
Construction of reservoirs (unit)
Construction of new roads (km)
Construction of highways (km)
Railway track (km)
Number of airports (unit)

Baseline 2014 Target 2019

21
49
1202
2650
807
1000
5434
8692
237
252

Development maritime sectors

Achieving food self-sufficiency

Rice (million tonnes)
Corn (million tonnes)
Soybean (million tonnes)
Sugar (million tonnes)
Beef (thousand tonnes)
Fish production (million tonnes)

Source:RPJMN 2015-2019

Generating capacity (GW)

Electrification ratio (%)
Crude oil (thousand barrels oil/day equal to oil)
Natural gas (thousand barrels oil/day equal to oil)
DMO (Domestic Market Obligation) of natural gas (%)
Gas pipelines (km)
Construction of refinery (unit)

Baseline 2014 Target 2019

50.7
86.6
81.5
96.6
818
700
1224
1295
53
64
11960
18322
1

Baseline 2014 Target 2019

70.6
82
19.13
24.1
0.92
2.6
2.6
3.8
452.7
755.1
12.4
18.8

Construction of ports to support the marine highway (unit)

The development of ferry ports (unit)
The development of of fishing ports (unit)
Pioneer ships (unit)
Fishery production (million tonnes)
Increasing the area of marine conservation (million Ha)

Baseline 2014 Target 2019

24
210
270
21
24
50
104
22.4
40-50
15.7
20

"Nine Priority Agenda (Nawa Cita) Jokowi-JK

Improvement Action Program to economic selfreliance

Build food sovereignty based on

agribusiness
Control policy on food
imports through the
eradication of the
"import mafia"

Agriculture poverty
alleviation and support
the re-generation of
farmers through:
100 villages sovereign seed
To enhance the capacity of
farmers, the active
involvement of women
Build irrigation, dams, roads,
transportation and markets
Increased development and
rural economic attractivities

Agrarian Reform
Land reform by delivery 9
million hectares of land
Ownership of agricultural land
into 2 acres per family farmer
and the opening of the 1
million dry land outside Java
and Bali

Creating a special bank

for agriculture, Small
and Medium Enterprises
and Cooperatives

SBY & Jokowi

Indicators

2010 2011
6.5
6.2
GDP growth (%)
27,029 30,659
Income per capita (thousand Rp)
5.4
5.1
Inflation (%)
8,991 9,068
Rupiah exchange rate (Rp/USD)
0.1
0.6
Primary balance of budget/GDP (%)
-1.1
-0.7
Surplus/Deficit budget/GDP (%)
11.3 11.8
Tax/GDP (%)
26.2 24.4
Stock of government debt/GDP (%)
8.4
9.6
Foreign debt (%)
16
16.6
Domestic debt (%)
6.8
7.4
Unemployment rate (%)
13.33 12.49
Poverty rate (%)

JOKOWI
SBY
2016* 2017*
2015*
2012 2013 2014*
7.1
6.6
5.7
5.8 5.02
6.3
33,531 36,508 43,403 47,804 52,686 58,489
4
4
5
8.4
8.4
4.3
9,670 12,189 11,878 12,500 12,150 12,100
-0.4
-0.5
-0.6
-0.7
-1.1
-0.6
-1.6
-1.8
-1.9
-2
-2.3
-1.9
14.6
14.2
13.2
11.9 11.9 11.5
22.3
23.3
26.7
24 26.1 23.9
4.2
4.8
5.3
6.2
7.8
7.5
18.2
18.6
18.7
16.5 18.3 17.7
5.9 5.5-5.8 5.2-5.5 5.0-5.3
5.8
6.2
11.46 11.37 10.96 9.5-10.5 9.0-10.0 8.5-9.5

Source:RPJMN 2015-2019

Need goverment intervention

Need huge budgetfiscal expansion

2018*
7.5
64,721
3.5
12,050
-0.3
-1.4
15.2
21.1
3.8
17.7
4.6-5.1
7.5-8.5

2019*
8
72,217
3.5
12,000
0
-1
16
19.3
3.3
16.7
4.0-5.0
7.0-8.0

The investment needs (trillion rupiah)

6,947

3,945
3,452

4,500

3,827

5,188

4,425

5,978

5,041

5,789

Public
Government

493

673

763

937

1,158

2015

2016

2017

2018

2019

Total 2015-2019
Rp26,557.9 T

4,023.8
15%
Government

Source:RPJMN 2015-2019

Public
22,534.1
85%

Additional State Capital Investment

(Rp73 trillion)

Food self-sufficiency

Infrastructure &
maritime

Aerospace industry

Defense industry

Major change in government budget

Increase budget
allocation for
infrastructure,
agriculture, energy
and maritime sectors

Source: Kata Data, 19 Nov 2014

Government budget: assumption

Indicators
GDP Growth (%)
Inflation (%, yoy)
Rupiah Exchange Rate (Rp/USD)
3-Month Government T-Bills (%)
Indonesian Crude Oil Price (USD/barrel)
Oil Lifting (thousand barrels/day)

Gas Lifting (thousand barrels oil/day equal to oil)

Source: Ministry of Finance RI, 2015

2014 Realization 2015 Revised Budget

5.02
8.36
11,878
5.8
97
794

5.7
5.0
12,500
6.2
60
825

1,224

1,221

Revenue
Domestic Revenue, 2006 2015 (Trillion Rp)

Source: Kementerian Keuangan, Nota Keuangan & RAPBNP 2015

Expenditure
Expenditure, 2006 2015 (Trillion Rp & % )

Financing

Summary of the state budget

Opportunities and risk

External factors:

Declining of agriculture and oil prices

Slowing down world economic growth (china, japan, EU)

Increase of the fed rate

Internal factors:

Current account deficit

Institutional capacityexecution

Policy consistency

Coordination central and regional government

Political stabilityeffectiveness of program.....

Trend in oil price

Trend in agricultural prices

Economic Growth
GDP (%,yoy)
World
AS
Eurozone
Japan
China
India

2013

2014
3,3
1,3
-0,5
1,6
7,8
5

Sumber: IMF-World Economic Outlook Update, Januari 2015

3,3
1,8
0,8
0,1
7,4
5,8

Projection
2015
2016
3,5
2,4
1,2
0,6
6,8
6,3

3,7
2,4
1,4
0,8
6,3
6,5

Corporate debt is very sensitive to exchange rate fluctuation

18
Corporate foreign debt to GDP

Sources of corporate debt

dominated by other sources (38.7%
of GDP), l debt from direct
investment (8,7% of GDP) and from
affiliates (4,7%).
Exchange rate depreciation will
increase interest rate and primary
debt denominated foreign currency
that potential default is high and
corporate profit decline. Rupiah
continues to depreciate in the last
year.

Sumber: REO, 2014 (olah)

Result from stress test IMF if there is shock

19

Percentage of corporate debt if there is external shock

Indonesian companies is very
vulnerable to the shock. IMF
showed that if borrowing cost
increase by 250 bps or profit
decline by 25%, Indonesia
companies has high debt risk.
Level of Indonesian corporate
debt is below 30% and will
increase to 48% if there is a
shock.

Source: IMF, 2014

Normalization cycle Normalisasi

20

Normalization scenario and declining in commodity

prices
US economy recovery is a
trade off for emerging
economies slowing down.

Siklus Interaksi
Ekonomi yang
Saling
terintegrasi

Current account deficit

Keterangan

Current account deficit is

still large (3.07% of GDP) in
third quarter 2014.
Service account deficit is
USD 7.67 miliar.
Income account defisit is
USD 16.78 miliar.

I. Transaksi Berjalan
A. Barang
B. Jasa - jasa
C. Pendapatan Primer
D. Pendapatan Sekunder
II. Transaksi Modal
III. Transaksi Finansial
- Aset
- Kewajiban
1. Investasi Langsung
2. Investasi Portofolio
3. Derivatif Finansial
Memorandum:
- Posisi Cadangan Devisa
Dalam Bulan Impor dan
Pembayaran Utang Luar Negeri
Pemerintah
- Transaksi Berjalan (% PDB)

Q1*
-4,156.83
3,349.64
-2,230.31
-6,360.98
1,084.82
1.23
6,967.23
-5,895.22
12,862.46
2,802.68
8,702.84
-140.36

2014
Q2*
-8,688.52
-126.35
-2,908.86
-7,193.27
1,539.96
7.21
14,322.24
-2,682.12
17,004.36
3,695.40
8,316.91
45.25

Q3**
-6,835.77
1,555.21
-2,531.09
-7,053.26
1,193.37
3.25
13,667.88
-3,468.04
17,135.92
5,428.58
7,089.52
-57.36

102,591.87 107,678.11 111,164.46

5.73

6.06

6.32

-2.05

-4.06

-3.07

Total
-19,681.12
4,778.50
-7,670.26
-20,607.51
3,818.15
11.69
34,957.35
-12,045.38
47,002.74
11,926.66
24,109.27
-152.47

Conclusion

The government should improved the quality of budget

absorption.

The government should accelerate the realization of

infrastructure projects.

Create a conducive investment climate.

Political stability.

Bureaucratic reform.

Encourage diversification of export products.

Maintaining purchasing power.

Maintaining macroeconomic stability.