Indonesian Economic

Outlook 2019

M. Chatib Basri

Chairman of the Advisory Board

Mandiri Institute
 2

Living in a very uncertain world

 Trajectory path of Fed Fund Rate
 Oil price and commodity price
 Trade war
 3
Should Fed pause the hike?
Unemployment rate Wage growth

10 year treasury constant maturity

Inflation minus 2 –years constant maturity
 4
Do current account deficit
matters
 Economic growth and current account deficit:
Singapore, China, Korea, Thailand, Vietnam

 Large current account deficit is not necessarily a bad

thing, as long it is financed by long-term and
productive Foreign Direct Investment (FDI), like export-
oriented sectors.

 large current account deficit may increase a

country’s vulnerability if it is financed by portfolio
investment

 capital flows to emerging economies are often

triggered by advanced economies, like U.S.: QE, Taper
Tantrum, current situation
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Indonesia: Balance of Payments
 6

Composition of the deficit financing

 Government budget deficit:

 25% global bonds
 75% Rupiah bonds in which: 35-40% non resident
holders
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Trade War
 8

Impact on ASEAN Countries

Impact on ASEAN: Scoreboard

Source: CEIC, OCBC Bank, WTO

5

Taken from OCBC, 2018

 Potential impact on Asean an other 9
Asian Economies

US is China’s largest trading partner:

• China’s trade linkages with Asia are significant as well.
China key trading partners

15.6%
700,000
600,000

Total Trade: USD mn

500,000

7.8%
6.5%
400,000

6.4%
4.2%
300,000

3.4%
2.5%
2.5%
2.2%
2.1%
2.1%
2.1%
2.1%
2.0%
1.9%
200,000
100,000
0

Vietnam
Australia

Malaysia

India
Russia
Hong Kong

Mexico
Germany

Brazil

UK
United States
Japan

Netherlands

Thailand
South Korea
7

Taken from OCBC, 2018

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Indonesian economy
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IMPACT ON INDONESIAN ECONOMY

Portfolio
investment (+)

IDR/USD
Economic Growth
Lower Contingent
liabilities/Fin Market
Fed may ” pause ” (+)
normalization
Improve
Fiscal
Bank
Indonesia CA Not much room for Investments
may hold Deficit monetary stagnant
the rate expansion

Oil Price Lower Not much

CPO Price Govt room for Fiscal
Coal Price (low rank) Revenue expansion
Oil, Palm Oil, and Soybean Oil Price Energy Commodity Price Data as of
Daily Jan 23, 2019
Monthly
1000 120
140 3,500
900 100
120 3,000
800 99.20
728 80 100 2,500
700 703 2,191
80 2,000
60 61.19
600
56.46 60 1,500
40
500 40 1,000
535

400 20
Palm Oil (USD/Mt) Soybean Oil (USD/Mt) 20 500
Sunflower Oil (USD/Mt) Crude Oil (USD/Bbl), RHS Crude Oil (USD/Bbl) Coal (USD/Mt) CPO (MYR/Mt), RHS
300 0 0 0
Aug-16

Aug-17

Aug-18
Dec-15
Feb-16
Apr-16

Dec-16
Feb-17
Apr-17

Dec-17
Feb-18
Apr-18

Dec-18
Oct-15

Oct-16

Oct-17

Oct-18
Jun-16

Jun-17

Jun-18

Jan-16

Jan-17

Jan-18

Jan-19
Nov-15

Nov-16

Nov-17

Nov-18
Mar-16
May-16

Mar-17
May-17

Mar-18
May-18
Jul-16

Jul-17

Jul-18
Sep-16

Sep-17

Sep-18
Metal Price Data as of Precious Metal Price Data as of
Daily Jan 23, 2018 Daily Jan 23, 2018

25,000 3,000 1,600 25

20,780 1,400 1,280
2,500 20
20,000
1,200
1,878 15.39
2,000 1,000
15,000 15
11,615 800
1,500
600 790 10
10,000
5,9211,000 400
5
5,000 Gold (USD/ Troy oz) Platinum (USD/ Troy oz)
500 200
Copper (USD/Tonne) Nickel (USD/Tonne) Silver (USD/ Troy oz), RHS
Tin (USD/Tonne) Aluminum (USD/Tonne), RHS 0 0
0 0
Jan-16

Jan-17

Jan-18

Jan-19
Nov-15

Nov-16

Nov-17

Nov-18
Mar-16
May-16

Mar-17
May-17

Mar-18
May-18
Jul-16

Jul-17

Jul-18
Sep-16

Sep-17

Sep-18
Nov-15

Mar-16
May-16

Nov-16

Mar-17
May-17

Nov-17

Mar-18
May-18

Nov-18
Jul-16

Jul-17

Jul-18
Jan-16

Sep-16

Jan-17

Sep-17

Jan-18

Sep-18

Jan-19

Source: World Bank (2017), Index Mundi (2018), CEIC (2018)

 Stronger revenue and fiscal management improved but there is a fiscal
risk for 2019 due to decline of oil, energy and commodity prices

Source: MOF and WB

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Budget 2019
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Thank you