Note issued: March 16th, 2020

Monthly Economic & Finance Briefing

Economic, Banking & Industry Research of BCA Group - DKP

Import dropped due to Covid-19 disruption

 Indonesian trade surplus was recorded at

USD 2.34 Bn for Feb-20, far above market
consensus of a USD 91 Mn surplus. Imports
registered steep decline (-18.7% MoM / -5.1%
YoY), while exports rose modestly (2.2% MoM /
11.0% YoY).

 As we predicted last month, the impact of the

Covid-19 outbreak eventually registered on the
import side, after the export side had been
whipsawed by falling commodity prices last
month. The import disruption was seen across
the board – in the handful of cases where it was
not seen, such as sugar and cereals, we could
detect the authorities’ efforts to build up stocks
in anticipation of higher demand during
Ramadan, which would start in late April. These
could help alleviate shortages during the crucial
month, but some of the inflationary impact from
the outbreak might have registered by March or
early April.

 But despite Covid-19’s impact on the supply

chains, its impact on the financial market could
present an even more immediate threat. This is
amply evident from the Fed’s speedy return to
its GFC policy footing (i.e. ZIRP and QE), which
followed its USD 1.5 Bn liquidity injections last
week. Unfortunately, the Fed’s actions (plus
BoJ’s ramped-up asset purchase, announced today) seem to have done little to calm nerves in the market,
with credit spreads (e.g. Ted) still elevated and emerging market selloff continuing apace.

 These monetary actions are not mistakes, per se – but they might not be sufficient in addressing the massive
challenges faced by the global financial system at this point (i.e. missed payments worldwide and Dollar
shortage in EMs). We think that a coordinated fiscal action by the global authorities – a tough ask in a post-
trade war world – is needed to face these challenges.

 What does this mean for BI policy? While ZIRP theoretically should give BI room to cut rates, the
ongoing Rupiah depreciation and the looming threat of inflation should curtail the possibility of
doing so. Stabilization and liquidity provision, especially in the FX market, remains BI’s priorities
for the time being.

 The two fiscal stimuli that had been launched by the MoF in recent weeks (which could increase the fiscal
deficit by about 0.2% of the GDP) may provide some boost, especially to laborers’ purchasing power and
corporations’ cash flow. However, with the outbreak in Indonesia currently at a critical point, any positive
impact would probably be outweighed by the massive disruptions to business activities – likely resulting in
rather steep growth slowdown in H1-20.

PT Bank Central Asia Tbk 20th Grand Indonesia, BCA Tower Jl. M.H Thamrin No. 1 Jakarta, Indonesia Ph : (62-21) 2358-8000
 INDONESIA ECONOMIC UPDATE

Selected Recent Economic Indicators

Last Real Rate Trade & Chg

Key Policy Rates Rate (%) 15-Mar -1 mth
Change (%) Commodities (%)

US 1.25 Mar-19 -0.55 Baltic Dry Index 631.0 421.0 49.9

UK 0.75 Aug-18 -1.05 S&P GSCI Index 298.4 394.0 -24.3
EU 0.00 Mar-16 -1.20 Oil (Brent, $/brl) 33.9 56.3 -39.9
Japan -0.10 Jan-16 -0.80 Coal ($/MT) 65.5 70.5 -7.2
China (lending) 4.35 Oct-15 -0.85 Gas ($/MMBtu) 1.97 1.95 1.0
Korea 0.75 Oct-19 -0.35 Gold ($/oz.) 1,529.8 1,576.0 -2.9
India 5.15 Oct-19 -1.43 Copper ($/MT) 5,447.8 5,772.3 -5.6
Indonesia 4.75 Feb-20 1.77 Nickel ($/MT) 12,271.0 13,203.5 -7.1
Chg CPO ($/MT) 539.3 650.8 -17.1
Money Mkt Rates 15-Mar -1 mth
(bps) Rubber ($/kg) 1.26 1.34 -6.0
SPN (1M) 3.52 3.46 5.7 Chg
External Sector Feb Jan
SUN (10Y) 7.30 6.55 74.6 (%)
INDONIA (O/N, Rp) 4.59 4.84 -24.9 Export ($ bn) 13.94 13.63 2.2
JIBOR 1M (Rp) 5.00 5.33 -33.2 Import ($ bn) 11.60 14.27 -18.7
Chg Trade bal. ($ bn) 2.34 -0.64
Bank Rates (Rp) Dec Nov
(bps) Central bank reserves
130.4 131.7 -0.99
Lending (WC) 10.09 10.24 -15.07 ($ bn)
Deposit 1M 6.02 5.98 4.68
Prompt Indicators Feb Jan Dec
Savings 1.17 1.19 -1.92
Consumer confidence
Currency/USD 15-Mar -1 mth Chg (%) 117.7 121.7 126.4
index (CCI)
UK Pound 0.814 0.767 -5.89
Car sales (%YoY) N/A -2.6 -0.2
Euro 0.900 0.922 2.45
Japanese Yen 107.6 109.8 2.04 Motorcycle sales
N/A N/A -6.8
Chinese RMB 7.009 6.977 -0.45 (%YoY)
Indonesia Rupiah 14,778 13,694 -7.34
Cement sales (%YoY) N/A N/A 7.5
Capital Mkt 15-Mar -1 mth Chg (%)
JCI 4,907.6 5,872.0 -16.42 Chg
Manufacturing PMI Feb Jan
DJIA 23,185.6 29,423.3 -21.20 (bps)
FTSE 5,366.1 7,452.0 -27.99 USA 50.1 50.9 -80
Nikkei 225 17,431.1 23,827.7 -26.85 Eurozone 49.2 47.9 130
Hang Seng 24,032.9 27,730.0 -13.33 Japan 47.8 48.8 -100
Foreign portfolio Chg China 40.3 51.1 -1,080
Feb Jan
ownership (Rp Tn) (Rp Tn) Korea 48.7 49.8 -110
Stock 1,701.5 1,839.8 -138.28 Indonesia 51.9 49.3 260
Govt. Bond 1,012.3 1,044.4 -32.08
Corp. Bond 32.8 32.1 0.71

Source: Bloomberg, BI, BPS

Notes:
*Previous data
**For change in currency: Black indicates appreciation against USD, Red indicates depreciation
***For PMI, > 50 indicates economic expansion, < 50 indicates contraction

2
 INDONESIA ECONOMIC UPDATE

Indonesia – Economic Indicators Projection

2015 2016 2017 2018 2019 2020E

Gross Domestic Product (% YoY) 4.8 5.0 5.1 5.2 5.0 4.9

GDP per Capita (US$) 3377 3605 3877 3927 4175 4290

Consumer Price Index Inflation (% YoY) 3.4 3.0 3.6 3.1 2.7 3.6

BI 7 day Repo Rate (%) N/A 4.75 4.25 6.00 5.00 4.50

USD/IDR Exchange Rate (end of year)** 13,800 13,473 13,433 14,390 13,866 14,445

Trade Balance (US$ billion) 7.5 8.8 11.8 -8.5 -3.2 -5.2

Current Account Balance (% GDP) -2.0 -1.8 -1.6 -3.0 -2.7 -2.9

** Estimation of Rupiah’s fundamental exchange rate

Economic, Banking & Industry Research Team

David E. Sumual
Chief Economist
david_sumual@bca.co.id
+6221 2358 8000 Ext: 1051352

Agus Salim Hardjodinoto Barra Kukuh Mamia Victor George Petrus Matindas
Industry Analyst Economist / Analyst Industry Analyst
agus_lim@bca.co.id barra_mamia@bca.co.id victor_matindas@bca.co.id
+6221 2358 8000 Ext: 1005314 +6221 2358 8000 Ext: 1053819 +6221 2358 8000 Ext: 1058408

Gabriella Yolivia Suryaputra Wijaksana Derrick Gozal

Economist / Analyst Economist / Analyst Economist / Analyst
gabriella_yolivia@bca.co.id suryaputra_wijaksana@bca.co.id derrick_gozal@bca.co.id
+6221 2358 8000 Ext: 1063933 +6221 2358 8000 Ext: 1065752 +6221 2358 8000 Ext: 1066722

Ahmad Aprilian Rizki Qosma Ryan Hidayat

Research Assistant Research Assistant
ahmad_rizki@bca.co.id qosma_hidayat@bca.co.id
+6221 2358 8000 Ext: 20378 +6221 2358 8000 Ext: 20364

PT Bank Central Asia Tbk

Economic, Banking & Industry Research of BCA Group - DKP
20th Grand Indonesia, Menara BCA
Jl. M.H Thamrin No. 1, Jakarta 10310, Indonesia
Ph : (62-21) 2358-8000 Fax : (62-21) 2358-8343

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