ECONOMIC OUTLOOK 2019:

Theguardian.com

CLIMBING AMID GLOBAL TURMOIL

Faisal Basri
5 December 2018
 Outline

I. Global Environment
II. Depreciation of Rupiah Causes
Macroeconomic Instability
III. Will Economic Growth to Accelerate?
IV. Recent Growth Performance by Sector
V. Domestic Demand under Pressure, but the
Purchasing Power does not Decrease
VI. Digital Economy and SOEs
VII. Political Outlook
VIII.Economic Prospects 2018-19
 Part I
Global Environment
Four factors

1. US economy and Federal interest rate hike

2. Widen the trade war
3. Oil prices
4. An impeding economic slowdown in China
 Global growth plateaus as economic risks
materialize
IMF: “And there are clouds on the horizon. Growth has proven to be less balanced than hoped.
Not only have some downside risks that the last WEO identified been realized, the likelihood of
further negative shocks to our growth forecast has risen.”

2014 2015 2016 2017 2018* 2019*

World GDP growth 3.4 3.4 3.2 3.7 3.7 3.7
Advanced economies 1.8 2.1 1.7 2.3 2.4 2.1
- United States 2.4 2.6 1.5 2.2 2.9 2.5
- Euro area 0.9 2.0 1.8 2.4 2.0 1.9
- Japan 0.0 1.2 0.9 1.7 1.1 0.9
Developing economies 4.6 4.2 4.4 4.7 4.7 4.7
- China 7.3 6.9 6.7 6.9 6.6 6.2
- India 7.3 7.9 7.1 6.7 7.3 7.4
- Asean-5 4.6 4.8 4.9 5.3 5.3 5.2
Indonesia 5.0 4.8 5.0 5.1 5.1 5.1
World trade volume growth
(goods and services) 3.4 2.7 2.5 5.2 4.2 4.0
* Projection.
Sources: IMF, World Economic Outlook April 2014, October 2017, and October 2018.
 -8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0

-10.0
Q1-2006 4.9
Q2 1.2
Q3 0.4
Q4 3.2
Q1-2007 0.2
Q2 3.1
Q3 2.7
Q4 1.4
Q1-2008 -2.7
Q2 2.0
Q3 -1.9
Q4 -8.2
Q1-2009 -5.4

Source: US Bureau of Economic Analysis

Q2 -0.5
Q3 1.3
Q4 3.9
Q1-2010 1.7
Q2 3.9
Q3 2.7
Q4 2.5
Q1-2011 -1.5
Q2 2.9
Q3 0.8
Q4 4.6
Q1-2012 2.7
Q2 1.7
Q3 0.5
Q4 0.5
Q1-2013 3.6
Q2 0.5
Q3 3.2
Q4 3.2
Quarterly GDP growth, percent

Q1-2014 -1.0
Q2 5.1
Q3 4.9
Q4 1.9
Q1-2015 3.3
Q2 3.3
Q3 1.0
looks like it will expand above 3% rate in 2018

Q4 0.4
Q1-2016 1.5
Q2 2.3
Q3 1.9
Q4 1.8
Q1-2017 1.8
the fastest 6 months of growth in 4 years

Q2 3.0
Q3 2.8
U.S. GDP expansion in the last 2 quarters is

Q4 2.3
U.S. has record 12th straight year without 3% growth in GDP. The economy

Q1-2018 2.2
Q2 4.2
Q3 3.5
 In October, U.S. labor market’s persistent
strength, hiring is up, wages are up
600

Percent
12.0
Thousands

10.0
400 10.0

324
268
250
200 8.0

0 6.0

3.7
-200 4.0

2.5

-400 2.0
2.3

-0.2
-600 0.0

U.S. inflation accelerates to six-year high, and unexpectedly cooled in

August to 2.7% as apparel prices fell by the most in about 7 decades and
-800 medical-care costs declined, offering Americans a respite from accelerating -2.0

price gains. Hourly wages increased by 3.1% (y-o-y) in September 2018, the
best gain since the early days of the recovery in 2009.
-1,000 -4.0

10

10

10
10

10

10

10

10

10

10

10

10

4
7

4
7
Jan'2007
4
7

4
7

4
7

4
7

4
7

4
7

4
7

4
7

4
7

4
7

Jan'17

Jan'18
Jan'08

Jan'09

Jan'10

Jan'11

Jan'12

Jan'13

Jan'14

Jan'15

Jan'16
Change in job-LHS Unemployment-RHS Inflation-RHS

Source: U.S. Bureau of Labor Statistics.

 Harga minyak turun tajam dalam 2 bulan terakhir,
berpotensi naik lagi ke kisaran US$ 65 per barrel
Crude Oil Light Sweet Pit (Nymex) January 2019 Brent Crude Last Day (ICE) January 2019

Source: http://www.nasdaq.com/markets/crude-oil.aspx Source: http://www.nasdaq.com/markets/crude-oil-brent.aspxc

Crude oil prices projections
Average spot prices (Brent, WTI, Dubai Fateh), USD/barrel
104.1

96.2

70.0
66.3 66.8 67.2 67.7
65.0 65.0 65.4 65.9

52.8
50.8

42.8

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030

Source: World Bank, Commodity Markets Outlook, April 2018.

http://pubdocs.worldbank.org/en/458391524495555669/CMO-April-2018-Forecasts.pdf
Pertumbuhan ekonomi China berpotensi melambat
 Various institutions, including Morgan Stanley, forecast that 25 per cent
US tariffs on US$50 billion worth of Chinese goods could knock 0.1
percentage points off growth, slowing the economy to its lowest level
since the first quarter of 2009 when the country’s exports were hit hard
by the global financial crisis. But if the US goes ahead with threatened 10
per cent duties on another US$200 billion worth of Chinese goods,
China’s growth rate could fall by 0.3 percentage points or more,
according to various estimates. That would put growth at its lowest level
since the aftermath of the Tiananmen crackdown in 1989 when the
world’s major economies sanctioned Beijing for its response to the pro-
democracy movement.
Source: South China Morning Post: https://www.scmp.com/news/china/economy/article/2155396/chinas-growth-slows-second-quarter-
government-tackles-risk-and

 China hits record-low investment growth as Beijing battles a slowdown.

Investment in factories, railways and other projects in China so far this
year grew at its slowest pace in more than a quarter-century, pointing to
challenges in government efforts to arrest an economic slowdown.
Source: Wall Street Journal: https://www.wsj.com/articles/china-economic-activity-indicators-mixed-in-august-1536892284
 Tahun 2018 tanpa APBN-P, tahun depan
cenderung konservatif
APBN Realisasi RAPBN
Indicator 2018 2018 2019

Real GDP growth rate (%) 5.4 5.17 (Q1-Q3) 5.3

Consumer price index/Inflation (%) 3.5 3.16 (Oct., yoy) 3.5

Exchange rate (IDR/USD) 13,400 14,220 (21/11) 15,000

Suku bunga SPN 3 bulan (%) 5.2 5.0* 5.3

Indonesian crude oil Price/ICP (USD/barrel) 48.00 69.18 (Jan-Oct) 70

Crude oil lifting (thousand barrel/day) 800 771 (H1) 775

Gas lifting (thousand barrel/day oil
equivalent) 1.200 1.152 (H1) 1.250
*Outlook (Ministry of Finance).
Sources: Ministry of Finance, BPS, BI
Comparison of some economic indicators, 2017
(Annual percent change, unless noted otherwise)
Current
Real GDP Consumer account Unem-
growth prices1 balance2 ployment3
Indonesia 5.1 3.8 -1.7 5.4
Malaysia 5.9 3.8 3.0 3.4
Philippines 6.7 3.2 -0.4 5.7
Thailand 3.9 0.7 10.8 0.7
Vietnam 6.8 3.5 4.1 2.2
ASEAN-5 5.3 3.1 2.1 …
China 6.9 1.6 1.4 3.9
India 6.7 3.6 -2.0 …
Emerging and Developing Asia 6.5 2.4 0.9 …
… Not available
1Movements in consumer prices are shown as annual averages.
2Percent of GDP.
3Percent. National definitions of unemployment may differ.

Source: IMF, World Economic Outlook, April 2018.

 Part II
Depreciation of Rupiah Causes
Macroeconomic Instability
 IDR slid to a two-decade low since the 1998 Asian
financial crisis, recovered in the last 2 weeks
IDR per USD
(Scale inverted to show weakening IDR)

11/24/17
04/07/04

09/17/13
01/23/14
06/03/14
10/08/14
02/09/15
06/15/15
10/21/15
02/24/16
06/28/16
11/03/16
03/08/17
07/25/17

04/02/18
08/16/18
13-May

24-May

13-May
Mar-19
10-Nov

30-Nov
30-Aug

06-Aug

18-Aug

Aug-12
22-Dec
13-Dec
14-Sep

27-Sep
06-Feb

28-Feb

07-Apr

14-Apr

26-Apr
10-Oct
12-Jun
19-Jan
05-Jan

Jan-08
Jul-24
03-Jul
7,500
8,440
(08/02/2011)
8,500

9,500

10,500

10,800
11,500 (08/30/2005)

12,500
12,400
(11/24-26/2008)

13,500

14,383
14,500 (12/05/18)

14,728
(09/29/2015)
15,500 15,237
(10/30/18)

Source: Bank Indonesia

 Foreign exchange reserves decreased by US$17
billions in the last 8 months
132.0
140
US$ billions

124.6 (Jan'18)
(Aug'11)
115.5
120 (Feb'15)

115.16
100 (Oct'18)
100.2
92.7 (Nov'15)
80 (Jul'13)
60.6
(Jul'08)
60

50.2
40 (Nov'08)

30.3
20 (Sep'05)

0
Jan'04

Jan'05

Jan'06

Jan'07

Jan'08

Jan'09

Jan'10

Jan'11

Jan'12

Jan'13

Jan'14

Jan'15

Jan'16

Jan'17

Jan'18
5
9

5
9

5
9

5
9

5
9

5
9

5
9

5
9

5
9

5
9

5
9

5
9

5
9

5
9

5
9
Source: Bank Indonesia.
Current account dan nilai tukar rupiah

 Current account (CA) merupakan cerminan degree of

openness suatu perekonomian, daya saing, dan
produktivitas suatu negara.
 Dalam jangka menengah dan jangka panjang, kondisi CA
memengaruhi nilai tukar.
 Dalam jangka pendek, boleh jadi defisit CA beriringan
dengan penguatan nilai tukar. CA mencerminkan fenomena
sektor riil (masalah struktural), nilai tukar lebih
mencerminkan fenomena moneter atau dipengaruhi
kebijakan moneter: bank sentral menaikkan suku bunga
atau melakukan operasi moneter dan pemerintah
menerbitkan surat utang. Oleh karena itu, nilai tukar rupiah
cenderung akan terus melemah.
 Pasca krisis 1998, nilai tukar rupiah berkorelasi
kuat dengan current account
0 661 6
4.55
2,000
4
2.80
4,000 2,909
2

6,000 0.19
0
7,855
8,000 8,577 8,770 -1.71
-2
10,000
10,014 10,261 -2.86
10,390
-3.43 -4
12,000
-4.59
-6
14,000 13,389
14,230
16,000 -7.34 -8
1984

2001
1982
1983

1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018*
Official exchange rate (LCU per US$, period average)-LHS
Current account balance (% of GDP)-RHS
*Q1-Q3 (January-September) for current account; year to date (5 December) for exchange rate.
Sources: Bank Indonesia and World Bank.
 Getting to the root of the problem: balance of
payments
USD millions

2014 2015 2016 2017 2017* 2018* Q1-17 Q2-17 Q3-17 Q1-18 Q2-18 Q3-18
I. CURRENT ACCOUNT -27,510 -17,519 -16,952 -17,307 -11,417 -22,423 -2,215 -4,608 -4,594 -5,600 -7,977 -8,846
A. Goods, net (Trade account) 6,983 14,049 15,318 18,785 15,728 2,222 5,635 4,835 5,258 2,323 297 -398
1. Exports, f.o.b. 175,293 149,124 144,470 168,854 123,322 135,855 40,763 39,167 43,392 44,374 43,759 47,722
-
2. Imports, f.o.b. -168,310 -135,076 -129,152 -150,069 -107,593 133,633 -35,128 -34,332 -38,133 -42,050 -43,463 -48,120
B. Services, net -10,010 -8,697 -7,084 -7,834 -5,500 -5,727 -1,272 -2,129 -2,099 -1,656 -1,856 -2,215
C. Primary Income, net -29,703 -28,379 -29,647 -32,756 -24,953 -23,724 -7,716 -8,307 -8,930 -7,681 -8,017 -8,026
D. Secondary Income, net 5,220 5,508 4,460 4,498 3,307 4,806 1,138 993 1,176 1,414 1,599 1,793
II. CAPITAL ACCOUNT 27 17 41 46 24 70 0 5 19 58 3 9
III. FINANCIAL ACCOUNT 44,916 16,843 29,306 29,356 22,404 10,997 6,748 5,344 10,312 2,303 4,530 4,164
1. Direct investment 14,733 10,704 16,136 19,285 14,545 9,946 2,757 4,376 7,412 3,263 2,734 3,949
2. Portfolio investment 26,067 16,183 18,996 20,899 18,692 -1,271 6,536 8,126 4,030 -1,271 104 -104
3. Financial derivatives -156 20 -9 -128 -59 163 -72 25 -12 60 12 91
4. Other investment 4,272 -10,064 -5,817 -10,700 -10,774 2,159 -2,474 -7,182 -1,118 251 1,680 228
IV. NET ERRORS & OMISSIONS -2,184 -439 -305 -509 -399 -1,194 -19 -2 -378 -616 -864 286
V. RESERVES & RELATED ITEMS -15,249 1,098 -12,089 -11,586 -10,612 12,550 -4,514 -739 -5,359 3,855 4,309 4,386
*Q1-Q3 (January-September).
Source: Bank Indonesia.
 Simple anatomy of current account
USD millions
2017 2017* 2018* Q3-17 Q3-18
CURRENT ACCOUNT -17,307 -11,417 -22,423 -4,594 -8,846
% of GDP -1.70% -1.50% -2.86% -1.75% -3.37%
A. Goods, net (Trade account) 18,785 15,728 2,222 5,258 -398
1. Non-oil and gas, net 25,236 20,085 11,100 6,323 3,482
2. Oil -12,816 -9,129 -13,549 -2,741 -5,120
3. Gas 5,467 4,130 4,849 1,460 1,593
4. Others 899 641 -177 216 -298
B. Services, net -7,834 -5,500 -5,727 -2,099 -2,215
C. Primary Income, net -32,756 -24,953 -23,724 -8,930 -8,026
1. Compensation of employees -1,509 -1,098 -1,109 -397 -383
2. Investment income -31,248 -23,855 -22,614 -8,533 -7,643
a. Direct investment income -20,161 -14,947 -13,021 -5,338 -4,424
b. Portfolio investment income -8,837 -7,307 -8,048 -2,621 -2,761
C. Other investment income -2,250 -1,601 -1,544 -574 -457
D. Secondary Income, net 4,498 3,307 4,806 1,176 1,793
*Q1-Q3 (January-September)
Source: Bank Indonesia.
 Transaksi perdagangan luar negeri (ekspor dan
impor) kembali defisit selama Januari-Juli 2018
Trade account
US$ billion Growth, % (yoy)
Description
2014 2015 2016 2017 2017* 2018* 2014 2015 2016 2017 2018*

Total export 176.0 150.4 145.2 168.8 138.6 150.9 -3.4 -14.6 -3.9 16.3 8.8

Non-oil and gas 146.0 131.8 132.1 153.1 125.7 136.6 -2.6 -9.8 -0.3 15.9 8.7

Oil and gas 30.0 18.6 13.1 15.7 12.9 14.2 -7.0 -38.2 -29.4 20.1 9.9

Total import 178.2 142.7 -135.6 -157.0 -126.8 -156.4 -4.5 -19.9 -4.9 15.7 23.4

Non-oil and gas 134.7 118.1 -116.9 -132.6 -107.2 -131.4 -4.7 -12.3 -1.0 13.4 22.6

Oil and gas 43.5 24.6 -18.7 -24.3 -19.5 -25.0 -4.0 -43.4 -23.9 29.7 27.7

Surplus (Deficit) -2.2 7.7 9.5 11.8 10.8 -5.5

Non-oil and gas 11.3 13.7 15.2 20.4 16.7 5.2

Oil and gas -13.5 -6.0 -5.6 -8.6 -5.9 -10.7

*January-September.
Source: BPS-Statistics Indonesia.
 Surplus perdagangan barang cenderung susut,
bahkan 2012-2014 da 2018 alami defisit
International trade: exports and import
250 50
USD billions

USD billions
200 39.6
39.7
40
150

100 28.6
26.1
30
50 2…
19.7
0 20

-50 11.9
8.3
10
-100
7.8
-150
0
-200 -0.1 -0.4
-4.1
-5.5
-250 -10

2017*
2018*
1988

2010
1945
1955
1965
1973
1975
1983
1985

1990
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

2011
2012
2013
2014
2015
2016
2017
Exports (plus)-LHS Imports (minus)-LHS Surplus/deficit-RHS
*January-September.
Source: BPS-Statistics Indonesia.
Oil trade deficit increased sharply in 2017-18
Oil trade account (exports minus imports)
USD billions

15.0

5.0

-5.0
-11.0 -11.7

-15.0
-14.7
-16.6

-25.0

-27.6

-35.0

2017*
2018*
1987

1992

1997

2002
1981
1982
1983
1984
1985
1986

1988
1989
1990
1991

1993
1994
1995
1996

1998
1999
2000
2001

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Crude oil Oil products Total Oil
*January-October.
Source: BPS-Statistics Indonesia.
 Exports of high-tech products declined
High-technology exports (% of manufactured exports)
60

50

43.0
40

30
26.9
25.6
21.5
20 16.7

10 10.5

5.8

0
1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016
Indonesia East Asia & Pacific (IDA & IBRD countries)
Lower middle income Vietnam
Malaysia Thailand

Sources: World Bank, World Development Indicators

 Exports of medium and high-tech products
declined as well
Medium and high-tech exports (% of manufactured exports)
90

80 76.4

70
62.7

60
53.3 61.8

50
49.2
40 34.4

28.6
30

20
17.7
10

Indonesia Malaysia Thailand Vietnam

Source: World Bank, World Development Indicators -- https://data.worldbank.org/indicator/TX.MNF.TECH.ZS.UN, downloaded on August 18, 2018.
 Trade in services (net)
USD millions

2015 2016 2017 2018*

Manufacturing services 356 351 354 290
Maintenance and repair services -340 -353 -178 -132
Transport -6,146 -5,544 -6,864 -6,371
Travel 3,469 3,639 4,242 4,041
Construction -74 93 183 215
Insurance and pension services -888 -661 -647 -517
Financial services -497 -577 -442 -349
Charges for the use of intellectual services -1,601 -1,686 -1,801 -1,238
Telecommunications, computer, and information -820 -1,175 -1,416 -1,239
Other business services -2,670 -1,836 -1,947 -1,010
Personal, cultural, and recreational services 45 36 74 51
Government goods ad services 469 630 607 532
Total services -8,697 -7,084 -7,834 -5,727
*Q1-Q3 (January-September)
Source: Bank Indonesia.
 Pertumbuhan wisman tetap tinggi walau melambat
International visitors arrivals to Indonesia by port of entry
Growth (yoy) 2017 = 21.88%; 2018 (Jan-Oct) = 11.92%
Government target: 2017 = 15 millions; 2018 = 17 millions, 2019 = 20 millions

Port of Entry 2014 2015 2016 2017 2017* 2018*

Ngurah Rai 3,731,735 3,936,066 4,852,634 5,653,086 5,012,765 5,124,117
Soekarno-Hatta 2,246,437 2,368,628 2,416,060 2,563,124 2,287,655 2,379,218
Batam 1,454,110 1,585,719 1,432,472 1,504,275 1,242,537 1,498,754
Tanjung Uban 320,861 305,471 305,404 368,587 295,987 414,015
Juanda 217,193 204,200 220,570 237,063 199,598 266,270
Kualanamu 234,724 201,447 203,947 237,361 197,180 183,659
Husein Sastranegara 180,392 159,811 181,033 163,875 133,512 123,780
Adi Sucipto 89,156 82,126 112,058 142,557 119,689 117,034
Tanjung Pinang 97,672 91,341 93,249 117,384 92,923 113,503
Sam Ratulangi 17,279 19,465 40,624 79,267 64,566 107,520
Lombok 69,881 70,248 90,738 122,983 108,448 73,130
Tanjung Balai Karimun 100,782 97,320 89,107 84,288 68,902 68,949
Top-12 8,760,222 9,121,842 10,037,896 11,273,850 9,823,762 10,469,949
Others 675,189 1,108,933 1,481,379 2,765,949 2,006,976 2,770,878
Total 9,435,411 10,230,775 11,519,275 14,039,799 11,830,738 13,240,827
*January-October.
Source: BPS-Statistics Indonesia
 Mostly from Asia-Pacific (thousand visitors)
Nationality International
2014 visitors arrivals to2016
2015 Indonesia 2017
by nationality
2017* 2018*
Malaysia 1,418.3 1,431.7 1,541.2 2,121.9 1,710.0 2,068.7
China 1,052.7 1,249.1 1,556.8 2,093.2 1,871.0 1,869.5 
Singapore 1,559.0 1,594.1 1,515.7 1,554.1 1,215.6 1,372.9
Australia 1,145.6 1,090.0 1,302.3 1,256.9 1,079.2 1,089.5
India 267.1 307.0 422.0 536.9 440.2 486.7
Japan 505.2 528.6 545.4 573.3 490.7 445.9 
United Kingdom 244.6 286.8 352.0 378.1 328.2 336.5
United States 246.4 269.1 316.8 344.8 290.3 321.9
South Korea 352.0 375.6 386.8 423.2 366.7 300.8 
France 208.5 208.7 256.2 274.1 247.2 258.9
Germany 184.5 201.2 243.9 267.8 237.4 240.3
Netherlands 168.5 172.4 200.8 210..4 183.8 184.4
Philippines 248.2 267.7 298.9 309.0 256.1 179.6 
Taiwan 220.3 223.5 252.8 264.3 231.8 179.0 
New Zealand 79.4 86.6 105.4 106.9 94.3 110.8
Thailand 114.3 118.6 124.6 138.2 116.2 105.2 
Russia 94.3 72.3 88.5 117.5 96.6 100.4
Top-17 8,108.9 8,483.0 8,109.3 10,760.2 9,255.3 9,651.0
Others 1,326.5 1,747.8 3,410.0 3,279.6 2,575.4 3,589.8
* January-October
Total
Source: BPS-Statistics Indonesia
9,435.4 10,230.8 11,519.3 14,039.8 11,830.7 13,240.8
Far more portfolio investment than FDI since
2014, but more volatile
FDI Portfolio Total
50
Billions USD

40

30

20

10

2018*
2017*
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017
-10

*Q1-Q3 (January-September)
Source: Bank Indonesia.
 FDI ke Indonesia relatif kecil
FDI inflows as a percentage of gross fixed capital formation, period average
1990-97 2000-04 2005-10 2011-16
Indonesia 4.8 -3.3 5.6 5.7
Malaysia 16.0 10.4 13.6 14.0
Philippines 5.2 5.9 7.4 7.0
Thailand 4.5 14.2 13.2 6.1
Viet Nam 33.6 12.6 20.4 23.2
Bolivia 24.1 38.7 11.2 15.5
Asia 6.1 9.2 9.6 6.3
East and South-East Asia 8.0 11.2 9.3 6.5
South-East Asia 10.7 15.1 17.6 17.0
FDI inward stock as a percentage of gross domestic product, period average
1990-97 2000-04 2005-10 2011-16
Indonesia 8.2 7.1 16.2 24.1
Malaysia 29.0 37.6 34.7 40.6
Philippines 7.9 14.5 13.5 17.8
Thailand 10.2 29.1 35.8 44.7
Viet Nam 20.2 47.1 43.1 50.5
Bolivia 23.5 66.1 40.7 33.7
Asia 14.8 20.8 23.9 25.7
East and South-East Asia 21.7 29.8 30.2 29.7
South-East Asia 19.8 41.9 51.1 66.1
Source: UNCTAD, World Investment Report database.
Worst in Class
Among emerging Southeast Asian nations, Indonesia attracts the least foreign
direct investments as a percentage of its GDP.

Vietnam Thailand Philippines Malaysia Indonesia

7.0

6.3 6.4

4.5

3.2
3.0 2.9 2.9
2.7
2.4
2.2
1.7 1.7

0.7
0.4

2016 2017 2018

Source: https://www.bloomberg.com/view/articles/2018-09-12/indonesia-is-flirting-with-the-wrong-kind-of-foreign-money
 First time climbing to the top in 2013, Indonesia beat
China in Japanese FDI, but then fell to 5th in 2017
Promising countries for overseas business operation by Japanese
Manufacturing companies over the medium term (next 3 years or so)

Rank 1997 2003 2005 2006 2007 2010 2011 2012 2013 2014 2015 2016 2017

1st China China China China China China China China Indonesia India India India China

Indonesia
2nd USA Thailand India India India India India India India Indonesia 2nd China India

China
3rd Indonesia USA Thailand Vietnam Vietnam Vietnam Thailand Indonesia Thailand China 2nd Indonesia Vietnam

4th Thailand Vietnam Vietnam Thailand Thailand Thailand Vietnam Thailand China Thailand Thailand Vietnam Thailand

5th India India USA USA Russia Brazil Indonesia Vietnam Vietnam Vietnam Vietnam Thailand Indonesia

6th Vetnam Indonesia Russia Russia USA Indonesia Brazil Brazil Brazil Mexico Mexico Mexico USA

7th Philippines Korea Korea Brazil Brazil Russia Russia Mexico Mexico Brazil USA USA Mexico

8th Malaysia Taiwan Indonesia Korea Indonesia USA USA Russia Myanmar USA Philippines Philippines Philippines

9th Brazil Malaysia Brazil Indonesia Korea Korea Malaysia Myanmar Russia Russia Brazil Myanmar Myanmar

Brazil &
10th Taiwan Russia Taiwan Taiwan Taiwan Malaysia Taiwan USA USA Myanmar Myanmar Brazil Korea

Source: Japan Bank for International Cooperation (JBIC), “Survey Report on Overseas Business Operations by Japanese Manufacturing
Companies,” various issues.
Japanese FDI relocation from China to ASEAN
heading to Vietnam, nil to Indonesia in 2017
Destination of Japanese FDI relocating from China (number of cases)
2016 2017
38

27

9 9
8

5 5 5

0 0

Vietnam Thailand Philippines Myanmar Indonesia

Source: Japan Bank for International Cooperation (JBIC), “Survey Report on Overseas Business Operations by Japanese Manufacturing
Companies,” 2016 and 2017.
 Stock index had a new record 12 times in 2015,
and 38 times in 2017, 11 times in 2018, but …
IDX (Jakarta Composite Index)
6,689
6,800

 On December 5, 2018: 6,133.120

 The highest (February 19, 2018): 6,689.287 6,133
5,800
 year to date  -3.50%
 year on year 2.21%
4,800

3,800

2,800

1,800

800
29-Apr

02-Aug

07-Aug

15-Aug

05-Apr

06-Apr
01-Feb
04-May

08-May

19-May

16-Sep
07-Feb

15-Feb

05-Mar

02-Sep

10-Mar

14-Sep

08-Mar

10-Sep

14-Mar

20-Mar

27-Mar

Oct-19
Feb-25

Sep-29

Apr-19
26-Jan
Oct-21'04

28-Jul
26-Oct

08-Nov

07-Nov

20-Nov

May-29
Aug-28
01-Dec

07-Jun

08-Dec

09-Jun

09-Dec

08-Jun

10-Dec

13-Jun

16-Dec

25-Jun

24-Dec

05-Jan
29-Jun

11-Jul

06-Jan

20-Jul
01-Oct

07-Oct

Aug-01
Jan-19

11/01/18
Source: Bursa Efek Indonesia (Indonesia Stock Exchange): http://www.idx.co.id
 Indonesia’s stock market performance is better
than Emerging Markets
As of November 21st 2018 (% change on December 29th 2017, in $ terms)
Brazil (BVSP) 14.2
India (BSE) 3.4
Pakistan (KSE) 2.3
Argentina (MERV) 0.7
United States (DJIA) -1.0
Russia (RTS, $ terms) -2.3
Japan (Nikkei 225) -5.5
Malaysia (KLSE) -5.6
Switzerland (SMI) -5.8
France (CAC 40) -6.3
Indonesia (IDX) -6.4
Australia (All Ord.) -7.2
Thailand (SET) -7.8
Britain (FTSE 100) -8.3
Euro area (EURO STOXX 50) -10.0
Singapore (STI) -11.7
Germany (DAX) -13.0
Hong Kong (Hang Seng) -13.2
South Africa (JSE AS) -13.8
Italy (FTSE/MIB) -14.3
Emerging markets (MSCI) -15.8
South Korea (KOSPI) -15.8
Mexico (IPC) -15.9
Turkey (BIST) -19.6

Source: The Economist (http://www.economist.com/news/economic-and-financial-indicators/21693195-markets).

Foreign holdings in LCY government bonds in
selected Asian countries
Percent of total LCY bonds
45

40
37.8

35

30

25 24.8

20

15 15.7

11.6
10 11.2

5
4.04

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*

Indonesia Malaysia Thailand Korea Japan China

* Data as of 30 June 2018 except for Japan and the Republic of Korea (31 March 2018).
Source: Asian Development Bank, asianbondsonline.adb.org
Recent developments of foreign holdings of EM
of government debt securities in LC bonds

Average

Source: downloaded from https://www.imf.org/external/np/g20/pdf/2017/060317.pdf

This time is different: pattern of net inflows of
government bonds (IDR trillion)

Note: Year to date for 2018: October 17.

Source: Ministry of Finance.
 This time is different: pattern of net inflows of
Nor for the bondbonds
government market

Source: Bloomberg, UOB Global Economics and Markets Research

20
 Foristhe
2018 notstock
a goodmarket, toostock market
year for the

Source: Bloomberg, UOB Global Economics and Markets Research

19
The inflation rate in 2018 is relatively low due
to price control
18.4 BI target 2018: 3.5% ± 1%
18
Calender year 2018 = 2.50%
November 2018 (yoy) = 3.23%

16

14

12.1
12

10
8.8
8.4

8 7.3

4.5 4.4

4
3.2

2
Jan'03

Jan'08

Jan'13

Jan'18
6

8
11
4
9
2
7
12
5
10
3
8

6
11
4
9
2

12
5
10
3
8

6
11
4
9
2
7
12
5
10
3

6
11
Source: BPS-Statistics Indonesia.
Laju inflasi cenderung naik cukup signifikan

 Dari sekitar 3 persen tahun ini ke sekitar 5 persen

tahun depan
 Jika pasangan No.1 yang menang, penyesuaian tarif
listrik dan harga BBM lebih cepat, sekitar Mei-Juni:
berbenah sebelum pelantikan presiden.
 Jika pasangan no.2 yang menang, penyesuaian
dilakukan akhir tahun setelah pelantikan
 Healthy banking sector: CAR comfortably
high, NPL relatively low
Indicators 2014 2015 2016 2017 Sep. 17 Sep. 18
Total asset (Trillion Rp) 5,615 6,129 6,730 7,387 7,150 7,769
Deposits (Trillion Rp) 4,114 4,413 4,837 5,289 5,143 5,482
- Demand deposits 890 988 1,124 1,233 1,199 1,314
- Saving accounts 1,284 1,396 1,552 1,701 1,575 1,724
- Time deposits 1,940 2,029 2,161 2,355 2,369 2,444
Loans (Trillion Rp) 3,674 4,058 4,377 4,738 4,544 5,120
Capital adequacy ratio (CAR) (%) 19.57 21.39 22.93 23.18 23.25 22.91
NPL gross, without channeling (%) 2.2 2.5 2.9 2.6 2.8 2.9
Returns on assets (%) 2.85 2.32 2.23 2.45 2.47 2.50
Net interest margin (%) 4.23 5.39 5.63 5.32 5.52 5.61
Ops.Expenses/Ops.Income (BOPO)(%) 76.29 81.49 82.22 78.64 85.72 85.54
Loan to deposit ratio (%) 89.42 92.11 90.70 90.04 88.74 94.09
Number of banks 119 118 116 115 115 115
Number of bank offices 32,739 32,963 32,730 32,285 32,602 31,738
Source: Bank Indonesia and Financial Services Authority (OJK).
 The impossible trinity or the policy trilemma
Fixed
Exchange rate 1. Jika ingin nilai tukar stabil (tetap)
seraya bank sentral tak direcoki
oleh kekuatan lain (pemerintah)
dalam menentukan suku bunga,
maka jangan terapkan rezim
devisa bebas (free capital
1 2 mobiity).
Pick one
side of 2. Jika ingin nilai tukar stabil (tetap)
the triangle seraya tidak ada pengendalian
devisa, maka jangan berikan
otonomi kepada bank sentral
dalam menentukan suku bunga.

3
3. Jika bank sentral memiliki
Monetary Free capital
Autonomy mobility
otonomi dalam menentukan suku
bunga dan berlaku rezim devisa
bebas, maka jangan berharap
nilai tukar stabil (tetap).
 BI sudah menaikkan suku bunga acuan 5 kali
sebesar 150 basis poin dalam 6 bulan terakhir
BI Rate, percent
12.75

Start of the previous

Governor (May 24, 2013)

9.50
8.50

8.00

7.75
7.50
6.75
6.50

6.50
5.75
Jan'09
4
7

4
7

4
7

4
7
10

4
7

4
7

4
7

4
7
9

3
6
9

2
5
8

2
5
10
Jan'06

10
Jan'07

10
Jan'08

10

Jan'10

10
Jan'11

10
Jan'12

10
Jan'13

12

11-II

11
Jul'05

Start of the current

BI 7-day repo rate, percent Governor
(May 24, 2018)

6.00
5.75
5.50

5.50
5.25

5.25
5.00
4.75

4.75

4.75
4.50

4.50
4.25

Source: Bank Indonesia 4.25

Credit growth reached 2 digits in the last five
months, but third party fund continue to slow
(y-o-y, % for LHS; % for RHS)
25 23.4 96

94.1
94

20 92

88.7
90

88.6
15
12.7 88
11.7
86
10
84

82
5 6.6

80
3.2
0 78

11
11

11

11

11
3

9
5
7
9

7
9

3
5

3
5
7

3
5
7
9

3
5
7
9
Jan'13

Jan'14

Jan'15

Jan'16

Jan'17

Jan'18
LDR-RHS Credits-LHS Third party funds-LHS
Sources: Bank Indonesia and Financial Services Authority (OJK).
Tekanan bertubi-tubi kenaikan suku bunga

 The Fed akan terus menaikkan suku bunga acuan:

sekali lagi tahun ini, dan sekitar 3 kali tahun depan?
 BI pun sudah menaikkan 7-day Repo Rate 5 kali
pada era Gubernur BI yang baru.
 LDR merangkak naik mendekati 100 persen,
likuiditas perbankan semakin ketat.
 Kenaikan utang pemerintah menyebabkan
crowding-out effect
 Laju inflasi akan lebih tinggi tahun depan karena
penyesuaian harga BBM dan tarif listrik
 Part III
Will Economic Growth to Accelerate?
 The rise and decline of Indonesian economy:
1961-2018
GDP growth, percent
15
Trendline-
10.92 polynomial
9.88
10 8.76
8.22
7.46
6.98
6.35 6.22
5.74
5.07
5
4.98 4.63 5.01 5.03 5.17
Pertamina 3.64
crisis 2.25 2.46
0 Oil price
collapse
-2.24
-5 The fall of
Old Order

-10

Economic crisis and the end

of New Order/Soeharto era
-13.13
-15

* Q1-Q3 (January-September).
Source: BPS-Statistics Indonesia and World Bank.
 The declining trend of economic growth in the
long-term, 1976-2018
GDP growth, percent
12

10

8 8%
7%
6 6%
5%
4

-2

-4

-6

-8

-10

-12

-14
87

99

10
77
78
79
80
81
82
83
84
85
86

88
89
90
91
92
93
94
95
96
97
98

11
12
13
14
15
16
17
1976

1
2
3
4
5
6
7
8
9
2000

18*
*Q1-Q3 (January-September).
Source: BPS-Statistics Indonesia.
 Setting off from a point where neighboring
countries started their journey too (1)
Gross national income (GNI) per capita,
30,000
Atlas method, current US$
28,380

25,000

20,000

15,000

10,000
9,650
8,690
5,960
5,000
3,540

China Indonesia Korea, Rep. Malaysia Thailand

Source: World Bank, World Development Indicators online, downloaded on August 31, 2017.
 Economic growth by island: Eastern Indonesia is
slowing down, but Sulawesi is the highest

2015 : 1.3%
2016 : 2.0%
2017 : 4.3%
2018*: 3.3% 2015. : 8.2% 2015 : 6.6%
2015 : 3.5% 2016. : 7.4%
2016 : 4.3% Share : 8.2% 2016 : 7.5%
2017 2017 : 7.0% 2017 : 4.9%
2017 : 4.3% 2018*: 6.8%
2018*: 4.6% 2018*: 13.7%
Share : 6.1% Share : 2.4%
Share : 21.7% 2017
2017 2017

2015 : 5.5%
2016 : 5.6%
2017 : 5.6% 2015: 10.3%
2018*: 5.7% 2016: 5.9%
Share : 58.5% 2017: 3.7%
2017 2018*: 2.2%
Share : 3.1%
*Q1-Q3 (January-September) 2017
Source: BPS-Statistics Indonesia.
 Peranan pulau dalam pembentukan PDB
nasional (persen)

2010 2015 2016 2017 2018-1 2018-2 2018-3

Sumatera 23.1 22.2 22.0 21.7 21.5 21.5 21.5
Jawa 58.1 58.3 58.5 58.5 58.7 58.6 58.6
Kalimantan 9.2 8.2 7.9 8.2 8.2 8.1 8.1
Bali & Nusa Tenggara 2.7 3.1 3.1 3.1 3.0 3.1 3.0
Sulawesi 4.5 5.9 6.0 6.1 6.0 6.2 6.3
Maluku & Papua 2.4 2.4 2.5 2.4 2.5 2.5 2.5

Kawasan Barat Indonesia 90.4 88.7 88.4 88.4 88.5 88.2 88.2
Kawasan Timur Indonesia 9.6 11.4 11.6 11.6 11.6 11.8 11.8

Jawa 58.1 58.3 58.5 58.5 58.7 58.6 58.6

Luar Jawa 41.9 41.7 41.5 41.5 41.3 41.4 41.4
Source: BPS-Statistics Indonesia.
Analogi perekonomian dengan anatomi
tubuh manusia

Tempo, 8-14 Januari 2018, hal.12

The Primary Heart
Credit penetration in Indonesia is still very low

Source: World Bank, World Development Indicators.

 Indonesia: domestic credits to GDP ratio has
not reached pre-crises level
Percent of GDP
70
60.8
60
62.1

50

47.0
40
38.7
34.2
30

20
20.6

10

Domestic credit to private sector Domestic credit provided by financial sector

Source: World Bank, World Development Indicators.
The Secondary Heart
Tax ratio has declined for the last 6 years in a
row, only single digit in the last two years
% of GDP
21.9
22

20 19.1
18.8

18

16.3
16

14 14.6 13.3

12 11.4
12.4 10.9

9.9
10 10.6 10.5

9.3
8

*Last quarter of 1999/2000 fiscal year plus April-December of 2000 fiscal year.
**January-September (preliminary).
Sources: World Bank for 1972-1999; for 2000-2018: Tax revenue from Ministry of Finance (APBN Kita, July edition); GDP from BPS-Statistics Indonesia.
Indonesia’s tax-to-GDP ratio is low compared
to peers
Percent of GDP
35

30

25

20

15

10

2012 2013 2014 2015 2016

Sources: World Bank and OECD.

The face is rather pale because of
the lack of sun exposure
 Degree of openness: (X + M)*/GDP
Population Exports (X) Imports (M) X+M
Country (mil.,2017) 1980 2017 1980 2017 1980 2017
China 1,386.4 5.9 19.8 6.5 18.0 12.4 37.8
India 1,339.2 6.2 18.9 9.3 21.8 15.5 40.7
United States 325.7 9.8 **11.9 10.3 **14.7 20.1 **26.6
Indonesia 264.0 30.5 20.4 22.2 19.2 52.7 39.6
Brazil 209.3 9.0 12.6 11.3 11.6 20.3 24.2
Japan 126.8 13.1 **16.1 14.1 **15.1 27.2 **31.2
Philippines 104.9 23.6 30.6 28.5 40.1 52.1 70.7
Vietnam 95.5 ***6.6 101.6 ***16.6 98.8 ***23.2 200.4
Germany 82.7 18.7 47.2 23.3 39.7 42.0 86.9
Thailand 69.0 24.1 **68.1 30.4 **53.5 54.5 121.6
United Kingdom 66.0 26.1 30.5 23.9 31.9 50.0 62.4
South Africa 56.7 34.3 29.8 29.3 31.3 63.6 61.1
Korea, Rep. 51.5 28.4 43.1 37.1 37.7 65.5 80.8
Malaysia 31.6 57.7 71.5 55.3 64.4 113.0 135.9
Netherlands 17.1 50.8 86.5 49.6 74.8 100.4 161.3
Sweden 10.1 28.0 45.3 28.9 41.1 56.9 86.4
Hongkong SAR, China 7.4 88.7 188.0 89.3 187.1 178.0 375.1
Denmark 5.8 32.5 55.2 33.0 48.2 65.5 103.4
Singapore 5.6 202.0 173.3 209.0 149.1 411.0 322.4
* Exports and imports of goods and services. **2016 ***1986
Source: World Bank: for population downloaded from http://databank.worldbank.org/data/reports.aspx?source=2&series=SP.POP.TOTL&country= on August 14, 2017;
for exports downloaded from http://databank.worldbank.org/data/reports.aspx?source=2&series=NE.EXP.GNFS.ZS&country= on August 14, 2017; and for imports
downloaded from http://databank.worldbank.org/data/reports.aspx?source=2&series=NE.IMP.GNFS.ZS&country= on August 14, 2017.
 Indonesia: degree of openness, 1960-2017
Percent of GDP

67.8

61.2
53.7

52.5
49.0

47.7
43.7

38.5
36.6

33.7
31.1

27.7
27.6

27.6
26.1
25.2

24.7

23.9
23.8

23.7
23.1
23.0

20.6

19.7
18.7
13.2
9.9

1960-1970 1971-1980 1981-1990 1991-95 1996-2000 2001-05 2006-10 2011-15 2016-17

Exports of goods & services Imports of goods & services Total

Source: World Bank: for exports downloaded from http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS); and for imports downloaded from
http://data.worldbank.org/indicator/NE.IMP.GNFS.ZS. Downloaded on August 14, 2017.
 Part IV
Recent Growth Performance by Sector
 Tradable merana, non-tradable melaju: GDP
growth by sector
Share
Sectors 2012 2013 2014 2015 2016 2017 2018* 2017
Agriculture, forestry & fishery 4.59 4.20 4.24 3.77 3.25 3.81 3.91 13.14
Mining and Quarrying 3.02 2.53 0.43 -3.42 1.06 0.69 2.05 7.57
Manufacturing industry 5.62 4.37 4.64 4.33 4.29 4.27 4.24 20.16
Electricity and gas 10.06 5.23 5.90 0.90 5.39 1.54 5..48 1.19
Water, waste management, cesspit and recycling 3.34 3.32 5.24 7.07 3.60 4.61 4.60 0.07
Construction 6.56 6.11 6.97 6.36 5.22 6.79 6.27 10.38
Wholesale&retail trade, car&motorcycle reparations 5.40 4.81 5.18 2.59 3.93 4.44 5.14 13.01
Transportation and warehousing 7.11 6.97 7.36 6.68 7.74 8.49 7.59 5.41
Accommodation, food and beverages 6.64 6.80 5.77 4.31 4.94 5.55 5.70 2.85
Information and communication 12.28 10.39 10.12 9.69 8.87 9.81 7.80 3.80
Finance and insurance 9.54 8.76 4.68 8.59 8.90 5.48 3.59 4.20
Real estate 7.41 6.54 5.00 4.11 4.30 3.68 3.40 2.79
Business services 7.44 7.91 9.81 7.69 7.36 8.44 8.54 1.75
Public adm., defense, & compulsory social security 2.13 2.56 2.38 4.63 3.19 2.06 6.98 3.70
Education 8.22 7.44 5.47 7.33 3.84 3.66 5.51 3.29
Health and social activities 7.97 7.96 7.96 6.68 5.00 6.79 6.88 1.07
Other services 5.76 6.40 8.93 8.08 7.80 8.66 8.95 1.76
Gross domestic product 6.03 5.56 5.01 4.88 5.02 5.07 5.17 100
*Q1-Q3 (January-September).
Source: BPS-Statistics Indonesia.
 Growth of manufacturing industries, 2011-18
Average 2018 2018 2018
2011 2012 2013 2014 2015 2011-15 2016 2017 Q1 Q2 Q3
GDP Total 6.17 6.03 5.56 5.08 4.88 5.54 5.02 5.07 5.06 5.27 5.17
Manufacturing, Total 6.26 5.62 4.37 4.64 4.33 5.04 4.29 4.27 4.56 3.84 4.33
Coal and Refined Petroleum Products -0.33 -2.40 -2.64 -2.12 -1.13 -1.72 3.24 -0.32 0.28 0.23 -1.63
Non-oil & gas manufacturing 7.46 6.98 5.45 5.61 5.05 6.11 4.42 4.84 5.07 4.27 5.01
Food Products and Beverages 10.98 10.33 4.07 9.49 7.54 8.48 8.46 9.23 12.77 8.67 8.10
Tobacco Products -0.23 8.82 -0.27 8.33 6.24 4.58 1.64 -0.84 -4.63 3.26 4.12
Textiles and Wearing Apparel 6.49 6.04 6.58 1.56 -4.79 3.18 -0.13 3.76 7.37 6.39 10.17
Leather & Related Products & Footware 10.94 -5.43 5.23 5.62 -3.97 2.48 8.15 2.22 5.46 11.38 8.83
Wood & of its products (except furniture) -2.72 -0.80 6.19 6.12 -1.63 1.43 1.80 0.13 3.89 2.27 1.56
Paper & Paper Products; Repro of Recorded 3.89 -2.89 -0.53 3.58 -0.16 0.78 2.16 0.33 -5.99 -3.03 -5.03
Chem & Pharma & Botanical Products 8.66 12.78 5.10 4.04 7.61 7.64 5.48 4.53 -6.25 -2.94 -2.80
Rubber & Plastics Products 2.08 7.56 -1.86 1.16 5.04 2.80 -8.34 2.47 3.18 11.85 12.34
Non-Metallic Mineral 7.78 7.91 3.34 2.41 6.03 5.49 5.46 -0.86 4.96 0.52 3.37
Manufacture of Basic Metals 13.56 -1.57 11.63 6.01 6.21 7.17 0.76 5.87 9.99 2.36 8.11
Computer, Optical Products & Elec.Equip 8.79 11.64 9.22 2.94 7.83 8.08 4.34 2.79 -2.41 0.47 -1.84
Machinery and Equipment 8.53 -1.39 -5.00 8.67 7.58 3.68 5.05 5.55 15.49 4.19 4.24
Transport Equipment 6.37 4.26 14.95 4.01 2.40 6.40 4.52 3.68 5.78 2.59 5.37
Furniture 9.93 -2.15 3.64 3.60 5.17 4.04 0.47 3.71 3.14 2.22 1.07
Other Manuf, Repair & Instr of Machinery -1.09 -0.38 -0.70 7.65 4.66 2.03 -2.91 -1.72 -1.65 -2.97 -3.62

Source: BPS-Statistics Indonesia

 Part V
Domestic Demand under Pressure, but the
Purchasing Power does not Decrease
 GDP growth by expenditure (percent)

Share
2016 2017 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 2017

Private consumption 5.01 4.95 4.94 4.95 4.93 4.97 4.95 5.14 5.01 56.13

LNPRT** consumption 6.64 6.91 8.05 8.49 6.02 5.24 8.09 8.71 8.54 1.18

General government consumption -0.14 2.14 2.68 -1.93 3.48 3.81 2.74 5.26 6.28 9.10
Gross domestic fixed capital
formation 4.47 6.15 4.78 5.35 7.08 7.27 7.95 5.87 6.96 32.16

Exports of goods and services -1.57 9.09 8.21 5.76 17.01 8.50 6.09 7.70 7.52 20.37

Less imports of goods and services -2.45 8.06 5.12 2.80 15.46 11.81 12.66 15.17 14.06 19.17

Gross domestic product 5.03 5.07 5.01 5.01 5.06 5.19 5.06 5.27 5.17 100.0*
* Not included change in inventory.
** LNPRT stands for lembaga non-profit yang melayani rumah tangga (non-profit organization serving the household).
Source: BPS-Statistics Indonesia.
Dibandingkan negara tetangga, pertumbuhan
konsumsi rumahtangga Indonesia stabil-rendah
Pertumbuhan konsumsi rumah tangga, persen
14

12

10

6
5.0
5.3 5.5 5.5
5.1 5.3
3.8 5.0 4.9 4.8 5.0
4 3.5 4.7
3.9 4.0
3.2
2

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

India Indonesia Malaysia Philippines China

Source: Worls Bank.

Motorcycle sales growth dropped sharply during
2015-17, grew 8.8% in Jan-Sep 2018
Motorcycle sales and growth
9,000 40.0
Thousands

Percent
8,044 7,909
8,000 7,771
7,399
7,142 30.0
7,000 6,708
6,281 6,215
5,882 5,886
6,000 20.0

5,000 4,714 4,722

4,471 8.8 4,340
10.0
4,000
1.8 8.8

3,000 0.0

-7.3
2,000
-5.3
-6.4 -10.0
1,000
-11.2
-15.2
0 -20.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017* 2018*

Sales (unit)-LHS Growth (yoy, %)-RHS

*January-September.
Sources: Asosiasi Industri Sepeda Motor Indonesia (AISI) and ASEAN Automotive Federation.
Car sales growth rose sharply to 7.4% in Jan-Oct
1,400 80
Thousands

Percent
1,230
58.1
1,200 60
1,116 1,080
1,063

1,000 963 40
896

800 20

4.9
604
600 7.4 0
483
1.6
-1.8
400 -20
-16.1
301 -19.9

200 -40
-40.3

0 -60

Wholesales (unit)-LHS Growth (%)-RHS

*January-October.
Source: Gaikindo
Indonesia: truck sales by capacity, 2007-2018
Growth, yoy, %
350
330 Jan-Oct 2018
Thousands

< 5 ton (pick up) 11.3

300 5-10 ton 27.7
10-24 ton 23.8
250
> 24 ton 44.9
Total 19.4
197 213
200

179
150

110 119
100

64
50
21
24

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017* 2018*

< 5 ton (pick up) 5-10 ton 10-24 ton > 24 ton Total
*January-July.
Source: Gaikindo.
Fiscal Risks and Infrastructures
 Perkembangan APBN pemerintahan Jokowi-JK

Actual Actual Actual Actual Outlook RAPBN

2014 2015 2016 2017 2018 2019
A. Revenues 1,550 1,508 1,552 1,666 1,903 2,143
I. Tax revenues 1,147 1,240 1,284 1,343 1,548 1,781
a. Income tax 546 602 667 647 761 890
i. Oil and gas 87 50 36 50 55 62
ii. Non-oil & gas 459 553 631 597 706 827
b. VAT/LGST 409 424 411 481 565 655
c. Excises 118 145 143 153 156 166
d. Others 73 70 62 63 67 71
II. Non-tax revenues 399 256 262 311 349 361
B. Expenditures 1,777 1,806 1,860 2,007 2,217 2,440
C. Overall balance -227 -298 -308 -341 -314 -297
as percent of GDP -2.25 -2.59 -2.49 -2.51 -2.12 -1.84
Central government expenditures by type,
IDR trillion
2014 2015 2016 2017 2018* 2018** 2019***
Personnel 244 281 305 313 366 342 369
Material 177 233 260 291 340 320 319
Interest payments 133 156 183 217 239 249 275
Capital 147 215 169 208 204 194 212
Subsidies 392 186 174 166 156 228 221
-Energy 342 119 107 98 95 163 157
-Non-energy 50 67 67 69 62 65 64
Social 98 97 50 55 81 80 103
Grants 1 4 7 5 1 1 2
Others 12 10 6 9 67 38 106
Total 1,204 1,183 1,154 1,265 1,455 1,454 1,607
Memo:
Infrastructures 155 256 269 401 410 n.a. 420
Primary balance -93 -142 -126 -144 -78 -65 -22
*Budget. **Outlook. ***Proposed udget
Sources: Ministry of Finance and World Bank.
Composition of central government expenditures
percent
2014 2015 2016 2017 2018* 2018** 2019***
Personnel 20.3 23.8 26.4 24.7 25.2 23.5 23.0
Material 14.7 19.7 22.5 23.0 23.4 22.0 19.9
Interest payments 11.0 13.2 15.9 17.2 16.4 17.1 17.1
Capital 12.2 18.2 14.6 16.4 14.0 13.3 13.2
Subsidies 32.6 15.7 15.1 13.1 10.7 15.7 13.8
-Energy 28.4 10.1 9.3 7.7 6.5 11.2 9.8
-Non-energy 4.2 5.7 5.8 5.5 4.3 4.5 4.0
Social 8.1 8.2 4.3 4.3 5.6 5.5 6.4
Grants 0.1 0.3 0.6 0.4 0.1 0.1 0.1
Others 1.0 0.8 0.5 0.7 4.6 2.6 6.6
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0
*Budget
Sources: Ministry of Finance and World Bank.
Beban pembayaran bunga utang semakin
meningkat
Rp triliun

Belanja Belanja peme- Pembayaran Beban Beban

negara rintah pusat bunga utang bunga (%) bunga (%)
(1) (2) (3) (4)=(3):(1) (5)=(3):(2)

2014 1,777.2 1,203.6 133.4 7.5 11.1

2015 1,806.5 1,183.3 156.0 8.6 13.2

2016 1,864.3 1,154.0 182.8 9.8 15.8

2017 2,007.4 1,265.4 216.6 10.8 17.1

2018* 2,217.3 1,453.6 249.4 11.2 17.2

2019* 2,439.7 1,607.3 275.4 11.3 17.1

*Outlook
**RAPN
Source: Ministry of Finance.
The growth of capex is far below materials
spending and interest payments
2014-2019, percent
106.8

80.2

51.2
44.2
33.5

5.1

Not including “others” which increased by 783 percent

-54.1

Interest Material Personnel Capital Total Social Energy

payments subsidies

Source: Ministry of Finance.

 Composition of central government expenditures

2014, percent 2019***, percent

Others, 1.1

Others,
Social, 8.1
6.7
Social,
Personnel, 6.4 Personnel,
20.3
23.0

Subsidies,
13.8
Subsidies,
32.6 Material,
14.7
Capital, Material,
13.2 19.9
Interest
payments, Interest
11.0 payments,
Capital,
17.1
12.2

Sources: Ministry of Finance and World Bank.

 Central government debt increased sharply in
the last 3 years
4,500 30
29.0

% of GDP
IDR trillion

2017 (outlook) 29
4,000 Interest payments = Rp 217 trillion 27.9
New debts (net) = Rp 427 trillion

3,942
27.5 28

3,500 27

3,467
26

3,165
3,000
24.9
24.7 25

2,500

2,609
24
23.1
2,376

23.0
2,000 23
1,978

22
1,809

1,500
21

1,000 20
2011 2012 2013 2014 2015 2016 2017

Total Government debt-LHS Debt to GDP ratio-RHS

Sources: BPS-Statistics Indonesia and Ministry of Finance.
Government debt to GDP (%), 2017 or the latest
Indonesia’s government debt is relatively very low and below the
maximum limit of 60% in accordance with the State Finance Law 2003
Japan 253.0
Greece 178.6
Italy 131.8
Singapore 110.6
United States 105.4
Euro Area 86.7
Brazil 74.0
India 68.7
Vietnam 61.5
Argentina 54.2
South Africa 53.1
Malaysia 50.9
China 47.6
Mexico 46.4
Philippines 42.1
Thailand 41.8
Cambodia 37.9
Laos 37.7
Myanmar 36.8
Indonesia 28.7
Turkey 28.3
Russia 12.6
Brunei Darussalam 2.8

Source: tradingeconomics.com.
 Low quality of investment
Composition of gross fixed capital formation, percent

2010 2011 2012 2013 2014 2015 2016 2017

Construction 74.28 73.10 72.84 73.48 74.73 75.19 75.16 75.12

Machinery & equipment 10.36 11.44 11.67 11.23 10.39 9.97 9.03 9.30

Vehicles 5.78 5.97 6.36 5.66 4.76 4.60 5.16 5.35

Other equipments 1.45 1.44 1.37 1.38 1.44 1.55 1.72 1.77

Cultivated biological resources 5.91 5.94 5.65 5.82 5.87 5.97 6.11 5.81

Intellectual property products 2.23 2.11 2.11 2.44 2.80 2.71 2.82 2.64

GFCF 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: BPS-Statistics Indonesia.
 Large infrastructure deficit in Indonesia

Source: World Bank, October 2018

Maritime infrastructure

Indonesia was ranked lower than China, Malaysia,

Singapore and Thailand in the World Economic
Forum 2016 for quality of port infrastructure, and
was also assessed as being below the East Asia and
Pacific average 50% of the participants in the World
Bank’s 2016 Logistics Performance Index indicated
that Indonesia has low quality of maritime services.

Source: World Bank, October 2018

Terkini: Kiri jeruk lokal; kanan jeruk impor

Superindo Malang, 3 November 2018

Disparitas harga sangat lebar

Di Superindo Malang, 3
November 2018 Rp 49.950
per kg.
Di Potianak ketika panen
puncak tak sampai Rp 5.000
per kg.
Menjelang musim usai
sekitar Rp 15.000 per kg
 Logistics costs in Asia
(in percentage of GDP)

Source: https://asia.nikkei.com/Spotlight/Asia-Insight/Indonesia-sneaks-up-on-Singapore-with-flurry-of-port-projects
World Bank: 5 recommendations

1. The public investment framework is not designed

to systematically leverage private financing
2. SOEs have played an increasingly dominant role in
infrastructure delivery crowding out the private
sector.
3. Constraints in the project cycle limit the quality
and number of PPP/B2Bs brought to market
4. Tarrifs are too low in most sectors to provide a
sustainable foundation for private investment
5. There is not enough capacity in the financial
system to meet infrastructure financing needs.
Source: World Bank, October 2018
Share of total investment in core infrastructure
Yet, private investment has fallen I recent years, from 19% of
total investment 2006-10, to 9% 2011-15
Percent
9
19

37
33

45
22
31

19
21

28
22
15

Realized infrastructure ivestment, Realized infrastructure investment, RPJM target scenario,

2006-2010 2011-2015 2015-2019
Central Government Subnational Governmet SOEs Private

Source: World Bank, October 2018

 Features of a successful PPP programme

Sumber: PwC
 Part VI
Digital Economy and SMEs
Mobile phone user internet penetration rate
Percent

62
59
56
53
50
47
45
43
41
38
36
33
31
29
27
24

2015 2016 2017 2018f 2019f 2020f 2021f 2022f

Indonesia China
 Two other factors supporting growth of
digital economy

Indonesia’s e-commerce sales Indonesia financial inclusion

Percent of GDP Percent age 15+
1.14 31
1.08 26

0.99
16 17
0.90

0.80
2 2
0.69

0.62 Made digital Credit card Debit card

payments in the ownership ownership
past year

2016 2017 2018f 2019f 2020f 2021f 2022f 2014 2017

E-commerce tumbuh pesat tetapi dari basis rendah
Pembayaran tunai yang masih dominan
merupakan peluang untuk tumbuh pesat
Composition of retail payment instruments, 2015

7% 11%
8%
36%

50%

22%

85%

42% 39%

Indonesia Malaysia Singapore

Cash Card Others
Source: Bank Indonesia, based on BBVA Research, Bloomberg, CEIC, World Bank
Total transaction in the digital payments
segment
40 18
37.2

15.5% 16
35 15.2%
14.9%
13.5% 14.2%
14
30
12.5%

12
25
22.4
10
20
8
15.2 15.6
15
12.9
6
11.1
9.2 9.7
10 8.7
7.2 4
6.4 6.1
5 2

0 0
Indonesia Thailand Singapore Malaysia Vietnam Philippines

Value 2018 (USD billions) Value 2022 (USD billions) Average growth rate-RHS

Source: Statista, downloaded on November 2, 2018.

Jumlah industri manufaktur berdasarkan skala
usaha, 2010-2015

4,000 27.0
Thousands

Thousands
3,500 3,386 26.5
3,221 26

26.0
3,000 2,887
2,813

2,530 2,555 25.5

2,500

25.0
2,000 25
24.5

1,500
24.0
24
24
1,000
23 23 23.5
531
500 405
424 285 283 23.0
203

0 22.5
2010 2011 2012 2013 2014 2015

Micro (LHS) Small (LHS) Large & Medium (RHS)

Source: BPS-Statistics Indonesia.
Jumlah tenaga kerja industri manufaktur
berdasarkan skala usaha

7
Millions

6.5
6.0
6
5.6
5.4
5.2 5.2
4.9 5.0
5 4.8 4.8
4.6
4.5
4.3

4
3.5 3.5

2.3 2.3

2
1.6

0
2010 2011 2012 2013 2014 2015

Micro Small Large & Medium

Source: BPS-Statistics Indonesia.
 Jumlah top-7 industri mikro dan kecil
mencapai 90 persen populasi

Mikro Kecil Mikro+Kecil Persen

1. Makanan 1,473,205 93,814 1,567,019 42.7
2. Kayu, gabus (tidak termasuk furnitur)
dan anyaman dari bambu, rotan, dsj. 674,970 19,954 694,924 18.9
3. Pakaian jadi 360,622 46,601 407,223 11.1
4. Barang galian bukan logam 234,762 29,758 264,520 7.2
5. Furnitur 117,901 20,699 138,600 3.8
6. Tekstil 127,245 4,188 131,433 3.6
7. Barang logam, bukan mesin
dan peralatannya 99,046 13,990 113,036 3.1
TOTAL 3,087,751 229,004 3,316,755 90.4
Source: BPS-Statistics Indonesia.
Jumlah industri mikro dan kecil 99,2%, tetapi
sumbangan nilai tambahnya hanya 10,6%
Composition of value added by size

Micro, 6.3%

Small, 4.3%

Large & Medium,

89.4%

Composition of unit by size Composition of labor by size

Large &
Micro, 91.8 Micro,
Medium,
44.0%
41.1%

Small,
7.4
Large &
Medium, Small,
0.8 14.9%

Source: BPS-Statistics Indonesia.

 Part VII
Political Outlook
 Kualitas demokrasi Indonesia lumayan baik,
tertinggi di ASEAN
Liberal democracy index, 2017
1. Norway 0.867
2. Sweden 0.863
3. Estonia 0.860
4. Switzerland 0.853
5. Denmark 0.841
13. France 0.812
14. Germany 0.809
16. United Kingdom 0.806
25. Japan 0.758
31. United States 0.727
34. South Korea 0.713
43. South Africa 0.622
56. Brazil 0.568
63. Timor-Leste 0.510
72. Indonesia 0.475
81. India 0.429
90. Philippines 0.363
92. Singapore 0.357
118. Myanmar 0.255
128. Malaysia 0.210
131. Vietnam 0.195
151. Russia 0.115
157. Thailand 0.101
160. Laos 0.091
162. Cambodia 0.082
167. China 0.058
178. North Korea 0.010

Source: V-DEM Institute, Democracy for All?: V-DEM Annual Democracy Report 2018.
Versi EIU melorot tajam (4868): lemah untuk
komponen political culture dan civil liberties
Democracy index 2017
8.0 40

7.5
45
7.0
50
6.5

6.0 55

5.5
60
5.0
65
4.5

4.0 70
2006 2008 2010 2011 2012 2013 2014 2015 2016 2017

Overall score Electoral process and pluralism

Functioning of government Political participation
Political culture Civil liberties
Rank-RHS
Source: The Economist Intelligence Unit, Democracy Index, various issues.
 Pemilu & pilpres ibarat pendulum seandainya …
• Pemilu merupakan kontrak
politik baru atau
pembaruan kontrak politik.
• Seandainya nuansa
ideologi pekat, pendulum
akan bergerak ke kiri dan
ke kanan lebih jauh dari
titik tengah (warna hitam).

Source: pepperspectives.com

• Tidak hadir di Indonesia

• Tantangan ke depan: penguatan institusi, reformasi birokrasi, dan
governance.
Keamanan diperkirakan terjaga
 Kemampuan meredam isu sektarianisme dan
“menggembosi” mesin penggeraknya:
• Riziek
• Saracen
• Merangkul MUI
• Kampanye Bhinneka Tunggal Ika
 Demokrasi di Indonesia relatif lebih sehat
ketimbang Thailand, Malaysia, Filipina.
 Modal paling berharga: kebebasan yang mampu
menciptakan built in stabilizer atau clearing di
pasar politik  Indonesia in making
Perolehan suara sah dan kursi DPR hasil Pemilu 2014
Suara (%) DPR (%)

PDIP 19.0
19.5

Golkar 14.8
16.3

Gerindra 11.8
13.0

Demokrat 10.2
10.9

PKB 9.0
8.4

PAN 7.6
8.8

PKS 6.8
7.1

Nasdem 6.7
6.3

PPP 6.5
7.0

Hanura 5.3
2.9

PBB* 1.5

PKPI* 0.9

*Tidak lolos ambang batas parlemen (3,5 persen dari suara sah).
Peta dukungan pada Pilpres 2014
Pemilu 2014

 Tahun 2014 pemilu legislatif lebih dulu dari pilpres.

Partai-partai pendukung capres-cawapres sudah
diketahui persis kekuatannya sebagai basis
distribusi kekuasaan:
 PDIP: Menko PMK, Medagri, Mesesneg, Menkop-
UKM, MenP3A, MekumHAM
 PKB: Menaker, Menpora, Mendestrans,
Meristekdikti
 Nasdem: Jaksa Agung, Mendag, Mehut-LH
 Hanura: Mepan-RB (Menko Polkam),
 PKPI: KaBIN
Partai-partai pendukung Jokowi-Ma’ruf pada
Pilpres 2019 (6+2+2)
Partai pendukung Prabowo-Sandi (4+0+2)
Jika Jokowi dua periode

 Pada 2014, Pemilu legislatif lebih dulu dari Pilpres.

Partai-partai pendukung setiap capres-cawapres
sudah definitif perolehan suara dan kursi di DPR,
sehingga distribusi kekuasaan mendekati
proporsional. Toh, partai yang tak lolos ambang batas
parlemen (3,5%), yaitu PKPI tetap kebagian jatah
posisi sebagai Kepala BIN.
 Pada 2019, pemilu berlangsung serentak. Sepuluh
partai pendukung Jokowi-Ma’ruf boleh jadi telah
melakukan “deal” awal walau belum jelas perolehan
suaranya dan belum tentu lolos ambang batas
parlemen (4% dari suara sah).
Efektivitas pemerintahan

 Periode 2019-2024 merupakan masa transisi kepemim-

pinan nasional dari generasi “tua” ke generasi “muda”
 Masa kerja efektif Kabinet cenderung lebih singkat,
karena setiap partai berlomba mencuri start untuk
melambungkan calon presdisen/wakil presiden,
mengingat usia KH Ma’ruf sudah cukup tua untuk
berlaga pada Pemilu 2024.
 Ongkos politik yang kian mahal membuat kompetisi
memperebutkan “logistik” lewat praktek pemburuan
rente diperkirakan semakin mewabah
 Kemungkinan yang lebih optimistik: muncul tokoh-
tokoh yang berprestasi cemerlang dari daerah
(gubernur, bupati/walikota).
 The electability of Jokowi-Ma’ruf is
comfortably higher than Prabowo-Sandi

55.9

52.6
46.3
42.5

41.6
37.8
36.3

33.1
32.8

32.7
31.8

Joko Widodo
29.6
31

28.6
28.3

Prabowo Subianto

23.9

23.6
Others
23.4

22.1

22.1

22.1
Do't know/Don't answer

18.2
17.3

17.3
16.5

16.3

16.3

14.7
14.3

14.1
13.8

12.4

11.9
10.9

7.9

Jan'15 Apr'15 Oct'15 Apr'16 Oct'16 Apr'17 Oct'17 Apr'18 Oct'18

Source: Litbang (R&D) Kompas

Overall satisfaction with the government's
performance decline significantly in October 2018
Percent

72.2
70.8
67.4
65.1 65.9 65.3
63.1

53.8 54.3

46.2 45.7

36.9
34.9 34.1 34.7
32.6
29.2
27.8

January April October April October April October April October

2015 2015 2015 2016 2016 2017 2017 2018 2018
Satisfied Not satisfied
Source: Litbang (R&D) Kompas
 The level of satisfaction in all areas decreased,
the lowest is in the economic field

Jan Apr Oct Apr Oct Apr Oct Oct

Field 2015 2015 2015 2016 2016 2017 2017 2018

Politics and security 73.1 69.3 69.6 75.9 75.0 71.2 76.4 73.1

Law enforcement 59.9 43.6 46.4 55.6 50.7 53.2 61.0 55.3

Economy 43.2 33.5 37.3 48.2 52.0 46.1 55,2 50.2

Social welfare 61.1 62.6 56.6 67.0 69.8 65.8 72,8 64.8
Source: Litbang (R&D) Kompas
 Potential for governance problems: pre-crisis

HIGH

Indonesia
Thailand
Malaysia

Philippines

LOW
LOW HIGH
(CONCENTRATED) (FRAGMENTED)

DISPERSAL OF DECISION-MAKING POWER

Source: Andrew MacIntyre, The Power of Institutions: Political Architecture and Governance, Ithaca and
London: Cornell University Press, 2003.
 Potential for governance problems: post-crisis

HIGH

Malaysia
Indonesia
 Philippines
Thailand
LOW
LOW HIGH
(CONCENTRATED) (FRAGMENTED)

DISPERSAL OF DECISION-MAKING POWER

Source: Andrew MacIntyre, The Power of Institutions: Political Architecture and Governance, Ithaca and
London: Cornell University Press, 2003.
 Part VIII
Economic Prospect 2018-2019
 Projections of GDP growth by several agencies

Latest 2014 2015* 2016* 2017*

Agency Published (5.0) (4.9) (5.0) (5.1) 2018** 2019**

Gov’t of Indonesia Aug. 2018 5.2 (+0.2) 5.2 (+0.3) 5.1 (+0.1) 5.2 (+0.1) 5.2 5.3

Bank Indonesia Aug. 2018 5.3 (+0.3) 5.2 (+0.3) 5.2 (+0.2) 5.2 (+0.1) 5.2 5.3

IMF Oct. 2018 5.2 (+0.2) 5.2 (+0.3) 5.0 (0.0) 5.2 (+0.1) 5.1 5.1

World Bank Oct. 2018 5.1 (+0.1) 4.7 (-0.2) 5.1 (+0.1) 5.1 (0.0) 5.2 5.2

ADB Sep. 2018 5.1 (+0.1) 5.0 (+0.1) 5.0 (0.0) 5.1 (0.0) 5.2 5.3

The Economist Oct. 2018 5.1 (+0.1) 4.9 (0.0) 5.0 (0.0) 5.2 (+0.1) 5.2 5.1

Faisal Basri Oct. 2018 5.0 (0.0) 4.9 (0.0) 4.9 (-0.1) 5.0 (-0.1) 5.0 4.9
*As of April-July
** Projection
 Economic growth is far below the
government's target

Average
2015 2016 2017 2018* 2019** 2015-19

RPJM target 5.5 6.6 7.1 7.5 8.0 6.94

Actual & projection 4.9 5.0 5.1 5.0 4.9 4.98

Difference -0.6 -1.6 -2.0 -2.5 -3.1 -1.96

*Estimate
**Projection
Terima Kasih
Email: faisal.basri@gmail.com
Twitter: @faisalbasri
Blog: faisalbasri.com
Blog: kompasiana.com/faisalbasri