Economic Outlook

2022

“Economic Outlook 2H22:

Resilient Economic Recovery
Amid Stagflation Fear”
Global Economy Slowdown in 2H22
Summary
World Economic Outlook 2022 Pr o j e c t i o n
• IMF baseline forecast project economic growth to slow from ( r e a l GDP, a nnua l pe r c e nt c ha nge ) 2021 2022 2 0 23

6.1 percent last year to 3.2 percent in 2022, 0.4 percentage Wo r l d Ou t p u t 6. 1 3. 2 2. 9

Ad v a nc e d Ec o n o mi e s 5. 2 2. 5 1. 4
point lower than in the April 2022 World Economic Outlook.
Un i t e d St a t e s 5. 7 2. 3 1. 0
• Several shocks have hit a world economy already weakened Eu r o Ar e a 5. 4 2. 6 1. 2
by pandemic: higher-than-expected inflation worldwide–– Ge r ma ny 2. 9 1. 2 0. 8

especially in the United States and major European Fr a n c e 6. 8 2. 3 1. 0

economies––triggering tighter financial conditions. Those I t al y 6. 6 3. 0 0. 7

Sp a i n 5. 1 4. 0 2. 0
factors increase the odd for the global economy entering
J a pa n 1. 7 1. 7 1. 7
stagflation in 2023.
Un i t e d Ki n g d o m 7. 4 3. 2 0. 5
• Despite gloomy global economic outlook, we remain bullish Ca n a da 4. 5 3. 4 1. 8

with Indonesia’s economic growth in 2h22 as booming in Ot h e r Ad v a n c e d Ec o n o mi e s 5. 1 2. 9 2. 7

commodity prices benefit Indonesia’s external performance Eme r gi n g Ma r k e t a n d De v e l op i n g Ec o n o mi e s 6 . 8 3. 6 3. 9

Eme r gi n g a n d De v e l o p i n g As i a 7. 3 4. 6 5. 0
and domestic spending. Resilient economic growth will boost
Ch i n a 8. 1 3. 3 4. 6
return for equity market in 2H22.
I ndi a 8. 7 7. 4 6. 1
ASEAN- 5 3. 4 5. 3 5. 1
Total CPI (%YoY)
Commodity Price Update

5.30%
Commodity 26-Sep-22 31-Dec-21 %YOY %YTD
US 8.30%
Gold 1,622.36 1,829.20 -7.30 -11.31
China 0.80%
2.50%
Brent Oil 84.06 77.78 5.70 8.07
Japan -0.40%
3.00% Natural Gas 6.90 3.73 20.93 84.99

Germany 3.90% Coal 438.00 169.60 113.92 158.25

7.90%

1.69% Nickel 22,064.00 20,873.50 16.38 5.70

Indonesia 4.69%

-2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% CPO 3,481.00 5,159.00 -24.80 -32.53

Wheat 858.00 770.75 18.80 11.32

Aug-21 Aug-22
Source: Bloomberg, Sucor Research
UST Yield Curve is Signaling a Recession in 2023
The US economy is likely to slowdown in 2h22
Purchasing Manager Index
• the US Treasury yield curve inversion is signaling that the US will 80
enter into recession in 1Q23. The last US GDP data confirm
70
economic slowdown ahead.
60
• The PMI data also confirm that many developed market and China
50
are depressed with current high inflation and supply shock.
40

30

20

10

0
22 22 22 22 22 21 21 21 21 21 21 20 20 20 20 20 20 19 19
e p- Jul- ay- ar- an- ov- ep- Jul- ay- ar- an- ov- ep- Jul- ay- ar- an- ov- ep-
S M M J N S M M J N S M M J N S

US China Germany
UST Yield Spread 10Y vs 2Y
us US GDP (%QoQ)
180
160
140
120
100
80
60
40
20
0
-20
2 2 1 1 1 1 0 0 0 0 9 9 9 9 8 8 8 8 7 7 7
02 02 02 02 02 02 02 02 02 02 01 01 01 01 01 01 01 01 01 01 01
2 /2 1 /2 1 /2 0 /2 0 /2 1 /2 1 /2 0 / 2 0 /2 1 /2 1 / 2 0 /2 8 /2 9 / 2 1 /2 8 /2 9 /2 0 /2 9 /2 9 / 2 0 /2
2 3 3 3 3 3 3 3 3 3 3 3 2 2 3 2 2 3 2 2 3
6/ 3/ 12 / 9/ 6/ 3/ 12 / 9/ 6/ 3/ 12 / 9/ 6/ 3/ 12 / 9/ 6/ 3/ 12 / 9/ 6/

Source: Bloomberg, Sucor Research

Indonesia is entering endemic era in 2H22
Vaccination Rate is a game changer Indonesia Covid-19 Cases
• Indonesia is entering endemic era in 2022 as the vaccination
program successfully reduce the death rate.

• The gov’t obligate the booster vaccination program to keep the

death rate and new covid cases at low level in 2h22.

• We see faster booster program will maintain the new covid cases
and death rate at low level until the end of 2022.

Indonesia Vaccination Rate Indonesia Covid-19 Deaths Cases

100.0%
90.0% 87.1%
81.1%
80.0% 76.9%

70.0% 66.8%
60.7% 60.9%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
5.6% 11.1% 2.3% 1.1% 0.0% 11.9%
0.0%
World US China Japan Germany Indonesia

Fully Vaccinated Partly Vaccinated

Source: Our World in Data *as of 2o Jun 2022

Divergence of Monetary policy Inflict Currency War
Influential Central Bank Policy Update Jun 2022
• The US Dollar Index surged to its highest level since March
2020, getting a lift from expectations that the Federal Reserve
is about to start aggressively hiking rates.

• The Japanese Yen has dropped to a 20-year low against the

US Dollar amid fear on economic slowdown due to higher
energy prices and exports slump in 2Q22.

• We expect that East Asian currency will be weakening in

2Q22 due to yuan depreciation against USD as many Asian
central bank diverge with The Fed’s tight monetary policy.

Selected currency performance against USD USD/SGP, USD/THB, USD/PHP

USD/SGD USD/THB USD/PHP
0.00%
0.02%
0.50%
0.44%
1.00% 0.85% 0.85%
1.50%

2.00% 1.89%
2.50%

3.00%

3.50%

4.00%

4.50% 4.26%

%MoM Apr-Mar'22 %MoM Mar-Feb'22

Source: Bloomberg, Sucor Research *as of 21 June 2022
BOJ yield curve control spillover effect
Yield Curve control will be a new paradigm Debt to GDP selected country

• We anticipate that the most influential central bank in the

world will follow BOJ steps to control the gov’t bond yield at
certain level to avoid insolvency problem in bond market.

• Massive debt to GDP ratio in developed countries has put

the majority central bank in the world facing trade off
between fighting against inflation or keep the financial sector
healthy.

• We believe in the end of the day the Fed and other influential
central banks will choose to save the financial market by
controlling yield curve rather than fighting against inflation.

10 year gov’t bond in selected countries Indonesia, Malaysia, Thailand, India 10Y Government Bond
50.00 46.70
8 2.5
7 45.00
6 2
40.00 36.20
5 34.60
1.5 35.00
4
3 1 30.00 27.60
2 25.00
1 0.5
20.00 18.40
0 0
-1 15.00 12.70
-2 -0.5 9.10
10.00
2 1 0 8 7 6 5 3 2 1 0 8 7 6 5 3 2 1 0
0 2 0 2 0 2 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 5.00 2.70
1 / 2 1 / 2 8 / 2 0 / 2 1 /2 1 / 2 7 /2 9 / 2 1 /2 1 /2 6 /2 8 /2 1 / 2 1 /2 8 / 2 8 / 2 0 / 2 1 / 2 9 /2
3 3 2 3 3 3 2 2 3 3 2 2 3 3 2 2 3 3 2
8/ 5/ 2/ 11 / 8/ 5/ 2/ 11 / 8/ 5/ 2/ 11 / 8/ 5/ 2/ 1 1 / 8/ 5/ 2 / 0.00
Indonesia 10Y Malaysia 10Y Thailand 10Y India 10Y
US China Germany Japan (RHS)
Apr-Mar'22 (bps) Mar-Feb'22 (bps)
Source: Bloomberg, Sucor Research *as of 21 Apr 2022
Inflation Prospect In 2H22

• US annual inflation rate accelerated to 8.6% in May 2022, due to US core PCE (%YOY) (RHS) VS Headline inflation
(%YOY)
the rising in energy prices by 34.6% driven by fuel oil which
sharply increased by 106.7%. Food costs also surged by 10.1%, 40 6
the biggest increased since 1981. We expect the US inflation has
30 5
reached its peak in June 2022.
20 4
• Germany inflation rate stood at 7.9%, reached an all-time high
since 1974, reflecting the impact of Russia’ invasion on Ukraine. 10 3
The inflation rate will increase further as the energy and food
0 2
prices remain high in Germany & Euro Area.
-10 1
• Other Asian countries also experienced a significant spike in
inflation in May 2022, such as South Korea's inflation which rose -20 0
by 5.4%, held above the central bank’s 2% target. In addition, 22 22 21 21 21 20 20 20 19 19 19 18 18 18 17 17 17 16
- - - - - - - - - - - - - - - - - -
inflation in Thailand surged to 7.1% from 4.65% in the previous ay Jan Sep ay Jan Sep ay Jan Sep ay Jan Sep ay Jan Sep ay Jan Sep
M M M M M M
month.
PCE %YOY Core PCE (%YoY)

FAO Food Price Index and US CPI Bloomberg Energy price index vs US CPI
12 0.5 50.0% 250.0%

40.0% 200.0%
10 0.4
30.0%
150.0%
8 0.3
20.0%
100.0%
6 0.2 10.0%
50.0%
0.0%
4 0.1
0.0%
-10.0%
2 0 -50.0%
-20.0%

0 -0.1 -30.0% -100.0%

22 22 21 21 21 21 20 20 20 20 19 19 19 19 18 18 18 18 17 17 17 2 22
2 1
- 2 t- 2 l- r -
021 21
0 9 21
- 2 t - 1 l- r - 20
9 8 8 20
-1 t-1 l-1 19 19
n - a r - e c- e p - u n - a r - e c - e p - u n - a r - e c - e p - u n - ar - e c - e p - u n - ar - e c - e p - u n - l-2 r- - t - 2 l- r -
u
J M D S J M D S J M D S J M D S J M D S J Ju Ap Jan Oc Ju Ap Jan Oc Ju Ap Jan Oc Ju Ap Jan Oc Ju
CPI Energy (%YoY) Bloomberg Energy Price (%YoY)
US Food Price Index FAO Food Price Index (%YoY)

Source: Bloomberg, Sucor Research

The Fed Rate hike creates crowding out effect in Eurodollar market
FFR Dot Plot Projection (15 Jun 2022)

• More aggressive monetary policy by the Fed has raised concerns

of global economic slowdown.

• The Fed rate will be on data driven to decide policy rate in 2H22.

• High gov’t yield environment is not only determined by the fed

policy rate but massive US current account deficit as well.

• The US need higher yield to attract more capital inflow to finance

massive current account deficit. This create crowding out effect in
Eurodollar market.

• As consequence of crowding out effect in Eurodollar market the

dollar index will continue to strengthen and depress other hard
currencies.
US Current Account deficit vs Net capital inflow
UST yield curve flattening
8 60.0%
600
6
40.0% 500
4
20.0% 400
2
0 0.0%
300

-2 200
-20.0%
-4 100
-40.0%
-6 0
-8 -60.0% -100
2 1 0 8 7 6 5 3 2 1 0 8 7 6 5 3 2 1 0 8 7
l-2 r-2 -2 t-1 l-1 r-1 -1 t-1 l- 1 r-1 - 1 t-0 l-0 r-0 -0 t-0 l-0 r- 0 -0 t- 9 l-9 -200
Ju Ap Jan Oc Ju Ap Jan Oc Ju Ap Jan Oc Ju Ap Jan Oc Ju Ap Jan Oc Ju
-300
Real Yield 10-Year UST S&P 500 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22

US net capital inflow (USD bn) US CAD (USD bn)

Source: Bloomberg, Sucor Research
The Emerging Market Policy Rate
• China’s 1-year LPR and 5-year LPR were left unchanged at 3.7% PBoC Loan Prime Rate
and 4.45%, respectively, as the economy began to recover gradually. 4.2 4.9
Previously, the PBoC cut the mortgage reference rate (5-year LPR) 4.1 4.8
by 15 bps to 4.45%. 4 4.7
3.9 4.6
• In ASEAN countries, Bank Negara Malaysia unexpectedly raised 3.8 4.5
the key overnight policy rate by 25 bps to 2.00% on May 11, 2022, 3.7 4.4
after holding it at a record low of 1.75% since July 2020. 3.6 4.3
3.5 4.2
• The central bank of the Philippines also raised interest rates by 25
3.4 4.1
bps to 2.5% as inflation continues to rise. The central bank is
3.3 4
committed to keeping inflation within the target range of 2-4%.
022 022 0 22 022 22
0 21
0 021 021 021 21
0 21
0 020 020 020 20
0 20
0 0 20
/2 / 2 /2 /2 /2 /2 / 2 /2 / 2 /2 /2 / 2 /2 / 2 /2 / 2 / 2
3 0 / 3 1 /3 1 / 2 1 / 3 1 / 3 0 /3 0 /3 1 / 3 1 / 3 1 / 3 1 /3 0 /3 0 / 3 1 / 3 1 / 3 1 /3 1
9/ 7 5 3 1 11 9 7 5 3 1 11 9 7 5 3 1

PBoC 1-Year Prime Rate PBoC 5-Year Prime Rate (RHS)

Malaysia, Thailand, Singapore, Philippines Rate CDS 5 Year Malaysia, Thailand, Indonesia, Philippines
4.5 250
4
3.5 200

3
150
2.5
2
100
1.5
1 50
0.5
0 0
22
0 22
0 22
0 22
0 220 210 21
0 210
1 1 1 0 0 0
02 02 02 02 02 02 02 02 02 01 01
0 0 0 9 9 2 2 2 2 1 1 1 1 1 1 0 0 0 0 0 0 9 9 9
0 2 0 2 0 2 0 2 02 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 1 0 1 0 1
0 /2 1 /2 1 / 2 1 /2 1 / 2 0 / 2 0 /2 1 / 2 1 / 2 1 /2 1 /2 0 / 2 0 /2 1 / 2 1 / 2 1 /2 1 / 2 0 /2 0 /2 1 / 2 0 / 2 9 /2 8 /2 1 / 2 9 / 2 1 / 2 0 /2 0 /2 6 / 2 1 / 2 0 /2 1 /2 0 / 2 0 / 2 8 /2 1 / 2 1 / 2 0 / 2
3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 2 3 2 3 3 3 2 3 3 3 3 3 2 3 3 3
9/ 7/ 5/ 3/ 1/ 1 1 / 9/ 7/ 5/ 3/ 1/ 11 / 9/ 7/ 5/ 3/ 1/ 11 / 9/ 8/ 6/ 4/ 2/ 12 / 10 / 8/ 6/ 4/ 2/ 12 / 10 / 8/ 6/ 4/ 2/ 1 2 / 10 / 8/

Malaysia Thailand Singapore Philippines Malaysia Thailand Indonesia Philippines

Source: Bloomberg, Sucor Research
Russia vs Ukraine Geopolitical Risk
• The main objective of Russian military intervention in Ukraine is to
make sure that the Ukrainian gov’t will never enter into NATO by
demilitarize Ukraine army.

• After the fall of Soviet Union, NATO expand its territory to the east
close to Russian border which trigger current military conflict
between Russia and Ukraine.

• Russia also launch de-dollarization policy to counter the economic

sanction imposed by US and EU.

• We project that the military conflict will last until the end of the
year as the both side remain fail to achieve the objective.

Source: Reuters
 Mid to High Income families spend in leisure
Commodity boom stimulate investment and consumption Share of Indonesia’s GDP by income families
• The commodity boom for the last 2 years has affect significantly to
Indonesia’s domestic and investment spending, Indonesia’s GDP
grew robustly in 2Q22 despite high basis las year. Robust GDP
growth will benefit banking sector particularly top 4 banks as
the loan disbursement will be accelerated in 2H22.

• We see that the commodity boom will last until 2023 which will
benefit mining and agriculture sector in the second half 2022.

• Furthermore Indonesia will enter into travel bubble as the

purchasing power of top 20% income families increase due to
commodity boom and ease of restriction. We see the travel bubble
will benefit transportation, retail and consumer sectors.
Indonesia GDP by Component

2019 2020 2021 2022

GDP Component s 2022F
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Hous ehol d Fi nal Cons umpt i on Expendi t ur5.e 02 5. 18 5. 01 4. 97 2. 83 - 5. 52 - 4. 05 - 3. 61 - 2. 22 5. 93 1. 03 3. 55 4. 34 5. 51 5. 00
Fi nal Cons umpt i on Expendi t ur e of NPI SH
16. 96 15. 28 7. 40 3. 53 - 5. 01 - 7. 82 - 1. 97 - 2. 14 - 4. 03 4. 12 2. 96 3. 29 5. 85 5. 04 4. 00
Gover nment Fi nal Cons umpt i on Expendi t ur5. e25 8. 23 0. 99 0. 50 3. 77 - 6. 90 9. 76 1. 76 2. 34 8. 06 0. 66 5. 25 - 7. 59 - 5. 24 5. 00
Gr os s Fi xed Capi t al For mat i on 5. 03 4. 55 4. 21 4. 08 1. 70 - 8. 61 - 6. 48 - 6. 15 - 0. 23 7. 54 3. 74 4. 49 4. 09 3. 07 5. 20
Bui l di ngs and St r uct ur es 5. 50 5. 50 5. 00 5. 50 2. 80 - 5. 30 - 5. 60 - 6. 60 - 0. 74 4. 36 3. 36 2. 48 2. 58 0. 92 5. 00
Machi ner y and Equi pment 8. 40 7. 20 7. 80 - 2. 90 - 3. 90 - 12. 90 - 21. 00 - 7. 60 3. 48 19. 00 11. 49 13. 46 19. 17 16. 30 5. 00
Expor t s of Goods and Ser vi ces - 1. 46 - 1. 84 0. 12 - 0. 38 0. 36 - 12. 02 - 11. 66 - 7. 21 7. 03 31. 78 29. 16 29. 83 16. 69 19. 74 3. 00
I mpor t s of Goods and Ser vi ces - 6. 47 - 6. 73 - 8. 34 - 7. 90 - 3. 62 - 18. 29 - 23. 00 - 13. 52 5. 46 31. 22 30. 11 29. 60 15. 87 12. 34 4. 00
GDP 5. 06 5. 05 5. 01 4. 96 2. 97 - 5. 32 - 3. 49 - 2. 19 - 0. 71 7. 07 3. 51 5. 02 5. 01 5. 44 5. 00
Source: Bloomberg, Sucor Research
Source: Bloomberg, Sucor Research
Mid to high income families boost the spending
HH spending in restaurant and hotel and transportation and communication grew robustly despite high basis in 2Q22.

2020 2021 2022

Dome s t i c Cons umpt i on Compone nt s
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
Hous e hol d Fi na l Cons umpt i on Expe ndi t ur 2. e83 - 5. 52 - 4. 05 - 3. 61 - 2. 23 5. 93 1. 02 3. 55 4. 34 5. 51
Food a nd Be ve r a ge s , e xc e pt of Re s t a ur5.a nt
01 s - 0. 73 - 0. 69 - 1. 39 - 2. 31 3. 89 0. 78 3. 24 3. 58 4. 09
Cl ot hi ng a nd Se r vi c e s Re l a t e d - 3. 30 - 5. 14 - 4. 29 - 4. 09 - 2. 71 1. 67 - 0. 46 1. 22 6. 47 4. 35
Dwe l l i ng a nd Ut i l i t i e s Re l a t e d 4. 32 2. 36 1. 82 0. 72 1. 27 2. 08 2. 28 3. 09 3. 22 3. 31
He a l t h a nd Educ a t i on Se r vi c e s 7. 86 2. 02 2. 05 0. 64 0. 31 1. 20 2. 43 2. 99 2. 15 4. 27
Tr a ns por t a t i on a nd Communi c a t i on - 1. 69 - 15. 33 - 11. 56 - 9. 45 - 4. 24 10. 59 - 0. 21 5. 34 7. 04 9. 68
Re s t a ur a nt s a nd Hot e l s 2. 44 - 16. 53 - 10. 94 - 7. 28 - 4. 16 16. 79 2. 44 2. 82 4. 21 6. 61
Ot he r Expe ndi t ur e s 3. 65 - 3. 23 - 2. 06 - 0. 88 - 1. 33 4. 62 1. 48 2. 28 2. 65 3. 56

Rapid investment spending in machinery and equipment indicate that job creation will be more robust and resilient in 2022

2020 2021 2022

I nve s t me nt Compone nt s
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
Gr os s Fi xe d Ca pi t a l For ma t i on 1. 70 - 8. 61 - 6. 48 - 6. 17 - 0. 23 7. 54 3. 76 4. 49 4. 09 3. 07
Bui l di ngs a nd St r uc t ur e s 2. 76 - 5. 26 - 5. 60 - 6. 63 - 0. 74 4. 36 3. 36 2. 28 2. 58 0. 92
Ma c hi ne r y a nd Equi pme nt - 3. 92 - 12. 86 - 21. 01 - 7. 56 3. 48 19. 05 11. 49 13. 46 19. 17 16. 3
Tr a ns por t a t i on 2. 72 - 34. 12 - 14. 63 - 6. 52 2. 08 42. 25 9. 04 3. 62 0. 27 6. 96
Ot he r e qui pme nt 2. 39 - 26. 09 - 15. 23 - 3. 77 - 4. 88 36. 69 9. 97 3. 44 6. 04 - 4. 31
Cul t i va t e d Bi ol ogi c a l Re s our- 0.
c e04
s - 14. 89 23. 08 3. 44 - 1. 18 0. 96 - 5. 28 9. 96 3. 43 3. 7
I nt e l l e c t ua l Pr ope r t y Pr oduc
- 5.
t s89 - 11. 45 - 3. 61 - 8. 40 0. 52 5. 16 - 3. 76 19. 35 - 5. 93 6. 89
Cha nge i n I nve nt or i e s 0. 00 0. 00 0. 00 0. 00 0. 00 0. 00 0. 00 0. 00 0. 00 0. 00

Source: Bloomberg, Sucor Research

Strong Service sector recovery will maintain high GDP growth

Source: Bloomberg, Sucor Research

Capital Inflow & CA Surplus reduce negative external shock
Indonesia’s Balance of Payment Components (USD bn)

30

20

10
1
0

-10 -4

-20 -18 -17 -16

-30 -24
-29 -28
-31 -30
-40
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (YTD)

Current Account FDI Portfolio Investment

Source: Bloomberg, Sucor Research

Indonesia CAD (%GDP)

  (USD mn) 4
3
2
First QE 13114 1
0
-1
Second QE 16262 -2
-3
-4
Third QE 22308
-5
0 6 0 7 08 0 8 09 1 0 11 1 1 1 2 13 1 4 14 1 5 16 17 1 7 1 8 19 2 0 20 2 1
Fourth QE 19929 3Q 2Q 1Q 4 Q 3Q 2Q 1Q 4Q 3Q 2Q 1 Q 4Q 3Q 2Q 1Q 4 Q 3Q 2Q 1 Q 4Q 3 Q

Source: Bloomberg, Sucor Research Source: Bloomberg, Sucor Research

Trade Surplus: How far it goes in 2022
Recent energy prices spike improved our term of trade
10000 450
400
8000
350
6000
300
4000 250

2000 200
150
0
100
-2000
50
-4000 0
22 22 22 21 21 21 21 21 21 20 20 20 20 20 20 19 19 19 19 19 19 18 18 18 18 18 18 17 17 17 17 17 17 16 16 16 16 16 16 15 15 15 15 15 15
un- pr- eb- ec- ct- ug- un- pr- eb- ec- ct- ug- un- pr- eb- ec- ct- ug- un- pr- eb- ec- ct- ug- un- pr- eb- ec- ct- ug- un- pr- eb- ec- ct- ug- un- pr- eb- ec- ct- ug- un- pr- eb-
J A F D O A J A F D O A J A F D O A J A F D O A J A F D O A J A F D O A J A F D O A J A F

Trade balance (USD mn) Coal Brent

Trade Surplus vs Int Foreign Reserve Banking loan and Third Party Fund Growth (%YoY)
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
2 2 2 2 1 1 1 1 1 1 0 0 0 0 0 0 9 9 9 9 9 9
l-2 -2 -2 -2 -2 -2 l-2 -2 r-2 -2 -2 -2 l-2 -2 -2 -2 -1 -1 l-1 -1 r-1 -1
Ju May Mar Jan Nov Sep Ju May Ma Jan Nov Sep Ju May Mar Jan Nov Sep Ju May Ma Jan

loan (%YoY) loan (%YoY)

Source: Bloomberg, Sucor Research Source: Bloomberg, Sucor Research

Trade surplus gives another stimulus for domestic economy
Trade surplus stimulate loan and retail sales growth GDP 2022
• Our regression result on trade balance and Indonesia’s retail
Projection        
sales as the proxy of monthly domestic consumption and loan   Q1 Q2 Q3 Q4
growth as investment spending since Jan 2007 to July 2021 USD/IDR 14400 14800 15000 15400
suggest that trade surplus will give a positive effect for retail
sales and loan growth.

• We see as long as trade surplus continue in 2022 retail and loan

disbursement will grow faster. Trade surplus will give top 20% of
richest quantile another purchasing power. GDP 5.1 5.08 5.02 4.9
• The combination of trade surplus and easing restriction on
people’s mobility in 2022 will give more confidence for business
to borrow more from banks.

loan growth (%YOY)

Retail Sales (%YOY)
10000 30
10000 40
8000 25
8000 30
6000 20 20
6000
4000 10 15
4000
2000 0 10
2000
0 -10 5
-2000 -20 0
0
-4000 -30 -2000 -5
22 21 21 20 19 19 18 17 17 16 15 15 14 13 13 12 11
n- ct- b- n- ct- b- n- ct- b- n- ct- b- n- ct- b- n- ct-
J u O Fe J u O Fe J u O F e J u O F e J u O F e J u O -4000 -10
22 21 21 20 20 19 18 18 17 17 16 16 15 14 14 13 13 12 11
n- v- r- p- b- l- c- y- ct- r- g- n- n- v- r- p- b- l- c-
Trade Balance (USD mn) Retail Sales %YOY (RHS) J u N o A p Se Fe J u D e M a O M a A u J a J u N o A p Se Fe J u D e

Source: Bloomberg, Sucor Research Trade Balance (USD mn) Loan Growth %YOY (RHS)
Indonesia Economic Update
• Bank Indonesia left its key 7-day reverse repurchase rate Inflation
steady at a record low of 3.5% on April 19th of 2022, as 6
widely expected. BI kept interest rate unchanged to support
the economic recovery, although it recognized risks from 5

rising inflation. 4

• Indonesia’s inflation hits 2-year high in March 2022, 3

recorded at 2.64% YoY. The biggest driver of inflation in 2
March was the rising price of chili, cooking oil, eggs,
household gaseous fuel and gold jewelry. 1

0
• Indonesia enjoyed a USD4.53 bn trade surplus in March, the
largest trade surplus since October 2021, amid rising 22 22 22 22 21 21 21 21 21 21 20 20 20 20 20 20 19 19 19
/ 2 0 / 2 0 / 2 0 /2 0 / 2 0 / 2 0 /2 0 /2 0 /2 0 / 2 0 / 2 0 / 2 0 / 2 0 / 2 0 /2 0 /2 0 /2 0 /2 0 / 2 0
commodity prices. Exports jumped 44.36% YoY, while 3 1 3 0 3 0 2 8 31 31 3 1 3 0 3 0 2 8 3 1 31 3 1 3 0 3 0 2 9 3 1 31 3 1
8/ 6/ 4/ 2/ 12 / 10 / 8/ 6 / 4/ 2/ 12 / 10 / 8/ 6/ 4/ 2/ 12 / 10 / 8/
imports rose 30.85% YoY. We project that the trade balance
will continue post a substantial trade surplus in May. Total Inflation Core Inflation

BI Rate, Loan Growth, M2 Growth Trade balance

6 15 10000 80

8000 60
5
10 40
4 6000
20
4000
3 5 0
2000
2 -20
0 0 -40
1
-2000 -60
0 -5 2 2 2 2 1 1 1 1 1 1 0 0 0 0 0 0 9 9 9
02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 01 01 01
2 2 2 2 2 1 1 1 1 1 1 0 0 0 0 0 0 9 1 /2 0 /2 0 / 2 8 / 2 1 / 2 1 / 2 1 / 2 0 /2 0 /2 8 /2 1 / 2 1 / 2 1 / 2 0 / 2 0 / 2 9 / 2 1 /2 1 /2 1 /2
02 0 2 0 2 0 2 0 2 0 2 0 2 0 2 02 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 1 3 3 3 2 3 3 3 3 3 2 3 3 3 3 3 2 3 3 3
/2 1 / 2 4 /2 1 /2 1 /2 0 /2 0 /2 0 / 2 1 /2 1 / 2 9 /2 0 /2 0 / 2 1 /2 9 /2 1 / 2 1 /2 9 / 2 8/ 6/ 4/ 2/ 12 / 10 / 8/ 6/ 4/ 2/ 12 / 1 0 / 8/ 6/ 4/ 2/ 12 / 10 / 8/
3 0 3 2 3 3 3 3 3 3 3 2 3 3 3 2 3 3 2
9 / 7/ 5/ 3/ 1/ 11 / 9/ 7/ 5 / 3/ 1/ 11 / 9/ 7/ 5/ 3/ 1/ 11 /
Trade Surplus (USD mn) Export (%)
BI-7DRR Loan Growth (RHS) M2 Growth (RHS) Import (%)
Source: Bloomberg, Sucor Research
Trade Surplus: How far it goes in 2022
Imports of Oil& gas back to its pre pandemic level Exports of oil& gas grow lower than imports
35.00 40% 20.00 30%

30% 29% 30% 18.00

30.00 27% 21% 20%
16.00
20% 13% 13%
25.00 14.00 10%
10%
12.00 0%
20.00 0% 10.00
-10% 8.00 -10%
15.00
-20% 6.00 -20%
10.00 -23%
-30% 4.00
-29% -30%
5.00 2.00 -32%
-38% -40% 15.57 17.61 11.98 8.48 9.63
22.92 29.02 22.30 13.87 17.90 0.00 -40%
0.00 -50% 2017 2018 2019 2020 44440
2017 2018 2019 2020 2021 (YTD)
Exports Oil&Gas (USD Bn) (%YOY)
Oil&Gas Imports (USD bn) (%YOY)
Non-oil and gas significantly offset oil & gas trade deficit Indonesia’s exports of non Oil &Gas benefit from current
commodity prices
60.00 250.00
50.00
40.00 36.00
30.23 200.00
28.22
30.00
18.81
20.00
150.00
10.00 3.51
0.00
-0.23 100.00
-10.00
-20.00
50.00
-30.00
2017 2018 2019 2020 2021 2022F
(YTD) 0.00
2017 2018 2019 2020 2021 (YTD) 2022F
Surplus Non-Oil&Gas Deficit Non-Oil&Gas Trade Balance
Imports Non-Oil&Gas Exports Non-Oil&Gas
Source: Bloomberg, Sucor Research
Trade Surplus: How far it goes in 2022
Assumption
• we simulate the performance of Indonesia trade balance next
year based on commodity prices assumption.

• We reveal that the trade balance quite resilience with higher

oil prices in worse scenario simulation of USD 170/barrel. As
long as coal and CPO could stay at USD 80/Metric tonnes
and MYR 2800/ tonnes Indonesia’s may still post trade
surplus of USD 2.3 bn each month.

• For our base line scenario our statistical simulation project

that trade balance will still post a significant trade surplus
next year of USD 3.9 bn a month.

Trade balance projection (USD mn)

Trade balance projection (USD mn)
7000
7000.0 6000
5000
6000.0
4000
5000.0 3000
2000
4000.0
1000
3000.0 0
-1000
2000.0 -2000
-3000
1000.0
19 19 19 19 19 1 9 20 20 20 20 20 20 21 21 21 21 21 21
0.0 a n - ar- ay - Ju l- ep - o v - an - ar- ay - Ju l- ep - o v - an - ar- ay - Ju l- ep - o v -
J M M S N J M M S N J M M S N
21 2 1 2 1 21 21 21 21 2 1 2 1 21 21 21 22 2 2 2 2 2 2 22 22 2 2 22 22 22 22 2 2
n- b - r- r- y - n- l - g - p - t - v - c- n- b- r- r- y- n- l - g - p- t- v - c-
Ja Fe Ma Ap Ma Ju Ju Au Se Oc No De Ja Fe Ma Ap Ma Ju Ju Au Se Oc No De Actual Data Fitted Value

Source: Bloomberg, Sucor Research

Administered prices are the key for Inflation in 22
Inflation is Likely above BI’s Inflation Target in 2022 Inflation is projected to reach 7% in 2022
10 • We expect the gov’t will increase the gasoline price of 20% to
8 30% next year to reduce the gap between PERTAMINA's
6 gasoline prices and market prices.
4 • Meanwhile the core inflation will be back to its natural level to
2 4% as the consequence of higher household and investment
0 spending next year.
-2 • We estimate the combination of higher administered prices and
22 22 21 21 20 20 19 19 19 18 18 17 17 17 16 16 15 15 core inflation next year will drive up headline inflation to 7% next
/20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 year.
30 31 31 31 31 31 31 31 28 30 30 30 30 31 31 31 31 31
6/ 1/ 8/ 3/ 10/ 5/ 12/ 7/ 2/ 9/ 4/ 11/ 6/ 1/ 8/ 3/ 10/ 5/
• We project BI will increase interest rate two times this year by
Core Inflation Volatile Foods Administered Price 125 bps.
Source: BI, Sucor Research

Trade Balance Helps Stabilize Bond yield BI is Likely to Hike BI 7-D RRR in 2022
6000 12 7
5000 6
10
4000
5
3000 8
2000 4
6
1000 3
0 4 2
-1000
2 1
-2000
-3000 0 0
1 1 0 9 9 8 7 7 6 5 5 4 3 3 2 1
-2 n-2 y-2 p-1 n-1 y-1 p-1 n-1 y-1 p-1 n-1 y-1 p-1 n-1 y-1 p-1 22 22 21 21 21 20 20 20 19 19 19 18 18 18 17 17 17 16 16
p /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
Se Ja Ma Se Ja Ma Se Ja Ma Se Ja Ma Se Ja Ma Se 30 10 19 17 18 13 18 20 24 20 21 23 29 22 16 20 16 17 21
6/ 2/ 10/ 6/ 2/ 10/ 6/ 2/ 10/ 6/ 2/ 10/ 6/ 3/ 11/ 7/ 3/ 11/ 7/

Trade Balance Indo 10Y Yield (RHS) BI 7DRRR Headline Inflation

Source: Bloomberg, Sucor Research Source: Bloomberg, Sucor Research
Gov’t will be more focus on energy subsidies in 2H22

Source: Ministry of Finance

Source: Ministry of Finance

Source: Ministry of Finance Source: Ministry of Finance

Gov’t restrain budget spending to bring down the deficit

Source: Ministry of Finance

Source: Ministry of Finance

Source: Ministry of Finance Source: Ministry of Finance

Budget deficit decline in 2022

• The gov’t is on the track to reduce the deficit back to 3% of GDP to keep our fiscal sector
healthy.
• Lower gov’t budget deficit will keep Indonesia’s rating rational at BBB stable outlook in
2022

The Gov’t Budget Deficit Projection in 2022

1400 196.8% 200.0%

1193.3
1200
150.0%

1000 961.5
868
100.0%
800

600
50.0%
31.5%
402.1
400

0.0%
200 -9.7%
-19.4%

0 -50.0%
2019 2020 2021 2022

State Budget Growth

Source: Bloomberg, Sucor Research
Gov’t Bonds Secondary Market Performance

Source: Ministry of Finance

JCI vs Bond Yield
• The yield curve flattening in gov’t bond. The yield for gov’t bond JCI vs IBPA
tenor 5 to 10 year increased faster than longer tenor 15 and 20 year
8000 350
in-line with UST yield curve movement.
7000 300
• 6000
BI policy rate hike going forward will push up further the yield for 250
5000
5 to 10 year while the global recession expectation will restrain the 200
4000
long end duration bond yield to increase faster. 150
3000
100
• The increase in gov’t bond yield will restrain the equity market 2000
performance in 4Q22. 1000 50
0 0
22 22 22 22 21 21 21 21 21 21 20 20 20 20 20 20 19 19 19
/ 2 0 / 2 0 / 2 0 / 2 0 /2 0 / 2 0 / 2 0 / 2 0 / 2 0 /2 0 / 2 0 /2 0 / 2 0 /2 0 /2 0 /2 0 /2 0 /2 0 /2 0
3 1 3 0 3 0 2 8 3 1 2 9 3 1 3 0 3 0 2 6 31 3 0 3 1 3 0 3 0 2 8 31 3 1 3 0
8/ 6/ 4/ 2/ 12 / 10 / 8/ 6/ 4/ 2/ 12 / 10 / 8/ 6/ 4/ 2/ 12 / 10 / 8/

JCI
INDOBeX Govt Total Return (RHS)

FR0090 (5Y) vs FR0091 (10Y) FR0093 (15Y) vs FR0092 (20Y)

8.5 8.5
8 8
7.5
7.5
7
6.5 7
6 6.5
5.5
6
5
4.5 5.5

4 5
22
0 22
0 22
0 22
0 21
0 210 21
0 210
1 1 0 0 0 0
02 02 02 02 02 02 02 02 01 01 01
0 0 9 9 9 2 2 2 2 1 1 1 1 1 1 0 0 0 0
0 2 0 2 0 2 0 2 0 2 0 2 0 2 02 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 2 0 1 0 1 0 1
0 0 9 9 9
1 /2 0 /2 0 / 2 8 /2 1 / 2 9 / 2 1 /2 0 / 2 0 / 2 6 /2 1 /2 0 / 2 1 /2 0 / 2 0 / 2 8 /2 1 / 2 1 /2 0 /2 1 /2 0 / 2 0 / 2 8 /2 1 / 2 9 / 2 1 /2 0 /2 0 /2 6 / 2 1 / 2 0 / 2 1 / 2 0 / 2 0 /2 8 /2 1 /2 1 /2 0 / 2
3 3 3 2 3 2 3 3 3 2 3 3 3 3 3 2 3 3 3 3 3 3 2 3 2 3 3 3 2 3 3 3 3 3 2 3 3 3
8/ 6/ 4/ 2/ 12 / 1 0 / 8/ 6/ 4/ 2/ 12 / 10 / 8/ 6/ 4/ 2/ 12 / 10 / 8/ 8/ 6/ 4/ 2/ 12 / 10 / 8/ 6 / 4/ 2/ 12 / 10 / 8/ 6/ 4/ 2/ 12 / 10 / 8/

FR0090 (Benchmark 5Y) FR0091 (Benchmark 10Y) FR0093 (Benchmark 15Y) FR0092 (Benchmark 20Y)
Source: Bloomberg, Sucor Research
Bond Yield Projection
Gov’t SUN issuance realization as of June 21, 2022
• We project that Indonesia 10-year gov’t bond yield will reach
7.2% in 2022 based on our main assumption that UST yield will
hover around 2.8% to 3.2% until the end of this year.
• We believe inflation will reach 8.0% to 8.5% in the US in the end
of 2022 and start to slowdown in 2023. This will stabilize UST
yield as the global market participant will anticipate for more
dovish Fed’s statement in 4Q22.
• We project that Indonesian inflation will hover around 4.5% to
5% this year as the gov’t bolstering energy subsidies this year to
control administered prices such as electricity tariff and gasoline
price at current level until the end of this year.
• As the consequence of stable expected inflation, we foresee that
BI will only hike the rate by 100 bps this year to stabilize rupiah
at IDR 14.900/usd

Net foreign inflow remains limited in absorbing the GS issuance

Source: MoF, Sucor Research

Outlook Summary

Macro Indicator 2022 2023 2024

GDP Growth 5.2 4 5
Inflation 7 4 3
BI 7D-RRR 5 4.5 4
Current account 1 0.5 0.1
USD/IDR 15200 15400 15000
UST 10Y 4 3 2
Indonesia 10Y Yield 7.4 6.8 5.8
THANK YOU
Sucor Sekuritas rating definition, analysts’ certification, and important disclosure

Ratings for Sectors

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Buy : We expect this stock to give return (excluding dividend) of above 10% over the next 12 months.
Hold : We expect this stock to give return of between -10% and 10% over the next 12 months.
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