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Indonesian economic outlook in the midst of global challenges
Muhammad Chatib Basri
Harvard Kennedy School
and
CReco Research
Short term problems: macroeconomic stability
2
The macroeconomic impact of the global volatility
3
The Fed interest rate hike
Risk of capital
outflow
Risk of assets re pricing
Exchange rate depreciation
Improve trade balance
or
Deteriorate trade balance
Slow down of
China
Declining commodity
priceWealth effect
Slow down growth
Bank Indonesia: interest rate ↑Govt tighten fiscal
Bank Indonesia: lower interest rate
Govt: Expand fiscal
Imported
inflation
Solution:FDI (export oriented) ↑ → BoP +
Declining oil price
Government Revenue
Problem in Euro and
China
(financial)
4
-10
-5
0
5
10
15
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GDP Growth(Countries, annual, 2015 data is q1 data, percent, last data in the bracket)
Source: CEIC, World Bank
Indonesia (4.71)
China (7.0)
India (7.51)
South Africa (1.3)
Rusia (-2.2)Greece (0.35)
Brazil (-1.56)
-3
-1
1
3
5
7
9
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GDP Growth(ASEAN countries, annual, 2015 data is q1 data, percent, last data in the bracket)
Source: CEIC, World Bank
Thailand (3.04)
Indonesia (4.71)
Vietnam (6.13) Philippines (5.16)
Malaysia (5.65)
GDP Growth
4,4
4,5
4,6
4,7
4,8
4,9
5
5,1
5,2
-6
-4
-2
0
2
4
6
8
Mar, 2014 Apr, 2014 Mei, 2014 Jun, 2014 Jul, 2014 Agu, 2014 Sep, 2014 Okt, 2014 Nov, 2014 Des, 2014 Jan, 2015 Feb, 2015 Mar, 2015
GDP Growth
Private Cons Govt Exp Inv Export Import GDP
7
GDP Growth
8
4
Table 4 GDP By Expenditure At Current Price and Constant Price 2010
(Trillion Rupiahs)
Component
Current Price Constant Price 2010
Qtr. I-2015 Qtr. II-2015
Qtr. I-2015 Qtr. II-2015
(1) (2) (3) (4) (5)
1. Pengeluaran Konsumsi Rumah Tangga
2. Pengeluaran Konsumsi LNPRT
3. Pengeluaran Konsumsi Pemerintah
4. Pembentukan Modal Tetap Domestik Bruto
5. Perubahan Inventori
6. Ekspor Barang dan Jasa
7. Dikurangi Impor Barang dan Jasa
Diskrepansi Statistik1
Gross Domestic Bruto (GDP)
1 529.1
30.7
180.0
891.1
77.8
600.3
585.4
5.2
2 728.8
1 567.4
31.9
254.2
925.5
80.9
620.1
613.9
0.8
2 866.9
1 188.1
23.7
133.7
688.7
55.1
497.3
468.2
39.4
2 157.8
1 201.2
24.2
176.8
709.6
56.3
505.1
473.1
39.2
2 239.3
1 Selisih GDP Industrial Origin dan GDP Pengeluaran
Table 5 Growth Rate of GDP By Expenditure Base Year 2010
(percent)
Component Qtr. I-2015
Over Qtr. IV-2014
Qtr. II-2015 Over
Qtr. I-2015
Qtr. I-2015 Over
Qtr. I-2014
Qtr. II-2015 Over
Qtr. II-2014
Semester I-2015 Over
Semester I-2014
Source of GrowthPertumbuhan
Qtr. II-2015 (y-on-y)
(1) (2) (3) (4) (5) (6) (7)
1. Pengeluaran Konsumsi Rumah Tangga
2. Pengeluaran Konsumsi LNPRT
3. Pengeluaran Konsumsi Pemerintah
4. Pembentukan Modal Tetap Domestik Bruto
5. Perubahan Inventori
6. Ekspor Barang dan Jasa
7. Dikurangi Impor Barang dan Jasa
Gross Domestic Bruto (GDP)
0.11
-1.19
-48.43
-4.77
-
-6.28
-10.04
-0.17
1.11
2.39
32.17
3.04
-
1.56
1.06
3.78
5.01
-8.25
2.71
4.29
-
-0.85
-2.27
4.72
4.97
-7.91
2.28
3.55
-
-0.13
-6.85
4.67
4.99
-8.08
2.47
3.92
-
-0.49
-4.62
4.70
2.66
-0.10
0.18
1.14
-
-0.03
-1.63
4.67
9
2
Table 2 Growth Rate of GDP By Industrial Origin Base Year 2010
(percent)
Industrial Origin Qtr. I-2015
Over Qtr. IV-2014
Qtr. II-2015 Over
Qtr. I-2015
Qtr. I-2015 Over
Qtr. I-2014
Qtr. II-2015 Over
Qtr. II-2014
Semester I-2015 Over
Semester I-2014
Source of GrowthPertumbuhan
Qtr. II-2015 (y-on-y)
(1) (2) (3) (4) (5) (6) (7)
A. Pertanian, Kehutanan, dan Perikanan
B. Pertambangan dan Penggalian
C. Industri Pengolahan
D. Pengadaan Listrik dan Gas
E. Pengadaan Air, Pengelolaan Sampah, Limbah dan
Daur Ulang
F. Konstruksi
G. Perdagangan Besar dan Eceran; Reparasi Mobil
dan Sepeda Motor
H. Transportasi dan Pergudangan
I. Penyediaan Akomodasi dan Makan Minum
J. Informasi dan Komunikasi
K. Jasa Keuangan dan Asuransi
L. Real Estat
M,N. Jasa Perusahaan
O. Administrasi Pemerintahan, Pertahanan dan
Jaminan Sosial Wajib
P. Jasa Pendidikan
Q. Jasa Kesehatan dan Kegiatan Sosial
R,S,T,U. Jasa Lainnya
Nilai Tambah Bruto Atas Harga Dasar
Pajak Dikurang Subsidi Atas Produk
Gross Domestic Bruto (GDP)
14.85
-8.18
-0.53
-7.17
0.27
-5.95
-0.41
-1.25
0.20
2.61
0.71
1.17
2.24
-6.43
-10.89
-6.39
1.84
-0.43
10.31
-0.17
10.09
-2.57
3.86
4.43
0.19
3.14
3.94
3.62
1.74
2.08
-1.21
1.08
1.78
0.48
6.31
3.30
1.99
3.50
13.96
3.78
4.00
-1.23
3.97
1.73
2.27
6.03
3.96
6.26
3.56
10.06
7.57
5.26
7.36
4.71
5.92
7.34
8.00
4.44
16.25
4.72
6.64
-5.87
4.42
0.76
2.15
5.35
1.69
6.59
3.87
9.56
2.46
5.03
7.64
6.46
12.16
8.16
8.07
4.13
26.70
4.67
5.37
-3.58
4.20
1.23
2.21
5.68
2.79
6.43
3.72
9.81
4.97
5.14
7.50
5.58
9.05
7.76
8.04
4.28
21.59
4.70
0.91
-0.54
0.96
0.01
0.00
0.51
0.24
0.25
0.12
0.43
0.09
0.15
0.12
0.21
0.36
0.08
0.13
4.03
0.64
4.67
10
11
Source: CEIC
0
2
4
6
8
10
12
14
16
18
20
6 8 10 12 2 4 6 8 10 12 2 4 6 8 10 12 2 4 6 8 10 12 2 4 6 8 10 12 2 4 6 8
2010 2011 2012 2013 2014 2015
Inflation(yoy growth, percent)
Headline Core Administered Volatile
Group Spending CPI
Jul 2015
CPI
Aug 2015
MOM
Jul 2015
MOM
Aug 2015
YOY
Aug 2014
YOY
Jul 2015
YOY
Aug 2015Contr
Headline 121.26 121.73 0.93 0.39 3.84 7.26 7.18 7.18
1 Foodstuff 130.57 131.38 1.95 0.62 1.07 8.25 8.60 1.45
2Food, beverages, cigarettes and
tobacco122.59 123.27 0.51 0.55 6.30 7.83 7.91 1.27
3 Housing, water, electricity, and fuel 119.38 119.65 0.18 0.23 5.97 7.94 7.30 1.19
4 Clothing 109.16 109.20 0.41 0.03 4.40 3.34 3.12 0.50
5 Health 115.71 116.49 0.53 0.67 4.96 6.25 6.58 0.97
6 Education, recreation and sport 110.27 111.63 0.30 1.23 3.80 3.82 4.24 0.48
7Transportation, communication and
finance116.87 116.78 0.73 -0.07 1.66 7.99 7.92 1.31
CPI by Expenditure(percent)
-10
0
10
20
30
40
50
Jan
-08
Ap
r-0
8
Jul-
08
Okt
-08
Jan
-09
Ap
r-0
9
Jul-
09
Okt
-09
Jan
-10
Ap
r-1
0
Jul-
10
Okt
-10
Jan
-11
Ap
r-1
1
Jul-
11
Okt
-11
Jan
-12
Ap
r-1
2
Jul-
12
Okt
-12
Jan
-13
Ap
r-1
3
Jul-
13
Okt
-13
Jan
-14
Ap
r-1
4
Jul-
14
Okt
-14
Jan
-15
Ap
r-1
5
Credit Growth(yoy growth, percent)
Total Credit Working Capital Investment Consumption
Source: CEIC
No Type of Tax2014
RealizationRevised 2105 State Budget
Target Δ% (2014-2015)
Δ% (2014-2015)2014 as of July
312015 as of
July 31
ANon Oil and Gas Income Tax (PPh)
458,692.28 629,835.35 37.31 258.486,23 293.521,34 13.55
B.
VAT and Luxuries taxes
408.995,74 576.469,17 40,95 216,137.27 202.701,81 (6,22)
C Land taxes 23.475,71 26.689,88 13,69 1,049.73 558,07 (46,84)
D Oil and gas taxes 87.446,35 49.534,79 (43,35) 51,876.00 31.375,54 (39,52)
E Total A+B+C+D 897.456,86 1.244.723,88 38,69 479,001.27 499.738,89 4,33
F Total A+B+C+D+E 984.903,21 1.294.258,67 31,41 530,877.27 531.114,43 0,04
Tax Revenue realization as of July 31st, 2015
0
200
400
600
800
1000
1200
1400
Jun
-00
Mei
-01
Ap
r-0
2
Mar
-03
Feb
-04
Jan
-05
Des
-05
No
v-0
6
Okt
-07
Sep
-08
Agu
-09
Jul-
10
Jun
-11
Mei
-12
Ap
r-1
3
Mar
-14
Feb
-15
Palm Oil(US Dollars per Metric Ton)
020406080
100120140160
Jun
-00
Mei
-01
Ap
r-0
2
Mar
-03
Feb
-04
Jan
-05
Des
-05
No
v-0
6
Okt
-07
Sep
-08
Agu
-09
Jul-
10
Jun
-11
Mei
-12
Ap
r-1
3
Mar
-14
Feb
-15
Crude Oil(US Dollars per Barrel)
0
50
100
150
200
250
Jun
-00
Mei
-01
Ap
r-0
2
Mar
-03
Feb
-04
Jan
-05
Des
-05
No
v-0
6
Okt
-07
Sep
-08
Agu
-09
Jul-
10
Jun
-11
Mei
-12
Ap
r-1
3
Mar
-14
Feb
-15
Coal(US Dollars per Metric Ton)
0
10.000
20.000
30.000
40.000
50.000
60.000
Jun
-00
Jun
-01
Jun
-02
Jun
-03
Jun
-04
Jun
-05
Jun
-06
Jun
-07
Jun
-08
Jun
-09
Jun
-10
Jun
-11
Jun
-12
Jun
-13
Jun
-14
Jun
-15
Nickle(US Dollars per Metric Ton)
Commodity Price
Source: Index Mundi
0,0
0,2
0,4
0,6
0,8
1,0
1,2
0
1
2
3
4
5
6
7
8
9
Jan
-12
Mar
-12
Mei
-12
Jul-
12
Sep
-12
No
v-1
2
Jan
-13
Mar
-13
Mei
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
Mei
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
Mei
-15
Policy Rates(Percent)
Indonesia (LHS)
US (RHS)
China (LHS)
Japan (RHS)
Germany (RHS)
India (LHS)
Source: CEIC
-5
-4
-3
-2
-1
0
1
2
3
4
5
Real Interest Rate(Monthly, Gov.Bond 10y, %)
Indonesia
US
China
Japan
Germany
India
Source: CEIC
Data as of Aug 28, 2015
Indonesia
Russia
Brazil
South Africa
Australia
Source: CEIC
80
100
120
140
160
180
200
220
Exchange Rates(Commodity countries, Des 2013=100)
Short and long term challenges
Short term:
Potential growth is limited --> stabilization over growth
Medium-
long term:
focus on supply constraint
22
Medium term and long-term issues: how to improve
productivity
23
In technology: no self discovery
Source: Authors’ calculation using UN-Comtrade data based on SITC classification
24
Source: Basri and Rahardja ( 2011)
Capability to undertake complex task is
still behind other middle income
countries
If products could not be made in Indonesia, where else can they be made?
From observed trade data, Indonesia made progress in improving capability to export products requiring more complex task (but so does Vietnam)
Why matters? It reflects institutional capacity and ability to accumulate and channel knowledge into productive activities
25
Source: Atlas of Economic Complexity (Hausmann and Hidalgo et.al)
Not yet able to manage complex tasks?
Economic Complexity Index
Development challenges are beyond
macro-stability
26
Brazil China India Indonesia Malaysia Philippines Thailand Vietnam
Characteristics (2013)
Population (person mn) 200.4 1,357.4 1,252.1 249.9 29.7 98.4 67.0 89.7
GDP Per Capita (in PPP, USD) 5,823 3,583 1,165 1,810 6,998 1,581 3,438 1,029
Density (person/sq km) 24.0 144.6 421.1 137.9 90.4 330.0 131.2 289.3
Real Exchange Rate Movement (%)
2003-2013 (average 68.3 31.4 -0.3 6.4 2.5 39.2 25.0 50.9
PISA Test Score (2012)
Math 391 613 351* 375 421 427 511
Science 406 580 348* 382 420 438 528
Broadband Penetration
Fixed (wired)-broadband subscriptions per
100 inhabitants (2013) 10.08 13.36 1.16 1.3 8.22 9.12 7.36 5.62
Logistics Performance Index (2014) 2.94 3.53 3.08 3.08 3.59 3.00 3.43 3.15
Percentage of shipment met quality 82 76 67 70 97 71 83 76
Government effectiveness score -0.08 -0.03 -0.19 -0.24 1.10 0.06 0.21 -0.30* Tamil Nadu dan Himachal Pradesh Sources: World Bank, ITU, BIIS and others
Policy anticipation
Short term
• Increase aggregate demand:
• cash transfer,
• cash for work,
• tax incentive for companies to keep their workers
Medium term
• Infrastructure
• Human capital: Attract FDI for technology spill over
• Tax incentive for R&D, training, export oriented sector
27