Indonesia–Recent Macroeconomic Developments and Near-Term Developments and Near Term
Prospects
D A V I D C O W E N
I M F M I S S I O N C H I E F F O R I N D O N E S I A
A S I A A N D P A C I F I C D E P A R T M E N T
M A R C H 2 6 , 2 0 1 4
T O K Y O1
Overview
Global and Emerging Market Developments
Managing the Tapering Environment
Developments in Indonesia and Outlook Developments in Indonesia and Outlook
Policy Framework Going Forward
2
I. Global and Emerging Market Developmentsg g p
Latest trends:Latest trends: Growth in advanced economies (AEs) and emerging markets
(EMs) has been broadly in line with the January 2014 WEO (EMs) has been broadly in line with the January 2014 WEO update.
Commodity prices: Oil firming on heightened geopolitical y p g g g prisk; food prices also pushing higher, but metal prices softening further.
Financial conditions are tightening in most AEs and EMs, but more so in the latter.
i k i h k l i Emerging market economies that took early action to strengthen fundamentals generally weathered January’s financial turmoil better (e.g. Indonesia).
3
financial turmoil better (e.g. Indonesia).
Indonesia: Growth Componentsp
Contribution to Real GDP Growth(I t )
7.5
8.0
8
10
(In percent, year-on-year)
6.5
7.0
4
6
5.5
6.0
0
2
4.5
5.0
-4
-2
Private consumption Government consumptionInvestment Net exports
4.0-6
Mar
-10
Jun-
10
Sep-
10
Dec
-10
Mar
-11
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
12
Sep-
12
Dec
-12
Mar
-13
Jun-
13
Sep-
13
Dec
-13
Change in stocks Statistical discrepancyReal GDP growth (in y/y percentage change, right scale)
Sources: CEIC Data Company Ltd.; and IMF staff estimates.
4
Commodity Price Trendsy
Key Commodity Prices
350
Oil Gas Rubber products Palm oil Coal
Key Commodity Prices(2007Q1=100)
WEO Proj.
250
300
150
200
50
100
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
Sources: IMF Commodity Price System database; and staff estimates and projectionsSources: IMF, Commodity Price System database; and staff estimates and projections.
5
Indonesia: Financial Conditions and Flows
Net Foreign Portfolio Flows(In billions of U S dollar cumulative since the
Financial Conditions(end 2012 100)
8
10Government rupiah bond flow
Equity flows
(In billions of U.S. dollar, cumulative since the beginning of 2013)
11140Nominal exchange rate (US$/rupiah)Jakarta stock index
(end 2012 = 100)
6
8 Equity flows
Total flows
9
10
120
130Jakarta stock indexBI policy rate (right scale)10-year treasury bond yield (right scale)
2
4
7
8
100
110
In p
erce
nt
-2
0
5
6
80
90
-4
Jan-
13
Feb-
13
Mar
-13
Apr-
13
May
-13
Jun-
13
Jul-1
3
Aug-
13
Sep-
13
Oct
-13
Nov
-13
Dec
-13
Jan-
14
Feb-
14
Mar
-14470
Jan-
13
Feb-
13
Mar
-13
Apr-
13
May
-13
Jun-
13
Jul-1
3
Aug-
13
Sep-
13
Oct
-13
Nov
-13
Dec
-13
Jan-
14
Feb-
14
Mar
-14
6Source: Bloomberg L.P.
F M A M J A S O N D F M
Source: Bloomberg LP; and IMF staff estimates.
Emerging Market Developments (1)
Ten-Year Local Currency Bond Yields(Change in basis points)
Exchange Rates against the U.S. Dollar(Percentage change + appreciation)
g g p
350
400
450
350
400
450Dec 31, 2012-May 22, 2013May 22, 2013-Dec 31, 2013Year-to-date since 2014
(Change, in basis points)
5
10
5
10
(Percentage change, + appreciation)
200
250
300
350
200
250
300
350
-5
0
-5
0
ciat
ion
0
50
100
150
0
50
100
150
-15
-10
-15
-10
+ap
prec
-150
-100
-50
-150
-100
-50
es a a a d a a a y y d a e o il
-25
-20
-25
-20
ea es ia nd ia ia ia ry ey ca nd le ia co zil
Dec 31, 2012-May 22, 2013May 22, 2013-Dec 31, 2013Year-to-date since 2014
Phili
ppin
eM
alay
siIn
diKo
reTh
aila
n dIn
done
si
Russ
iSo
uth
Afric
Turk
eH
unga
rPo
land
Colo
mbi
Chil
Mex
ico
Braz
Source: Bloomberg L.P.
Kore
Phili
ppin
eM
alay
sTh
aila
nIn
dIn
done
s
Russ
Hun
gar
Turk
eSo
uth
Afric
Pola
n
Chi
Colo
mb
Mex
i cBr
az
Source: Bloomberg L.P. Source: Bloomberg L.P.
7
Emerging Market Developments (2)g g p ( )
Equity Prices(Local currency returns in percent)
Five-Year Sovereign CDS Spreads(Change in basis points)
30
40
30
40Dec 31, 2012-May 22, 2013May 22, 2013-Dec 31, 2013Year-to-date since 2014
(Local currency returns, in percent)
100
120
140
100
120
140Dec 31, 2012-May 22, 2013May 22, 2013-Dec 31, 2013Year-to-date since 2014
(Change, in basis points)
10
20
10
20
60
80
100
60
80
100 Year-to-date since 2014
-20
-10
0
-20
-10
0
0
20
40
0
20
40
-40
-30
-40
-30
ia es ia nd ia ea ca nd ey ry ia ia le co zil
-60
-40
-20
-60
-40
-20
nd ea sia es sia
sia ey ca nd ry ile co bia zil
Indo
nes
Phili
ppin
eIn
dTh
aila
nM
alay
sKo
re
Sout
h Af
ricPo
lan
Turk
eH
unga
rRu
ss
Colo
mb
Chi
Mex
icBr
az
Source: Bloomberg L.P.
Thai
lan
Kore
Mal
ays
Phili
ppin
e
Indo
nes
Russ
Turk
e
Sout
h Af
ric
Pola
n
Hun
ga Chi
Mex
ic
Colo
mb
Braz
Source: Bloomberg L.P.
8
Source: Bloomberg L.P. g
Emerging Market Developments (3)g g p (3)
Policy Rates (I )
Reserves
6
8
12
14(In percent)
Change from May 2013-December 2013 (right scale)Change from end-2012-May 2013 (right scale)Current policy rateLatest CPI inflation (y/y percent change)
14
16
20
25 Change from May 2013-December 2013Change from end-2012-April 2013Change in 2014 (year-to-date)End-2013 reserves (in months of imports, right scale)
2
4
6
8
10(y/y p g )
8
10
12
5
10
15
s of
impo
rts
age
chan
ge
2
0
2
4
4
6
8
-5
0
5
In m
onth
s
In p
erce
nt
-4
-2
-2
0
nesi
a
pine
s
aysi
a
Kore
a
iland
urke
y
Russ
ia
Afric
a
ngar
y
olan
d
Braz
il
Chile
exic
o
mbi
a0
2
-15
-10
nes
ysia
ndia
and
rea
esia
key
ssia ary
rica
and
hile
mbi
aaz
ilxi
co
Indo
Phili
p p
Mal K
Tha T u R
Sout
h A
Hun Po
B
Me
Colo
Sources: CEIC Data Company Ltd; Haver
Phili
ppin
Mal
ay InTh
aila Ko
Indo
n e
Turk
Rus
Hun
gSo
uth
Afr
Pola Ch
Colo
m BrM
e x
Sources: IMF, International Financial Statistics; Analytics; and IMF, WEO database.
9
and WEO database.
EMs and Indonesia: Yield and CDS Spreadsp
External Bond and Credit Default Swap Spreads
600Indonesia 5 year CDS Spread EM 5 Year CDS Spread Index
p p(In basis points)
400
500 Global EMBI Spread Indonesia EMBI Spread
200
300
100
200
0
Jul-1
1
Sep-
11
Nov
-11
Jan-
12
Mar
-12
May
-12
Jul-1
2
Sep-
12
Nov
-12
Jan-
13
Mar
-13
May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
10
S N J M M S N J M M S N J M
Source: Bloomberg L.P.
III. Managing the Tapering Environment
Recent Policy Measures: Since May 2013, a series of policy measures (summarized below) have been taken to Recent Policy Measures: Since May 2013, a series of policy measures (summarized below) have been taken to strengthen macroeconomic fundamentals and maintain financial stability, as well as reduce external vulnerabilities.
Monetary policy and liquidity management
Bank Indonesia (BI) has:( )
Raised both the policy rate and the overnight deposit facility rate (bottom of interest rate corridor) starting in June 2013 by a total 175 bps to 7.5 percent and 5.75 percent, respectively.
Shortened the minimum holding period for central bank bills (SBIs) from six months to one month in September.
Introduced tradable central bank rupiah deposits at one- and six-month tenors in September to facilitate interbank p p pmoney market development .
Introduced in December a mini master repo agreement (among a group of large domestic banks) to stimulate collateralized interbank lending.
Exchange rate policy and foreign exchange market operations
Shifted to a more flexible exchange rate policy framework in mid 2013 to encourage more market activity.
Improved the functionality in the foreign exchange market, supported by market deepening measures by BI since the second half of 2013.
Macroprudential controls
Tightened loan-to-valuation (LTV) limits on mortgages for second and third residential properties in September 2013.
Raised the secondary reserve requirement (RR) in September (fulfilled by banks’ holding of treasury and BI securities) f b h d i b b l i h d h l d i i ( ) li k dfrom 2.5 percent to 4 percent, to be phased in by December 2013; also tightened the loan-to-deposit ratio (LDR) linked RR .
11
Recent Policy Measures (concluded)y ( )
Fiscal policyp y Increased subsidized petrol price by 44 percent and subsidized diesel price by 22 percent in mid-June 2013, and
approved in the revised 2013 budget a temporary cash compensation scheme for vulnerable groups. Raised electricity tariffs on average 15 percent in 2013. Raised liquefied petroleum gas prices 17 percent in January 2014.
Announced in August the allowance of temporary deductions and deferred payments of income tax for the rest of 2013 for certain labor-intensive and export-oriented industries.
Other measures Relaxed regulations in August on bonded zones through simplification of licensing procedures and increasing the
allocation of certain goods for local sale. Changed the mechanism for importing beef and horticultural products in September 2013, moving away from strict
t t t th t ill h lt i t h th d ti i f ll b l th f i d ll i t t quotas to a system that will halt imports when the domestic price falls below the reference price and allow imports to resume if the domestic price exceeds the reference price.
Revised the negative investments list (DNI) in December, raising the level of foreign ownership in a number of sectors including transportation terminals, seaports and power plants, albeit tightening restrictions in farming and logistics and clarifying restrictions in telecommunications.
But also:
Implemented a scheduled ban on exports of unprocessed mineral ores in January 2014. For exports of six forms of mineral concentrates, including copper, continue to allow, subject to a special export tax that would increase to 60 percent in 2016, to encourage full in-country processing by 2017.60 percent in 2016, to encourage full in country processing by 2017.
Passed a new Trade Law in February that gives the government greater authority to restrict export and import activity with a view to secure domestic supplies and manage prices.
Swap lines A bilateral swap arrangement (BSA) with Japan was extended in August 2013 while BSAs with China and Korea were
12
A bilateral swap arrangement (BSA) with Japan was extended in August 2013, while BSAs with China and Korea were agreed in October.
Risk Factors for Outlook on Indonesia
Surges in global financial market volatility leading to economic and financial stress in EMsand financial stress in EMs
Protracted period of slower growth in emerging economies Protracted period of slower growth in emerging economies (notably China)
Geopolitical factors adversely affecting energy prices
Domestic factors
13
Indonesia: Recent Investment Trends
Contribution to Imports GrowthContribution to Real Investment Growth
6
8Consumer goodsRaw materialsCapital goods
(In percent, year-on-year)
12
14 BuildingDomesticForeign
(In percent, year-on-year)
4
6 Oil and gasImports, in U.S. dollar terms
8
10
12 ForeignReal gross fixed investment
0
2
4
6
-2
0
-2
0
2
-42010 2011 2012 2013
Sources: CEIC Data Company Ltd ; and IMF
-42010 2011 2012 2013
Sources: CEIC Data Company Ltd ; and IMF
14
Sources: CEIC Data Company Ltd.; and IMF staff estimates.
Sources: CEIC Data Company Ltd.; and IMF staff estimates.
Emerging Market Yields and Portfolio InflowsEmerging Market Yields and Portfolio Inflows
Bond Flows from AMs to EMsEmerging Market Bond Yields
6
(percent of AM’s GDP)
18EM foreign currency fixed i
(percent)
4
5
$480 bn
14
16 incomeEM local currency government bondIndonesia 10-year bond yield
3
10
12
1
2
Long term trend6
8
042007 2008 2009 2010 2011 2012 2013 2014
15
Source: IMF staff estimates.Sources: Bloomberg L.P.
Indonesia: Direction of Trade (Exports)p
Total Export Destinations, 2002 Total Export Destinations, 2013 est.
Japan Japan
Chi
24%18%
China
United States 15%20%
China
United States
24%
6%9%
EU
India12%
13%
EU
India
15%
7%11%
8% Singapore
Korea, Rep. of
9%
9%9%
6%
Singapore
Korea, Rep. of
3%
ASEAN
Others
7%9%
ASEAN
OthersOthers
16
III. Developments in Indonesia and Outlookp
Si th A ti l IV C lt tiSince the Article IV Consultation: Growth in 2013 performed better than expected on a stronger
contribution of net exports but with possible one-off factorscontribution of net exports, but with possible one off factors.
Inflation came in lower than projected at end 2013, as policy tightening and moderating demand pressures kept expectations well tightening and moderating demand pressures kept expectations well anchored, with food prices contributing less than expected.
The external current account deficit was slightly lower than g yforecasts, given a sizable rupiah depreciation and unexpected reversion to a trade surplus in Q4 2013.
Reserves were considerably higher than expected at end 2013, as foreign investors took a favorable turn, with exchange rate and bond yield flexibility and improved market functionality supporting
17
yield flexibility and improved market functionality supporting.
Macroeconomic Performance and Outlook
Indonesia: Selected Economic Indicators, 2012-14
2012 2013 2014Est. Art. IV Est. Art. IV
Real GDP (percent change) 6.3 5.4 5.8 5.3 5.3Domestic demand 8.0 5.0 5.1 4.9 4.3
Proj. 1/
Net exports 2/ -1.6 1.1 2.1 1.2 1.5
Prices (12-month percent change)Consumer prices (end period) 3.7 9.5 8.1 6.0 5.5Consumer prices (period average) 4.0 7.2 6.4 7.6 6.2
Public finances (in percent of GDP)Public finances (in percent of GDP) Central government balance -1.9 -2.5 -2.3 -2.5 -2.5Central government revenue 16.3 16.0 15.7 16.0 16.0Central government expenditure 18.1 18.4 18.0 18.5 18.5
Balance of payments (in billions of U.S. dollars)Current account balance 24 4 30 4 28 5 27 6 23 6Current account balance -24.4 -30.4 -28.5 -27.6 -23.6(in percent of GDP) -2.8 -3.5 -3.3 -3.2 -2.9
Overall balance 0.3 -17.2 -7.3 -9.0 1.0
Gross reservesIn billions of U.S. dollars (end period) 112.8 88.7 99.4 79.7 100.4In months of imports of goods and services 6 4 4 9 5 6 4 1 5 4In months of imports of goods and services 6.4 4.9 5.6 4.1 5.4
Sources: Data provided by the Indonesian authorities; and IMF staff estimates and projections.
1/ Based on January 2014 World Economic Outlook ( WEO) update. Latest projecitons will be relasead in the April 2014 WEO.2/ Contribution to GDP growth (percentage points)
18
2/ Contribution to GDP growth (percentage points).
Growth and Inflation Outlook: Discussion PointsGrowth and Inflation Outlook: Discussion Points
Investment—a stronger or weaker outlook?
Over the last decade, the main driver of cyclical growth in investment has been foreign entities.
Headwinds this year are higher borrowing costs, tighter bank liquidity, and rising leverage ratios.
However, stronger overseas corporates (including Japan) and diversification away from other EM ll l ti i th ti li t d th i ti ld l d tEMs, as well as relaxations in the negative list and other incentives, could lend some support.
Trade—are recent improvements durable?
The recent improvement in the trade balance is due to a decline in imports (raw materials and capital goods) and some pickup in exports capital goods) and some pickup in exports.
The return to positive growth in exports should be watched closely, in light of front-running of unprocessed mineral ore exports and less supportive growth conditions in major EMs.
At the same time, signs exist of an incipient recovery in manufacture exports associated with , g f p y f pstronger demand from advanced economies.
Inflation—how benign are conditions?
On the one hand, profit margins may be squeezed from higher input and borrowing costs and li k i i h i h i h ill i d i d d i i fi i i earlier weakening in the rupiah, with still-supportive domestic demand giving firms some pricing
power.
On the other hand, the rupiah’s recent strengthening could help further contain pressures.
19
Recent Economic Activityy
Purchasing Managers' Index (PMI) and Industrial Production
Retail and Transport Sales and Consumer Sentiment
30
40
55
60 PMI (manufacturing, from April 2011)
Industrial production (y/y, in percent, right scale)
Industrial Production
140
80
100 Consumer confidence index: expectations (index, right scale)Retail sales
Sentiment(Year-on-year percent change)
10
20
50
55
eutr
al
sca e)Industrial production (3-month percent change of 3 mma, s.a.a.r., right scale) 130
40
60
80Motor vehicle sales
Motorcyle sales
-10
045SA
, 50=
n
110
120
0
20
-30
-20
35
40
100
110
-40
-20
0 0 0 0 1 1 1 1 2 2 2 2 3 3 3 3 4
Feb-
10
Jun-
10
Oct
-10
Feb-
11
Jun-
11
Oct
-11
Feb-
12
Jun-
12
Oct
-12
Feb-
13
Jun-
13
Oct
-13
Feb-
14
Sources: Haver Analytics; and CEIC Data
Feb-
10M
ay-1
0Au
g-10
Nov
-10
Feb-
11M
ay-1
1Au
g-11
Nov
-11
Feb-
12M
ay-1
2Au
g-12
Nov
-12
Feb-
13M
ay-1
3Au
g-13
Nov
-13
Feb-
14
Sources: CEIC Data Company Ltd.Company Ltd.
20
Inflation Developmentsp
Contributions to CPI Inflation
9
10Administrative prices Volatile food prices Core
Contributions to CPI Inflation(In percentage points of headline inflation)
6
7
8
9
Headline (in percent) Core inflation (y/y)
4
5
6
1
2
3
0
Feb-
10
May
-10
Aug-
10
Nov
-10
Feb-
11
May
-11
Aug-
11
Nov
-11
Feb-
12
May
-12
Aug-
12
Nov
-12
Feb-
13
May
-13
Aug-
13
Nov
-13
Feb-
14
21
Sources: CEIC Data Company Ltd; and IMF staff calculations.
External Developments and Outlookp
Current Account Balance and Gross Reserves Current Account Balance and Scenarios
140
150
8
10 Net non oil and gas tradeNet oil and gas tradeOther itemsCurrent account balance
(In percent of GDP, unless otherwise indicated)
0
1
CA (Baseline)
Current Account Balance and Scenarios (In percent of GDP)
120
130
4
6
Current account balanceGross reserves (in months of imports)Gross reserves (US$ billions, right scale)
-1
0
CA (Stronger rupiah; 10,000 Rp/USD, e.o.p )
CA (20% fall in non-O&G
100
110
0
2
-3
-2commodity prices)
70
80
90
6
-4
-2
5
-4
70-6
Mar
-10
Jun-
10
Sep-
10
Dec
-10
Mar
-11
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
12
Sep-
12
Dec
-12
Mar
-13
Jun-
13
Sep-
13
Dec
-13
Sources: CEIC Data Company Ltd ; and IMF staff estimates
-52010 2011 2012 2013 2014 Proj.
Sources: CEIC Data Company Ltd.; and IMF staff estimates.
22
Sources: CEIC Data Company Ltd.; and IMF staff estimates. Sou ces: C C ata Co pa y td.; a d sta est ates.
Fiscal Developmentsp
Central Government Overall and Primary Balance
0
2
3
(In percent of GDP)
1
0
1
2
2
3-2
-1
0
4
-4
-3
2
Overall balancePrimary fiscal balanceEnergy subsidies (right scale)
5-5
4
2008 2009 2010 2011 2012 2013Est
Energy subsidies (right scale)
23
Est.Sources: Indonesian authorities; and IMF staff estimates and projections.
Tax Revenues and Fuel Subsidies
Fuel PricesTax Revenue
12,000IDN gasoline (88 premium, subsidized)
Fuel Prices(In rupiah per liter)
Tax Revenue(In percent of GDP)
9 000
10,000
11,000 IDN gasoline (92 pertamax)IDN diesel (high speed, subsidized)
7,000
8,000
9,000
5,000
6,000
4,000
Feb-
10M
ay-1
0Au
g-10
Nov
-10
Feb-
11M
ay-1
1Au
g-11
Nov
-11
Feb-
12M
ay-1
2Au
g-12
Nov
-12
Feb-
13M
ay-1
3Au
g-13
Nov
-13
Feb-
14
Sources: CEIC Data Company Ltd ; andSources: CEIC Data Company Ltd.; and Statistics Singapore.
24
Monetary Developmentsy p
Monetary Policy and Interbank Rates(In percent)
Monetary Aggregates and Loan-to-Deposit R ti
7.5
8.0
(In percent)
10050 Net foreign assetsNet domestic assetsM2
Ratios(Contribution to growth, year-on-year)
6 0
6.5
7.0
80
90
30
40M2Private sector credit (y/y)Private sector credit (y/y, at Dec. 2012 ER)Loan-to-deposit ratio
5.0
5.5
6.0
60
70
10
20
3.5
4.0
4.5
Interest rate corridorLending facility BI rate
50
60
0
10
3.0
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
Lending facility BI rateO/N JIBOR Deposit facility
40-10Fe
b-10
Apr-
10Ju
n-10
Aug-
10O
ct-1
0D
ec-1
0Fe
b-11
Apr-
11Ju
n-11
Aug-
11O
ct-1
1D
ec-1
1Fe
b-12
Apr-
12Ju
n-12
Aug-
12O
ct-1
2D
ec-1
2Fe
b-13
Apr-
13Ju
n-13
Aug-
13O
ct-1
3D
ec-1
3
25Source: CEIC Data Co., Ltd.
A A A A
Sources: CEIC Data Company Ltd; and IMF staff estimates.
Foreign Exchange Market Activityg g y
Spot Foreign Exchange Market Turnover by Counterparty
Indicators of Foreign Exchange Market Liquidity(M thl i i h U S d ll )
4,000
4,500
Domestic banks
Counterparty(Daily average, in millions of U.S. dollars)
500
70
801 month implied rupiah/US$ volatility (left scale)
1 month NDF spread (left scale)
(Monthly average, in rupiah per U.S. dollar)
3,000
3,500
,Overseas banks
Other customers400
50
60Closing bid-ask spread (left scale)
Daily high bid-low ask spread (right scale)
2,000
2,500
200
300
20
30
40Periods of onshoreFX illiquidity
500
1,000
1,500
100
10
0
10
0
Mar
-10
Jun-
10
Sep-
10
Dec
-10
Mar
-11
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
12
Sep-
12
Dec
-12
Mar
-13
Jun-
13
Sep-
13
Dec
-13
Mar
-140-20
-10
Jan-
10M
ar-1
0M
ay-1
0Ju
l-10
Sep-
10N
ov-1
0Ja
n-11
Mar
-11
May
-11
Jul-1
1Se
p-11
Nov
-11
Jan-
12M
ar-1
2M
ay-1
2Ju
l-12
Sep-
12N
ov-1
2Ja
n-13
Mar
-13
May
-13
Jul-1
3Se
p-13
Nov
-13
Jan-
14M
ar-1
4
26Sources: CEIC Data Co., Ltd.; and IMF staff estimates.
M N M N M N M N
Sources: Bloomberg L.P.; and IMF staff estimates.
IV. Indonesia Policy Framework Going Forward V. do es a o cy a ewo Go g o wa d
Macroeconomic policies Macroeconomic policies The current monetary stance appears broadly appropriate, assuming
inflation expectations remain well anchored and credit growth continues to moderatecontinues to moderate.
A more flexible monetary and exchange rate framework put in place since late 2013 has helped improve policy transmission and deepen market activity.y
Fiscal deficit reduction in line with budget targets would help support external adjustment, contain borrowing costs, and reduce vulnerability to funding shocks.
Structural reforms—three objectives Diversify the exports away from the resource sector. Further deepen financial markets growing the domestic investor Further deepen financial markets, growing the domestic investor
base. Create conditions for far-reaching employment generation.
27
Thank you
(see http://www.imf.org/external/pubs/cat/longres.aspx?sk=41129.0
for the 2013 Article IV Consultation Staff Report on Indonesia)
28