Wednesday, 25 November 2015


Pursuant to the World Bank and IMF release on the revision of projection of Indonesia’s economic growth this year BI was also making projections but was pessimistic about economic growth in the last two quarters.

Governor of BI Agus Martowardojo stated that economic growth in the second half of this year would only be around 5% - 5.2%. Previously the Monetary Authorities predicted that economic growth in the last two quarters of the year would be around 5.3% - 5.4%.

Lowered growth projections was in parallel with estimated growth of Q – 2. In the beginning BI was optimistic growth would be 4.9%, now it was only 4.7% which was the same as Q-1. So all year through economy was at lower level. In short this year Indonesia’s economy would only grow by 5% instead of 5% - 5.4%.

In BI’s assessment economic growth of Semester 2 depended on budget realization by the central or provincial Government an realization of infra structure projects.

BI had not relaxed their monetary policy as the global situation was not conducive to it. There were some relaxation efforts done by BI to propel growth this year such as the LTV regulation but the result of such would only be seen in Q IV. 2015.

So far budget realization was posted at Rp.820 trillion or 41% of total allocated APBN-P budget 2015. The Government as disclosed by Ministry of Finance Bambang Brodjonegoro was optimistic that by the second half of this year realization could be enhanced.

If the Government’s optimism was realized it was probable that economic growth this year would be around 4.7% - 5.1% toward mid point at around 4.9%, moreover to think that slowdown was happening in nearly all industrial sectors.

Under the circumstances it would be unwise for the Government to start a policy which suppressed potential growth; it was advisable for the Government to postpone increase of taxes which might suppress growth percentage even lower.

It was noteworthy that low export was one of the reasons why growth was limited, moreover global commodity prices was still low. The Central Statistics Board noted that Indonesia’s export in June 2015 last posted increase of 11,63% to become USD 12.96 billion against USD 11,61 billion in May.

Meanwhile Indonesia’s total import in June 2015 came to USD 12.96 billion, an increase of 11.63% against May 2015; but compared to June 2014 down by 17.42% or USD 15.69 billion. Non oil-gas import in June 2015 came to USD 10.39 billion, an increase of 8.95% against May 2015 or USD 9.53 billion but down by 15.58% against June 2014 at USD 12,30 billion.

The biggest increase in non oil gas import in June 2015 was machineries and mechanic equipments worth USD 410 million or 26.326% while biggest downturn was shipping category around USD 300 million or 82.26%.

Three countries of origin of non oil gas products in January-June 2015 were China USD 14.71 billion or 24.17%; Japan USD 7.18 billion or 11.80%; Singapore USD 4.21 billion or 6.92%.

Import of non oil-gas products from Asean states constituted market share of 21.52% or worth USD 2.21 billion and from Uni Europe 9.33% or USD 983.1 million. Meanwhile import of oil-gas in June 2015 came to USD 2.58 billion, an increase of 23.89% against May 2015 worth USD 2,08 billion, but compared to June 2014 was posting downturn of 24.06% amounting to USD 3,39 billion.

Accumulatively total import of January-June 2015 was posted at USD 73.94 billion or down by 17.81% against same period of 2014 which came to USD 89.95. accumulatively import consisted of import of oil-gas USD 12.10 billion or down by 39.91% and oil-gas USD 60.84 billion or down by 10.74%.

Over the period of January-June 2015 downturn to import was happening to among others consumer goods 13.83% from USD 6.3 billion to become USD 5.4 billion. Auxiliary goods also posted downturn of 18.78% against previous import of USD 68.60 billion to become USD 55.89 billion also down by 15.01% against the previous USD 14,85 to become USD 12,62 billion.

It was noteworthy that less import especially raw materials and auxiliary goods indicated that domestic capacity at home was declining in line with low consumers purchasing power.

Economic slowdown was also indicated by lowered position of Indonesia’s foreign debt (ULN). The position of ULN in May 2015 only grew by 5,9% (y o y) slower than the growth in April 2015 which was 7,7% (y o y). it was mentioned that by that growth rate the position of Indonesia’s ULN by May 2015 was posted at USD 302.3 billion consisting of ULN of the public sector USD 133,5 billion consisting of ULN of the public sector USD 133,5 billion (44,2% of total ULN) and ULN of the private sector USD 168.7 billion (55.8% of total ULN).

Slowdown of ULN growth in May 2015 in May 2015 was influenced by the private and public sectors. ULN of the private sector grew by 10.2% (y o y) lower than growth in the previous month at 13.2% (y o y). This was mainly due to slowdown in growth of bond ownership by foreigners. Meanwhile growth of ULN of the public sector grew by 1,0% (y o y) slowing down compared to the month before at 1,5% (y o y).

Based on tenure the position on Indonesia’s ULN was dominated by long term debt (84% of total ULN). Long term ULN in May 2015 was posted at USD 256.7 billion, growing by 7,5% (y o y) lower than that of April 2015 at b,4% (y o y).

The long term ULN consisted of ULN of the public sector USD 130,3 billion (97.6% of total ULN o of the public sector) while ULN of the private sector was USD 126.4 billion (74.9% of total private ULN) and short term ULN was contracting by 2.3% (y o y).

ULN of the private sector in May 2015 was concentrated in the sectors of finance, processing industry, mining, electricity, gas and clean water. The ULN market share in the four sectors against total ULN was 75.9%. But annual growth of ULN of the finance sector and electricity was slowing down compared to growth of the previous month whild annual ULN growth ULN growth of the ULN of the processing sector was posting increase.

On the other hand, annual mining sector posted severe contraction compared to the contraction last September. BI saw that the development of ULN per May 2015 was still healthy but must be watched on of the risk on economy. It was right for BI to constantly monitor the development of ULN especially of the private sector.

All the disheartening fact generated pressures on Rupiah. Rupiah hardly ever moved at Rp13.300 which means Rupiah was undervalued at around Rp.12,750 – Rp.13,000 per USD.

It was understandable that BI regarded Rupiah weakening being caused external sentiment. However there were some facts worthy of the Government’s attention, such as data of Trade Balance and absorption of Government budget.

BI’s assessment was right that one thing to watch on was downturn of export and import. Although surplus, it was more caused by low import. If this were let to go on it would generate negative market perception although resulting in lowered current transaction.

Previously Chairman of the Association of Indonesian Economic Scholars (ISEI) Darmin Nasution disclosed that hard pressures on Rupiah caused degradation of trust among economic stakeholders.

It was mentioned that weakening of Rupiah might cause premium risk, costly hedging and expensive return of bonds. Weakening of Rupiah and also increased prices of imported goods which would further jack up inflation.

Therefore to ease Rupiah weakening process. Strengthening of fundamental economy and efforts to enhance reformation was a pressing necessity among others to jack up export in spite on low commodity price sat the global market. (SS)

Business News - July 28, 2015

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