Indonesia Market Opportunities

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Indonesia Market Opportunities Embassy of Indonesia Lisbon Indonesia Market Opportunities Ambassador Mulya Wirana Santa Maria da Feira- 19-20 April 2016 A. COUNTRY SNAPSHOT: THE BIGGEST ARCHIPELAGO INDONESIA GDP Size US$ Land Area 1,904,443 sq km 868.35* GDP percapita US$ 3,509* Sea Area 3,116,163 sq km Total Area 5,020,606 sq km Coastal Line 81,000 km Population 251 Million people(4th biggest population) Main Towns Population GDP Share GDP/Capita (‘000) (%) (US$ ‘000) Jakarta (Capital) 9,558 Jakarta (Capital) 16.3 9.9 Surabaya 2,584 East Java 14.7 2.3 Bandung 2,393 West Java 14.3 1.7 Semarang 1,553 Central Java 8.5 1.5 The rising population share of Indonesia’s middle class (% of Pop) Medan 2,109 North Sumatera 5.4 2.3 Samarinda 791 East Kalimantan 6,2 10.0 Makassar 1,339 South Sulawesi 2.3 1.6 2003 2010 LanguangeIndonesian (Bahasa Indonesia) 37.7% 56.5% As well as some 7500 other regional languanges Source: World Bank and dialects. Source: *Bank of Indonesia 2 Political Map of Indonesia Development of Seaport , Airport and Roadways SLOC MALACA K Tanjung Bitung PANJANG CILAMAYA MAKASAR ALKI-I RD. INTAN CILACAP TL. LEMBAR ALKI-II ALKI-III ALKI-III BALKI-III C Sea Line Of Communication (SLOC) and ALKI Primary National Sealanes Global Hub Seaport MAIN INT. AIRPORT Secondary National Sealanes Primary Land Transportation Primary Seaport (Roads and / or Railways) Summary . The economy of Indonesia slowed in 2015 in line with weaker global growth. Domestic economic growth was projected at 4.8% annually, down from the 5.0% (yoy) achieved in 2014. The slowdown was prompted by sluggish exports on the back of weaker global demand and lower commodity prices. In 2016, economic growth in Indonesia is projected in the range of 5.2-5.6% (yoy), bolstered by fiscal stimuli, primarily in the form of infrastructure projects, and tenacious consumption. The 2015 current account was expected improve from the previous year at around 2% of GDP. Improvements in the non-oil and gas as well as oil and gas trade balances contributed to the smaller current account deficit as imports decreased significantly. This was in line with the considerably weak domestic demand and exports due to lower commodity prices and dwindling global demand. Depreciatory pressures on the exchange rate have escalated in 2015, triggered by uncertainties in the FFR hike and Yuan depreciation. Through to November 2015, the rupiah depreciated by an average of 11.05% to a level of Rp13,351 per USD. Rupiah depreciation was precipitated by a number of externalities, including uncertainty surrounding the timing and magnitude of the FFR hike, concerns over fiscal negotiations in Greece and Yuan depreciation against a backdrop of economic moderation in China. Inflation in 2015 was projected below 3%. Low inflation was supported by volatile foods, deflation of administered prices and controlled core inflation. In November 2015, Consumer Price Index (CPI) data recorded inflation of 0.21% (mtm), affecting all components. Consequently, CPI inflation from January-November 2015 was recorded at 2.37% (ytd) or 4.89% (yoy) on an annualised basis. Inflation in 2016 was predicted to remain within the target corridor of 4±1%. Financial system stability remained solid, underpinned by a resilient banking system and relatively stable financial markets. Banking industry resilience endured, with credit, liquidity and market risks well mitigated. In October 2015, the Capital Adequacy Ratio (CAR) remained well above the 8% minimum threshold at 20.8%, while non-performing loans (NPL) were low and stable at 2.7% (gross) or 1.4% (net). The BI Board of Governors agreed on 17th December 2015 to hold the BI Rate at 7.50%, while maintaining the Deposit Facility rate at 5.50% and the Lending Facility rate at 8.00%. Bank Indonesia believes that rooms for monetary easing are open, on the back of preserved macroeconomic stability, specifically end-2015 inflation that is projected to be below 3%, and current account deficit, projected at around 2% of GDP. However, with the lingering uncertainty in the global financial market, Bank Indonesia will remain vigilant in easing its monetary policy. On the fiscal front, Indonesia will continue its prudent fiscal management in 2015 with strong commitment to fiscal consolidation. Recent policy reforms represent an essential step and integral part of structural reforms to strengthen economic fundamentals in Indonesia. The budget deficit for 2015 will be maintained below the threshold of 3.0% of GDP. Data Highlights GDP Growth Inflation (%) 7.0 6.3 6.5 6.0 6.1 6.0 6.0 5.7 5.5 5.6 5.0 5.0 4.6 4.7 4.7 4.7 4.0 3.0 2.0 1.0 - 2005 2006 2008 2009 2010 2011 2012 2013 2014* Q1 Q2 Q3 2007 2015 2015 2015 Source: BPS, Bank Source: Bank Indonesia Indonesia Balance of Payments Fiscal Balance billion USD billion USD (%) 20 140 - 15 120 (0.5) - 0.7% 10 100 1.1 (1.0) 5 80 % 0 60 (1.5) 1.8 % -5 40 (2.0) 2.2 2.2 % % -10 20 (2.5) -15 0 * * 1 2 3 4 1 2 3 4 1 2 4 1 2 3 4 * 3 1 * * * * 2 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 4 1 2 3 (3.0) Q Q Q Q Q Q 201 201 201 2013 2014 2010 2011 2012 2013 2014 2015 0 1 2 Current Account Capital & Financial Account Overall Balance Reserve Assets Fiscal Surplus / (Deficit) (% of GDP) Source: Bank Indonesia * Preliminary Figures Sourc BPS 5 e: Fitch S&P Moody’s BBB BBB B+ B B+ CCC CCC BB+ BB+ B BB+ BB+ BB BBB BB CC CC C CC C+ CC BB C+ C+ B+ B+ BB BB+ BB+ - B BB B C B BB B+ B+ + - - - - - - B - - Mar-99 Mar-99 Mar-99 Dec-99 Dec-99 Dec-99 Sep-00 Sep-00 Sep-00 Jun-01 Jun-01 Jun-01 Mar-02 Mar-02 Mar-02 Dec-02 Dec-02 Dec-02 Aug-03 Aug-03 Aug-03 May-04 May-04 May-04 Feb-05 Feb-05 Feb-05 Nov-05 Nov-05 Nov-05 Aug-06 Aug-06 Aug-06 I m May-07 May-07 May-07 A ck p g In I Jan-08 In Jan-08 n Jan-08 r v v v r a es es n es d o Oct-08 e t t Oct-08 t Oct-08 ow me m me v en n n Jul-09 i t t t Jul-09 Jul-09 n g g l r r g a e Apr-10 ad Apr-10 Apr-10 d e e Sou d In r Jan-11 g c Jan-11 Jan-11 e: t e M Oct-11 e ood Oct-11 Oct-11 d r n y b ’ Jul-12 s, Outlook Outlook Stable Negative Outlook Positive Positive Watch Jul-12 Jul-12 a S y & t P, Mar-13 Mar-13 Mar-13 i R F o i tch Dec-13 a Dec-13 Dec-13 n t a Sep-14 i Sep-14 n Sep-14 l P Jun-15 g Jun-15 Jun-15 e A r “Indonesia’s Baa3 rating Baa3 bond fiscal is narrowby “Indonesia’s governmentsupported continued policy policy continued tomaintain macro effortsthe g c credibility credibility growth, and policy, sound its monetary buoyant of economic The ratings on Indonesia balance the country's low per capita per balance capita low country's theThe Indonesia ratings income on and developing policy policy and developing and institutional against settings improved the deficits, low government debt ratios, the debt theofratios, large size deficits, low Indonesian government financial sector management as well as economic performance. S&P performance. economic as well management financial sector face of lower prices for Indonesia’s commodity exports and possible possible and exports commodity prices Indonesia’s for lower of face en e policy credibility policy credibility and initiatives monetary from tobolster stemming The stable outlook on the rating rating onthe The by stable supported is our ofoutlook expectation “The recent wave of reform initiatives by the government is is reformoflikely initiatives totheby “The wave governmentrecent “S&P significantly change the business environment, which which can currently significantly environment,business change the expects these actions to improve Indonesia's growth prospects and growth prospects Indonesia's toimprove actions these expects structural structural a nationalistic morefrom change approach toeconomic policy annual policy ofthe real past. Fitch expects GDPrecentgrowth to improve the business sentiment. The series of packages contain a a contain packages of The series sentiment.the improve business pick up up pick to5.3% in 2016 and 5.5% in 2017 from 4.8% in 2015..” p be characterised characterised be difficult. as agenda signal The may reforma number of measures with with potential the number ofmeasures in run longerthe to t c outlook revision revision outlook i i o e economy and and its healthy GDPeconomy growth prospects. n s : global global financial volatility in 2015.” Dec 2011(affirmed Dec Nov 2015) reflects S&P’s view of Indonesia's improved improved S&P’s ofIndonesia's view reflects external resilience. external public public finances.” May 2015 May Jan2015 - economic balance balance in economic the B BBB Ba B + a / 3 - P / / o S S si t t a a t i b b v le le e The Economy Slowed in 2015, Expected to Pick Up in 2016 Economic Growth Economic Growth - Expenditure Side S e c t o r 2013 201 2014 2015 4 • In line with weaker global growth, the economy of Indonesia I I III IV I II III I also slowed in 2015.
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