Republic of Indonesia 2018 Investor Update Stability at the Forefront with Unwavering Reforms Commitment
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Republic of Indonesia 2018 Investor Update Stability at the Forefront with Unwavering Reforms Commitment June 2018 Disclaimer This presentation has been prepared by the Republic of Indonesia (the “Republic”). This presentation is being presented solely for your information and is subject to change without notice. By accessing this presentation, you are agreeing to be bound by the restrictions set out below. Any failure to comply with these restrictions may constitute a violation of applicable securities laws. This presentation contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Republic to be materially different from those expressed or implied by the forward-looking statements. The Republic has filed a registration statement (including the prospectus) with the U.S. Securities and Exchange Commission (the “SEC”). You should read the prospectus in that registration statement (file no. -223441), any prospectus supplement and other documents that the Republic has filed with the SEC for more complete information about the Republic. A copy of the prospectus can be obtained for free by visiting EDGAR on the SEC web site at www.sec.gov, from Deutsche Bank Securities Inc. at 60 Wall Street, New York, NY 10005, USA, Attention: Prospectus Group, by calling 1-800-503-4611, or by emailing [email protected]. A prospectus of the Republic, dated March 16, 2018, is available from the SEC website at https://www.sec.gov/Archives/edgar/data/1719614/000119312518070289/d714087dsb.htm This presentation may not be reproduced, disseminated or quoted without the prior written consent of the Republic. 2 Outline 1 Executive Summary 2 Recent Macroeconomic Development 3 Financial Market Condition 4 2018 State Budget Realization Performance 5 Fiscal Incentive to Support Investment and Export 6 Medium Term Fiscal Objectives & 2019 Macro-Fiscal Framework 7 Monetary Policy and Banking Sector 8 Debt Management and Budget Financing 3 01 Widi Island in North Maluku, Indonesia Executive Summary Executive Summary Indonesia in Snapshot Strong GDP Growth One of the Best GDP Supported by robust domestic activity and Growth Performer increasing role of investment …. with more potential to come Infrastructure Development Acceleration Strategic national projects supported by budget and non-budget financing (private sector) Continuous Reform …. Fiscal, monetary and Real sector Credit Rating Improvement International recognition from global rating agencies Prudent Debt Management Credible Policy Framework Maintain productive use of public debt ….followed by International Recognitions Reform on the Move 1. Taxation 2. Investment Regulation Preserved Fiscal Prudence 3. Bureaucratic ….improving creditworthiness 5 Indonesia’s GDP Growth Has Been Robust Consumption and investment remain as the main engines of growth GDP breakdown by expenditure 2016 2017 2018 Domestic and foreign direct investment have (%, YoY) Q1 Q2 Q3 Q4 Y Q1 Q2 Q3 Q4 Y Q1 been picking up thanks to the acceleration of infrastructure spending. Household Consumption 4.98 5.10 5.04 5.03 5.04 5.00 5.02 4.95 4.98 4.98 5.01 International trade is rebounding and supporting Government Consumption 3.43 6.21 (2.95) (4.03) (0.14) 2.69 (1.92) 3.48 3.81 2.14 2.73 growth, partly attributed to the increase of commodity prices, but also signals that global Gross Fixed Capital Formation 4.67 4.18 4.24 4.79 4.47 4.77 5.34 7.08 7.27 6.15 7.95 demand improves. Export (3.10) (1.50) (5.75) 4.15 (1.57) 8.41 2.80 17.01 8.50 9.09 6.17 Indonesia’s growth is still stable and higher than most of its G20 peers Import (5.04) (3.47) (4.13) 2.72 (2.45) 4.81 0.20 15.46 11.81 8.06 12.75 Medium term growth is well maintained through GDP 4.94 5.21 5.03 4.94 5.03 5.01 5.01 5.06 5.19 5.07 5.06 improving investment climate and fiscal incentive GDP Growth Comparison Amongst G-20 Countries Indonesia GDP Projection 2018 GDP Growth 7.2 7.1 Institutions 6.0 Projection 5.1 Government of Indonesia (2018 Budget) 5.4% 3.0 IMF (WEO Apr 2018) 5.3% 2.5 2.4 2.3 2.2 2.2 2.1 1.7 1.5 1.3 1.1 0.7 World Bank (IEQ June 2018) 5.2% 0.3 0.3 ADB (ADO Apr 2018) 5.3% Italy India Brazil China S&P (May 2018) 5.3% Korea Japan Turkey Russia France Mexico Canada Australia (0.5) Germany Argentina Indonesia Fitch (Dec 2017) 5.4% South Africa Saudi Arabia United States United Kingdom Avg. GDP Growth 5 Years Std. Dev. GDP Growth 5 Years 6 Regional Growth Most of regions recorded positive growth in the first quarter 2018 Government effort aimed to KALIMANTAN: 8.2% of GDP 2017: improve connectivity among 4.33 the islands and bring down the 2017: 2017: logistics cost. The prices of 4.30 6.99 SULAWESI: 6.0% of GDP basic goods in the outlying 2017: 2018: islands are becoming more 4.97 3.25% 2017: 2018: affordable as the result. This 2018: 2017: 2017: 4.14 6.83% 4.37% 6.93 4.89 will translate to improved efficiencies, thriving regional economies, and lowering the 2017: 2018: SUMATERA: 21.5% of GDP 4.40 18.42% development disparity among the regions. 2017: PAPUA: 2.5% of GDP Infrastructure and connectivity 2017 Regional GDP 5.61 2017: projects to create more 3.73 Growth sustainable and equitable 2017 – Q1 Regional 2017: 2018: 2017 National economic growth in all regions. GDP Growth 2018: 5.69 5.78% 2017: GDP Growth Intergovernmental transfer, 2.93 3.74% 2018 – Q1 Regional including Village Fund, has GDP Growth JAVA: 58.7% of GDP also promoted equality in the BALI & NUSRA: 3.0% of GDP 5.06% region. As the industrial center, Java still holds the biggest economic activity accounting for 58.67 percent of GDP Maluku and Papua recorded high growth of 18.42 percent, underpinned by the increase of commodity price and mining activity 7 Sovereign Rating Credit Upgrade and Improving Global Perception International acknowledgement from various agencies and improving global perception The 2018 World Bank Ease of Doing Business Ranking1 31 May 2018 20 Dec 2017 12 Feb 2018 BBB- BBB- BBB- BBB BBB- BBB “The sovereign ratings “The focus on macro “infrastructure JUMPED on Indonesia are stability is also development has been 19 ranks supported by the evident in credible gaining momentum under government’s budget strong initiative of President relatively low debt assumptions in the Joko Widodo for levels and its previous few determination of National moderate fiscal years” Strategic Projects (PSN)” 2018 : #72 performance and out of 190 external indebtedness” countries Score: 66,5 7 Mar 2018 13 Apr 2018 (↑5.0) BBB- BBB Baa3 Baa2 “Indonesia's economy “The upgrade to Baa2 is 2017: #91 continues its strong increasingly underpinned by a 2016: #106 performance, with inflation credible and effective policy 2015: #120 remaining low and stable. Fiscal framework conducive to 2013 2014 2015 2016 2017 2018 deficits have been reined in, and macroeconomic stability” government debt is low” China Vietnam Indonesia Philippines Brazil India 1 Source: World Bank: Doing Business 2018: Reforming to Create Jobs 8 Inflation has been More Benign Create Substantial Foundation for Robust Consumption Inflation Rate (YTD, %) Inflation Rate & Components (%) Inflation is more benign supported 11.1% 12.0% by more stable food inflation as supply side improves. 8.4% 8.4% The administered price inflation is 7.0% 10.0% the biggest source of pressure in 8.7% 2017, but pressure is easing as 4.3% tariffs are adjusted at the end of 3.8% 3.4% 3.6% 8.0% the first semester of 2017. 2.8% 3.0% Indonesian Consumer Confidence 1.3% 5.9% is showing a vibrant economic 6.0% activity and good expectation on economy 2008 2010 2012 2014 2016 May-18 4.3% Source: BPS 3.1% 3… 3.6% 4.0% 3.0% 3.0% Consumer Confidence Index 3.2% 130 2.8% 2.0% 125 Future Policies 120 0.7% Improving logistic and distribution 0.0% and stronger coordination 115 0.2% between institutions are some key 110 factor in inflation management (2.0)% The monitoring of prices and 105 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M improvements to the trading of 100 2016 2017 2018 some food commodities can J M M J S N J M M J S N J M M anticipate price game practices. Inflation (CPI) Core Inflation Administered Price Volatile Food 2016 2017 2018 Source: BPS Source: Bank Indonesia 9 Direct Investment Grew by 11.8 Percent in Q1-2018 Underpinned by improving investment climate Direct Investment Realization Direct Investment Share by Sectors Q1-2018 FY-2016 FY-2017 Q1-2018 Metal, Machinery, & Electronic Industry Housing, 12% Nominal Growth Nominal Growth Nominal Growth Estate & (Rp Tn) (% YoY) (Rp Tn) (% YoY) (Rp Tn) (% YoY) Building 15% Domestic 216.2 20.5 262.3 21.3 76.4 11.0 Others Foreign 396.6 8.4 430.5 8.5 108.9 12.4 45% Electricity, Total 612.8 12.4 692.8 13.1 185.3 11.8 Gas, & Water Supply 10% FDI Share by Country Origins Q1-2018 FDI Share by Country Origins 2010-2017 Crops & Transportation, Warehouse, Plantation & Telecommunication Singapore 10% Singapore 32.6% 23.8% 8% Japan 12.2% Source: NSWi BKPM Japan 16.7% US 5.5% Positive FDI flow shows a high interest in Indonesia.