Indonesia’s current account challenge
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Part 1 – The current economic environment INDONESIA’S CURRENT ACCOUNT CHALLENGE Richard Dutu Economist, Indonesia Desk OECD Economic Department
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Indonesia’s current account challenge. Part 1 – The current economic environment. Richard Dutu Economist, Indonesia Desk OECD Economic Department. The current economic environment. GDP growth, 2002-2013. GDP growth has been trending down recently. Average GDP per capita growth, 2002-2012. - PowerPoint PPT Presentation
Transcript of Indonesia’s current account challenge
Part 1 – The current economic environment
INDONESIA’S CURRENT ACCOUNT CHALLENGE
Richard DutuEconomist, Indonesia DeskOECD Economic Department
1. The current economic environment
• GDP growth has been trending down recently.
GDP growth, 2002-2013
0
2
4
6
8
10
12
QoQ annualised YoY
• Yet Indonesia remains well placed regarding recent GDP/capita growth.
Average GDP per capita growth, 2002-2012O
ECD
Sout
h Af
rica
Braz
il
Philip
pine
s
Mal
aysia
Kore
a
Sing
apor
e
Hong
Kon
g SA
R, C
hina
Thai
land
INDO
NESI
A
Russ
ian
Fede
ratio
n
Viet
nam
Indi
a
Chin
a
0
2
4
6
8
10
12
0
2
4
6
8
10
12
• Growth is supported by consumption as both investment and export growth have slowed.
Contributions to GDP growth, 2002-2012
-10
-5
0
5
10
15
YoY
Imports of goods and servicesExports of goods and servicesInvestmentGovernment consumption Private consump-tionGDP
• Export growth is down due to lower commodity prices.
Commodity prices20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
100
120
140
160
180
200
220
240
260
280
100
120
140
160
180
200
220
240
260
280
2008
M01
2008
M05
2008
M09
2009
M01
2009
M05
2009
M09
2010
M01
2010
M05
2010
M09
2011
M01
2011
M05
2011
M09
2012
M01
2012
M05
2012
M09
2013
M01
2013
M05
2013
M09
60
80
100
120
140
160
180
200
60
80
100
120
140
160
180
200
Metal price index Thermal coal prices
• Indonesia exports to the entire world, but China and Japan account for 27%.
Major trading partners
15%
12%
10%
9%
9%
9%
7%
6%
6%
6%
3%3%
2% 2%
1%
JapanChinaOtherEuropeSingaporeUnited StatesIndiaKorea, Republic OfMalaysiaOther AsiaThailandTaiwanAustraliaOil ExportersLatin America
• Credit growth is strong and steady.
Credit to the economy
2010 2011 2012 2013-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Loans to Non Industrial Origin
Loans by Industrial Origin
trillion ruphias
• The fiscal balance remains sustainable.
Government fiscal balance, 1990-201319
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
5
10
15
20
25
-3
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
Fiscal balance (right scale)Expenditure (left scale)Revenue (left scale)
• As is Indonesia’s government debt.
Government debt, % of GDP of selected countriesRu
ssia
INDO
NESI
A
Chin
a
Hong
Ko.
..
Kore
a
Philip
pine
s
Sout
h Af
rica
Thai
land
Viet
nam
Mal
aysia
Braz
il
Indi
a
Unite
d St
...
Sing
apor
e
Japa
n
0
50
100
150
200
250
Gross debt in % of GDP, 2012
Inflation, 2010-2014
• Inflation is edging up, pushed by food prices.
2010 2011 2012 20130
2
4
6
8
10
12
14
16
18
Headline inflationCore inflationFood prices
Inflation decomposition, 2010-2014
• Although transportation, communication and finance have contributed recently.
2010 2011 2012 2013-2
0
2
4
6
8
10
Transportation, communication and financeEducation,recreationHealthClothingHousing, electricity,gas and fuelProcessed food, beveragees,tobaccoFood
Exchange rate and international reserves, 2007-2014
• The rupiah has depreciated dramatically in recent months.
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-140
20000
40000
60000
80000
100000
120000
140000
8000
9000
10000
11000
12000
13000
International reserves(bn USD, left scale)
Interest rates, 2007-2014
• And Bank Indonesia has had to raise rates.
0
2
4
6
8
10
12
14
Bank Indonesia's deposit facility ratePolicy rateInterbank rate 1 monthBank Indonesia's repo rate
• Indonesia’s yields have gone significantly higher than its neighbours.
Change in 10-year bonds yield
2010 2011 2012 2013 2014-600
-400
-200
0
200
400
600
USA Thailand Singapore Malaysia Indonesia Korea
China
Equity prices, 2007-2014
• Equities have underperformed in the region recently.
2007 2008 2009 2010 2011 2012 20130
50
100
150
200
250
Japan KoreaUnited States ChinaIndia INDONESIA
Foreign capital flows in Rupiah portfolio, 2011-2013
• After recovering, capital inflows slowed in November.
Source: Bloomberg
