1. 1 Ministry of Finance of The Republic of Indonesia June 2009 STATE OF THE GLOBAL ECONOMY AND ITS EFFECT ON INDONESIA

2. 1.Recent Global Economic Condition 2.Impact on Indonesia’s Economy 3.Indonesia’s Policy Response 4.Conclusion OUTLINE 2

3. Recent Global Economic Condition 3

4. Global Economic: Good News dan Bad News 4

5. Moodys revised Indonesia credit rating outlook to positive 5

6. World Economic Growth in 2009 revised down from 3,2% (2008) to -1,3% (2009) The decline on world trade flows from 2,5% (2008) to -11% (2009) Capital inflow to emerging market drop by USD 700 billion (2007-2009) Value of leading financial institutions contracted by the crises 6 The 2008/2009 Global Crisis

7. The projection of world economic growth and trade projection are getting lower, but optimistic rise in 2010 Trade growth projection is negative in 2009 and revised to be positive in 2010 supported by increasing of trade activities (Baltic Dry Index). 7 Baltic Dry Index

8. World and Asia economic growth getting slower since Q4 2008 World Economic Growth USEuropeChinaJapanSingaporeIndonesiaMalaysiaThailandPhilippines 2008-Q12.52.210.61.36.76.27.46.03.9 2008-Q22.11.510.10.62.56.46.75.34.2 2008-Q30.70.69.0-0.30.06.44.73.94.6 2008-Q4-0.8-1.46.8-4.3-4.25.20.1-4.22.9 2009-Q1-2.5-4.66.1-9.7-10.14.4-6.2-7.10.4 8

9. GDP growth of Indonesia (%) is positive as well as China and India 9 Indonesia resilience to the global crises better than others Indonesian contribution in export lower than others 9

10. Increasing in commodity price followed by the oil price 10

11. US dollar depreciate, while Asian currency dan Rupiah appreciate. 3 Mar 2009 117.2 1 Dec 2008 74.5 27 Dec 2008 91.2 IDR 15 Jun 93.2 11

12. Indonesia CDS getting lower… 5 Jan 09 : 723 8 Jun 09 : 285 Thailand 8 Juni 105.3 Philippines China 12

13. Mitigate the global economic crisis (G20) 2009 – 2011 : USD 5T Bank Recapitalization: USD 1,1 Billion Toxic Asset Restructure: USD 1,4 billion Fiscal Stimulus(globally phase one): USD 1,4 billion Capital increase and IFIs : USD 1,1 billion 13

14. 14 The World Financial Sector Recovery Program Through Toxic Asset and Banking Recapitalization ( commitment : 2,5 trillion USD) US 1,8 TChina 19,2 M Russia 32,6 M South Korea 19,3 M Eropa 349,3M Australia 5,2 M Brazil 3,8 M Japan 147,6 M Canada 59,6 M Singapore dan Hong Kong 10 M In $US

15. Amerika Serikat Stimulus 5,5% Deficit 12,30% Inggris Stimulus 1,0 % Deficit 10% China Stimulus 13,3% Deficit 3% Jepang Stimulus 3,1 % Deficit 7,1% Indonesia Stimulus 1,4 % Deficit 2,5% Malaysia Singapura Stimulus 6,4% Deficit 1,1 % Stimulus 4,4% Deficit 3,1% Filipina Stimulus 4,% Deficit 2,2% The Cost of Fiscal Stimulus Program in some countries: US$ 1.4 Billion 15

16. Impact on Indonesia’s Economy 16

17. Macroeconomic of Indonesia is improving 2090.9 1.0068 17

18. Stock Net Foreign Buying 2009Stock Indices & Exchange Rates Bond Net Foreign Buying 2009 (Rp billion) As of Juni 23, 2009, Rupiah appreciate 5% dan JCI stronger 33% since 2008. Source: Bloomberg, as of 23 June 2009. YTD Performance as of 23 June 2009 IHSG 3rd Best Performance below India dan China....

19. Capital outflow happened in Q3 & Q4 2008 and inverse in Q1 2009 Source : BI dan BPS 19 May 2009 57,8

20. Foreign reserve has risen up to USD 57.87 billion 43,3 55.9 60.6 57.87 20

21. Economic Growth projection Q1 2009  4,37% Much better than the WEO projection (April 2009) 2.5% 21 Source: Indonesia National Statistic Bureau

22. Private consumption increase in Q1 2009.. 22

23. Agriculture sector keep stable, while Manufacturing and trade drop because of global crises. 23

24. Global crises hit the non-tradables sector significantly.. 24

25. Investment is not fully recover 25

26. Export and import remain in a low level… 26

27. But export growth in some sectors reversing in March 2009 27

28. Export growth based on country destination in 2009 Even the export to Japan and Singapore still negative, it still supported by the export to US, South Korea, and China. Singapore US Japan South Korea 28

29. Indonesia’s Policy Response 29

30. What we have done, 2009: 1.Monetary Policy and BOP 2.Financial Sector 3.Fiscal Policy 4.Export Promotion and Real Sector 30

31. 1.Monetary Policy and BOP 1.Central Bank reduce policy rate and LPS rate and the commercial banks to follow-up 2.Coopertaion in Currency Swap 1.CMIM: ASEAN+3 2.BSA-Japan, BCSA-China 3.Upcoming Rp-Yen swaps 2.Financial Sector 1.Handling Trouble Banks: Century Bank and Bank IFI 2.Non-bank Financial Sector Reform 3.Law on Financial System Safety Nets (JPSK) Government measures to mitigate the crises 31

32. 3. Fiscal Policy: Implementation of fiscal stimulus 2009 and improve spending Contigency Loans 2009 and 2010 Front Load Bonds issuance and Samurai Bonds Laws: VAT and Local Taxes Prepate budget 2010 to continue stimulus, social spending, defense budget, bureaucratic reform, and expand infrastructure. Continue reform: MoF, tax, customs, budget, treasury, bonds market and financial sector 4. Export Promotion and Real Sector Trade Financing: JBIC, Bilat, ADB and IFC Tax incentives (Rate, Minimum Treshhold, Tax on Employee, ….. Energy costs) Extending KUR and other support for SME Securing Financing for 10.000 MW and other major infrastructure projects Government measures to mitigate the crises 32

33. Indonesia’s fiscal stimulus to mitigate the global crisis impact in line with other Asian countries... Decreasing of BI Rate Decreasing of BI Rate Indonesia,s fiscal stimulus budget amounted 1.4% GDP Indonesia,s fiscal stimulus budget amounted 1.4% GDP The BI Rate decreased 225 bps sinceSep 2008 33 JPN

34. Conclusion … Despite the global recession, Indonesian economy expected to remain strong and solid. Macroeconomic management is improving capital inflow continued to support the stable rupiah, an effective stimulus fiscal will likely outlast the election session. The 2009 growth expected to achive 4 to 4,5% and accelerated in 2010, sipported by external factor & investment pick-up. 34

35. THANK YOU 35