1. Part 1 – The current economic environment INDONESIA’S CURRENT ACCOUNT CHALLENGE Richard Dutu Economist, Indonesia Desk OECD Economic Department

2. 1.The current economic environment

3. GDP growth has been trending down recently. GDP growth, 2002-2013

4. Yet Indonesia remains well placed regarding recent GDP/capita growth. Average GDP per capita growth, 2002-2012

5. Growth is supported by consumption as both investment and export growth have slowed. Contributions to GDP growth, 2002-2012

6. Export growth is down due to lower commodity prices. Commodity prices Metal price indexThermal coal prices

7. Indonesia exports to the entire world, but China and Japan account for 27%. Major trading partners

8. Credit growth is strong and steady. Credit to the economy

9. The fiscal balance remains sustainable. Government fiscal balance, 1990-2013

10. As is Indonesia’s government debt. Government debt, % of GDP of selected countries

11. Inflation, 2010-2014 Inflation is edging up, pushed by food prices.

12. Inflation decomposition, 2010-2014 Although transportation, communication and finance have contributed recently.

13. Exchange rate and international reserves, 2007-2014 The rupiah has depreciated dramatically in recent months.

14. Interest rates, 2007-2014 And Bank Indonesia has had to raise rates.

15. Indonesia’s yields have gone significantly higher than its neighbours. Change in 10-year bonds yield

16. Equity prices, 2007-2014 Equities have underperformed in the region recently.

17. Foreign capital flows in Rupiah portfolio, 2011-2013 After recovering, capital inflows slowed in November. Source: Bloomberg