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THE REPUBLIC OF INDONESIA April 2009. 2 Presentation Outline 1Update of the Global Credit Crisis on Indonesias Economy 2Effective Policy Responses in.

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Presentation on theme: "THE REPUBLIC OF INDONESIA April 2009. 2 Presentation Outline 1Update of the Global Credit Crisis on Indonesias Economy 2Effective Policy Responses in."— Presentation transcript:


2 2 Presentation Outline 1Update of the Global Credit Crisis on Indonesias Economy 2Effective Policy Responses in 2008 and Proactive Measures for 2009 4Fiscal Stimulus and Budget Financing 5Conclusion 3Indonesian Q1 2009 Profile: Budget and BOP

3 Update of the Global Credit Crisis on Indonesias Economy

4 4 Impact of the Global Credit Crisis on Asian Economies and Indonesias Macroeconomic Environment Equity and currency markets have stabilized Bank Indonesia has more room to cut policy rate due to fall of headline inflation Sufficient foreign reserves (USD bn) despite global crisis Source: Ministry of Finance, Bank Indonesia, Bloomberg Mar Source: Ministry of Finance, Bank Indonesia, Bloomberg Depreciation of Stock Indices & Exchange Rates Comparison between January 2 nd to April 20 th 2009 Mar 09

5 5 Credit Growth Decelerated, But Remains Resilient Source: Bank Indonesia Bank credit growth falling but remains at double-digit level Banks loan-to-deposit ratio stabilizing Non-performing loans ratio remains low

6 6 Credit Contraction Resulting in Higher Financing Cost 1-Jan-0831-Dec-0831-Mar-09 ROI-146.00%8.73%8.78% ROP-195.76%7.13%5.16% VIETNAM-165.91%10.45%8.27% UST 5-Yr3.44%1.55%1.66% Bond yields have risen considerably amidst heightened risk aversion in global capital markets Source: Bloomberg

7 7 International Bonds Historical Yield Source: Bloomberg Indonesia International Bonds Historical Yield Curve

8 8 Slowdown in Real Sector Growth has been Gradual … The Trade Surplus Remains Stable Despite the Decline in Raw Material and Commodity Prices… Source: Central Bureau of Statistics, Bloomberg

9 9 Slower Economic Growth Forecasted for 2009 Breakdown of GDP Growth Quarterly GDP Growth Source: Ministry of Finance, Central Bureau of Statistics * 2009 GDP based on Adjusted National Budget

10 Effective Policy Responses in 2008 and Proactive Measures for 2009

11 11 Steps Taken in Financial Markets and Forex Market Supporting the Banking and Capital Market Systems Place government funds with state-owned banks to increase liquidity in the banking system Increase the amount of deposits guaranteed by the government Stronger coordination between the central bank and government in monitoring, supervising, regulating and policy implementations on banks and capital markets Prepare crisis protocol (implementation of the Financial System Stability Committee) Manage state-owned enterprises currency transactions to reduce currency volatility Maintain a sufficient level of foreign exchange reserves through trade financing facilities and prevention of illegal imports Requiring greater disclosure on large-sized purchases of foreign currency against IDR to curb speculative pressure on IDR Double Bilateral Swap Facilities with Japan (US$12 bn) and signing bilateral swap facility with China in Local Currency equivalent to US$ 15 bn Ensuring Foreign Exchange Stability

12 Balance Of Payment and National Budget 2009

13 13 Current Account Balance Current Account: Tracking Q1 I 2009 (USD million) PredictionPrediction Realization

14 14 Capital Account Balance Capital Account: Tracking Q12009 (USD million) Prediction Prediction Realization

15 15 Portfolio Investment Portofolio Investment by Foreigner: Tracking Q12009 (USD million) 1) Sukuk Valas : Global Islamic Bond (Asumed bought by Foreign Investor 95% from total Emision) * Provisional Figures ** Very Provisional Figure Prediction Prediction Realization

16 16 FDI Inflow FDI inflow and outflow: Tracking Q1 I 2009 (USD juta) Prediction Realization Prediction Realization

17 17 Government Debt: Tracking QI 2009 (USD million) Government Transaction Prediction Realization

18 18 Private Sector Transaction Private Sector Debt: Tracking Q12009 (USD million) 1) Noted in NPI as one of component in Direct Investment in Indonesia 2) Noted in NPI as one of component in Portfolio Investment in (liabilities) * Provisional Figures ** Very Provisional Figure Prediction Prediction Realization

19 19 Foreign Reserve Right Scale is for the Monts For Import and Foreign Bond Payment Foreign Reserve MonthsUSD Billion *On April 2009 there is additional reserve from Global SUKUK : USD 650 Million

20 20 National Budget 2009 Realization (in Trillion Rupiah)

21 21 Tax Collection by 31 Mar 2009 below 2009 target

22 22 AgricultureMiningManufacturing Transportation & Communication Trade & services Finance Transportation & Communication Trade & services Construction Manufacturing Mining Non-oil corporate Income Tax Import VAT Domestic VAT Tax Collection by Sector (ISIC-2) by March 2009

23 23 % Min Spending 2009 Stimulus 2009 non stimulus Min Spending per March 2009 = Rp36,4 T, faster than 2008 = Rp28,7 T Total Min Spending 2007 2008 Ministries Expenditure by March 2009 = 10.9% (March 2008 = 9/9%)

24 24JanFebMar Financing by March 2009 0,1 0,8 1,1 1,9 Program LoanProject Loan Realization on Foreign Loan in 2008 and 2009 Government Securities Bond Payment 2008 Real.

25 Fiscal Stimulus and Budget Financing

26 26 Fiscal Stimulus package for 2009 Infrastructure and national programs, including: –Expansion of program for poverty alleviation –Expansion of credit program for small businesses –Reduction in tax rates for small businesses –Provision of subsidies for employee tax payments –Additional infrastructure projects Accelerate job creation and foster growth of small scale businesses Subsidies on medicine and cooking oil Direct subsidies (cash transfers - unconditional and conditional) for low-income households Direct and indirect subsidies for education and health sectors Tax rate reductions on individual household incomes Boosting the household purchasing power Import duty facility on selected capital goods and materials Trade finance facility Tax rate reductions on corporate income and listed companies, as well as higher minimum threshold for individual income tax Discounts on electricity peak-hour charges for industries and lower prices of diesel fuel Stimulate trade and promote entrepreneurship 1 2 3

27 27 Fiscal Stimulus 2009 in Indonesia amounted 1.4% of GDP 1.2009 budget deficit increase from 1% of GDP to 2.5% of GDP due to projected drop in revenue collection and additional fiscal stimulus 2.This deficit will be financed by: a.Rp 51,3 trn (USD 4.6 bn) from 2008 budget cash surplus b.Rp. 44 trn (USD 4 bn) Debt financing, contingent loan from WB/ADB, Japan and Australia c.Additional loans program amounting to Rp1,1 trn from 2008 which had not been dispersed earlier

28 28 2009 Budget with Safety Net and Crisis Prevention Mechanism Assumptions on Macroeconomic Indicators OriginalAdjustedOriginalAdjusted GDP growth rate6.0%4.5%Average IDR/USD9,40011,000 Average inflation rate6.2%6.0%Average oil production960,000 barrels/day Interest rate on 3-month short-term SBI7.5% Average ICPUS$80/barrelUS$45/barrel Assumption 1 USD = IDR 9,400 for Original Budget, 1 USD = IDR 11,000 for Adjusted Budget Source: Ministry of Finance EXPENDITURE OriginalAdjusted Central Governments own expenditure$76.2bn$62.3bn Capital and recurrent expenditure$32.3bn$27.6bn Debt interest service$10.8bn$10.1bn Total subsidy$17.7bn$11.2bn Others$15.4bn$13.4bn Transfers to regional Governments$34.1bn$27.6bn Total expenditure$110.3bn$89.8bn Total expenditure as % of GDP19.47%18.01% Memo: Stimulus spending$ 1.3bn$ 1.9bn REVENUE OriginalAdjusted Domestic revenue$104.8bn$77.1bn Tax revenue$77.2bn$60.2bn Non-tax revenue$27.5bn$16.9bn External grants$0.1bn Total revenue$104.9bn$77.1bn Total revenue as % of GDP18.50%15.46% BUDGET DEFICIT Budget deficit-$5.5bn-$12.7bn Budget deficit as % of GDP1.00%2.50% 2009 Budget (in USD) The 2009 budget is designed to give the Government enough room to adjust to any potential impact of the global credit crisis

29 29 Approved Regional Budget 2006 - 2009

30 30 Consolidated Deficit for Central and Region Government % to GDP

31 31 Outstanding Regional Development Bank Fund in SBI in IDR Trillion

32 32 Newly 2009 Budget Outlook Adjust macroeconomic assumptions: Economic growth: 6.0% 4,5% IDR/USD: 9,400 11,000 World oil price: 80 45 US$/b Original capital and social spending through line ministries remain unchanged Incorporate fiscal stimuli (1.4% of GDP) to stabilize the economy Revenue projected to be lower than original budget Accelerate expenditure disbursement from the central and regional government Semi Automatic price adjustment with maximum cap applied to gasoline price Budget deficit: 1% to 2.5% of GDP Increase in budget deficit to be financed by 2008 budget surplus of US$4.7bn (1% GDP) and additional debt of US$4bn (0.8% GDP) Arrange contingencies financing from multilateral and bilateral countries in anticipation of any worsening of the Financial crisis

33 33 INSTRUMENTAMOUNTPURPOSE JAPAN BSAUSD 16 bioBOP Cina BCSAUSD 15 bioTrade CMIM ASEAN+3USD 15 bioBOP JBIC+ADB Trade FinancingUSD 1 bioTrade DDO WorldBankUSD 2 bioBudget DDO ADB+BillateralUSD 3.5 bioBudget Available SWAP Agreement and Foreign Exchange Inflow 2009

34 34 200720082009 SUN (Rupiah) 86,37 86,9331,38 SUKUK (Rupiah) 5,56 Global SUKUK 7,15 (1 Global Bond16 (2 46.2 (3 33,00 (4 Total issued 77,1 Remaining Issuance 22,5 (2009 Value is as of April 16, 2009) Bonds Issuance (in IDR Trillion) (1 Equivalent to USD 650 Million (2 Equivalent to USD 1,5 Billion (3 Equivalent to USD 1,5 Billion (4 Equivalent to USD 3 Billion

35 35 Liquidity Support for Budget and BOP Parameters: Deficit increased from USD5.5 bn (1.0% GDP) to USD12 bn (2.5% GDP) Finance by accumulated budget surplus amounted USD 4.6 bn Additional Debt required: USD 4.0 bn Under the volatile market, the additional contingencies financing coming from: -The World Bank -ADB -Bilateral (G2G): Japan and Australia Maintain amount of government securities of USD4.9 bn nett of issuance, including domestic and international Sukuk Budget Deficit Financing (in USD) In response to forex risk due to volatile market conditions, steps taken: Extend BSA swap with Japan, USD 6 bn to USD 12 bn Bilateral swaps with China in Local Currency USD 15 bn Trade Financing through IND Exim Bank with JBIC up to USD 500 mn Liquidity and Trade Financing Support (in USD)

36 36 2009 Funding Plan Notes: a) Estimates based on new set of assumptions plus additional fiscal stimulus measures b) 2008 financing surplus c) Additional debt from standby facility 2009 Original Budget2009 Budget Outlook a) Revenue and Grant 1 $104.9bn$77.1bn Expenditures 2 $110.3bn$89.8bn Deficit 1-2 -$5.5bn-$12.7bn Financing 3+4+5 $5.5bn$12.7bn Non Debt 3 $0.6bn$5.0bn b) Amortization 4 -$11.3bn- $10.6bn Loan-$6.6bn- $6.6bn Gov. Securities-$4.8bn- $4.1bn Gross debt Financing 5 $16.1bn$14.2bn Loan$5.5bn$5.1bn Program$2.8bn Project$2.7bn$2.3bn Gov. Securities$10.6bn$9.1bn Additional Debt$4.0bn c) Assumption 1 USD = IDR 9,691 for 2008, 1 USD = IDR 9,400 for 2009 Original Budget, 1 USD = 11,000 for 2009 Budget Outlook Source: Ministry of Finance Budget Deficit Financing (in USD)

37 Conclusion

38 38 Conclusion Indonesia continue to experience robust economic growth, improved investment climate, low inflation and reduce debt to GDP ratio. Indonesia economy experience a negative impact due to slower world economic growth and negative world trade volume. In response the global crisis, Indonesia introduce easing monetary policy, prudent financial sector, provide liquidity for forex market and fiscal stimulus in line with other Asian countries. In order to fulfill the financing need for fiscal stimulus, trade financing facility and liquidity support, Indonesia received various contingent facilities from the World Bank, ADB, and from bilateral counterpart such as Japan, China, and Australia.

39 39

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