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Jl.MH. Thamrin No.2 Jakarta 10110 - Indonesiahttp://www.bi.go.id

BANK INDONESIAFor further information. please contact:Economic Outlook & Policy DisseminationBureau of Monetary Policy Directorate of Economic Research and Monetary Policy

Telephone : +62 61 3818163 +62 21 3818206Fax. : +62 21 3452489E-mail : [email protected] : http://www.bi.go.id

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MONETARY POLICY REPORTBANk INdONEsIA

The Monetary Policy Report is published quarterly by Bank Indonesia after the Board

of Governors’ Meetings in January. April. July. and October. In addition to fulfilling the

mandate of article 58 of Act Number 23 of 1999 concerning Bank Indonesia. amended

by Act No. 3 of 2004. the report has two main purposes: (i) to function as a tangible

product of a forward-looking working framework in which formulation of monetary

policy is based on economic and inflation forecasts; and (ii) as a medium for the Board

of Governors of Bank Indonesia to present to the public the various policy considerations

underlying its monetary policy decisions.

The Board of Governors

Darmin Nasution Senior Deputy Governor

Hartadi A. Sarwono Deputy Governor

Siti Ch. Fadjrijah Deputy Governor

S. Budi Rochadi Deputy Governor

Muliaman D. Hadad Deputy Governor

Ardhayadi Mitroatmodjo Deputy Governor

Budi Mulya Deputy Governor

MONETARY POLICY REPORTQUARTER I-2010

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Monetary Policy Strategy

Underlying Principles

Under the ITF. the inflation target is established as the overriding objective and nominal anchor for monetary policy. In this regard. Bank Indonesia has adopted a forward looking strategy by guiding the present monetary policy response for achievement of a medium-term inflation target.

The application of the ITF does not mean that monetary policy disregards economic growth. The basic monetary policy paradigm of striking the optimum balance between inflation and economic growth is retained in both setting the inflation target and in the monetary policy response by focusing on achievement of low. stable inflation in the medium to long-term.

The Inflation Target

Government upon coordination with Bank Indonesia has set and announce an inflation target of CPI every year. Based on KMK No.1/KMK.011/2008, the inflation targets established by the Government for 2008-2010 are 5.0%, 4.5% and 4.0% with ±1% deviation. However, based on the latest developments, Bank Indonesia has proposed new inflation target to the government. The proposed inflation target for 2010-2012 are 5% ± 1%, 5% ± 1%, and 4.5% ± 1% respectively.

Monetary Instruments and Operations

The BI Rate is the published policy rate reflecting the monetary policy stance adopted by Bank Indonesia. The BI Rate is a signal for achieving the medium to long-term inflation target and is announced periodically by Bank Indonesia for a specific period. To strengthen the operational framework for monetary policy. Bank Indonesia changed from use of the 1-month SBI rate as the operational target to the overnight interbank rate with effect from 9 June 2008. In monetary operations. the BI Rate is implemented through liquidity management on the money market to achieve the monetary policy operational target. reflected in movement in the overnight interbank money market rate. To enhance the effectiveness of liquidity management on the market. a set of standing facilities in combination with an interest rate corridor is employed in day-to-day monetary operations.

Policymaking Process

The BI Rate is determined by the Board of Governors in the Monthly Board of Governors’ Meeting. In unforeseen circumstances. the monetary policy stance may be adjusted in advance of the Monthly Board of Governors’ Meeting in a weekly Board of Governors’ Meeting. Changes in the BI Rate essentially depict the Bank Indonesia monetary policy response for guiding the forecasted level of inflation within the limits of the established inflation target.

Transparency

Monetary policy is regularly communicated to the public through customary media for communication. such as statements to the press and market actors. website postings and publication of the Monetary Policy Report (MPR). This transparency is aimed at building improved understanding and shaping public expectations of the economic and inflation outlook and the monetary response taken by Bank Indonesia.

Coordination with the Government

For the purpose of coordination in inflation targeting. monitoring and control. the Government and Bank Indonesia have established a team of officials representing the various relevant agencies. The task of the Team is to deliberate and recommend the necessary policy actions for the Government and Bank Indonesia in managing inflationary pressures for achievement of the established inflation target.

Steps for Reinforcing Monetary Policy with the Overriding Objective of Price Stability (Inflation Targeting Framework)

In July 2005. Bank Indonesia launched a reinforced monetary policy framework consistent with the Inflation Targeting Framework (ITF). encompassing four key elements: (1) use of the BI Rate as the policy reference rate. (2) anticipatory monetary policymaking process. (3) more transparent communications strategy and (4) closer policy coordination with the Government. These measures are intended to strengthen monetary policy effectiveness and governance in order to achieve the overriding objective of price stability in support of sustainable economic growth and greater public prosperity.

Enhanced Monetary Policy Measures Under Inflation Targeting Framework

In July 2005. Bank Indonesia implemented and enhanced monetary policy measures within the Inflation Targeting Framework (ITF) which encompasses four main areas: the use of the BI rate as an operational target. enhanced decision making process. more transparent communications strategy. and strengthened policy coordination with the Government. The measures is intended to strengthen the effectiveness and to provide good governance to its monetary policy making to achieve the price stability needed to support suistainable economic growth and attain social welfare.

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Monetary Policy Report - Quarter III-2009Contents


Contents

1. General Review ............................................................................ 1

2. Latest Macroeconomic Indicators................................................ 5

Deveopments In The World Economy ............................................. 5

Economic Growth ........................................................................... 7

Balance of Payments ...................................................................... 14

3. Monetary Indicators and Policy, Quarter I-2010 ........................ 16

Rupiah Exchange Rate ........................................................................................ 16

Inflation ................................................................................................................. 17

MonetaryPolicy ................................................................................................... 19

4. Outlook for the Indonesian Economy ........................................ 27

AssumptionsandScenarios ................................................................................ 27

EconomicGrowthOutlook ................................................................................... 28

Inflation Forecast ............................................................................. 35

Risk ................................................................................................. 36

5. Monetary Policy Response, QI-2010 ........................................... 37

Statistics ............................................................................................ 38

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Monetary Policy Report - Quarter III-2009 Contents


General Review

1

1. General Review

The domestic economy is forging ahead with support from the buoyant performance

of the global economy. Economic activity in Indonesia showed significant improvement

during Q4/2009. Quarterly growth in the economy reached an estimated 5.4% (yoy),

bringing growth for 2009 overall to 4.5% (yoy). Conditions in the economy, marked by

growing optimism, support a more upbeat outlook compared to earlier forecasts. In 2010,

the Indonesian economy is predicted to grow in the range of 5.5%-6.0% and in 2011 at

6.0%-6.5%. Price stability remains in safe territory, as reflected in the subdued movement

in the CPI during Q1/2010. This is consistent with the prediction of no significant inflationary

pressure arising at least during the first half of 2010. For the year as a whole, CPI inflation

will come within the 5%±1% targeted range.

In the view of Bank Indonesia, the global economy is in recovery and gathering

momentum. Advanced economies, led by the US and Japan, are showing steady

improvement. Similarly, economic recovery in non-Japan Asia, most importantly China

and India, is forging ahead. In other developments, signs are emerging of improvement

in European economies, albeit on a limited scale. The resolution of the Greece crisis has

so far met with positive response among economic actors, with impact limited to financial

markets.

The recovery in the global economy coupled with improved perceptions of risk has

fuelled optimism on financial and commodity markets. Reflecting this are gains in global

stock indices and an upward trend in international market commodity prices. Foreign capital

flows continued to pour into emerging markets in keeping with improving risk perceptions,

a condition that has bolstered currency appreciation in the region. Rising optimism over

the global economic recovery and strengthening of global demand spurred price increases

across a range of commodities. The price increases alongside appreciation in the currency

have not so far triggered any significant rise in global inflation, particularly in advanced

nations. With the world economy not yet fully recovered to normal, monetary authorities

in developed nations in particular have leaned towards an accommodative monetary policy

stance. Signals of monetary tightening are more evident on emerging markets due to rising

inflationary pressures fuelled by high rates of economic expansion.

Domestic economic performance in Q1/2010 could potentially surpass earlier

forecasts. During Q1/2010, the domestic economy charted an estimated 5.7% growth

(yoy). This performance was bolstered by the following factors. First, stronger export

performance is forecasted in keeping with the improvement in the global economy and

rising international commodity prices. Second, consumption is predicted to remain strong,

bolstered by safe levels of public purchasing power and consumer expectations. Third, in

keeping with rising exports and household consumption, stronger recovery in investment

is forecasted with support from various Government actions to fast-track infrastructure

projects. Added to this, the improved investment climate in 2010 is also supported by the

S&P decision to raise Indonesia’s sovereign credit rating from BB- to BB. With this rating

upgrade, Indonesia is now just 1 notch below investment grade. Fourth, in line with more

Monetary Policy Report - Quarter I-2010

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robust external side performance, more vigorous growth is forecasted for some sectors, most

importantly manufacturing and trade. Manufacturing growth has picked up in response to

stronger performance in export-oriented manufacturing and the automotive industry. At

the same time, more vigorous trade sector growth is consistent with mounting activity in

exports and imports and stronger manufacturing performance. Nevertheless, various issues

remain that pose challenges to higher growth, particularly in regard to measures to accelerate

infrastructure programmes and make optimum use of opportunities from the launching of

the ASEAN-China Free Trade Agreement (AC-FTA).

The strengthening of the economy is also visible in the steady improvement in

economic performance at the regional level. Economic performance in the regions was

led by Sumatra, Kalimantan, Sulawesi, Maluku and Papua (Kali-Sulampua) and Jakarta. Other

regions (Java, Bali and Nusa Tenggara or Jabalnustra), however, reported slowing economic

activity. Buoyant economic performance in the regions is driven by higher exports, investments

and consumption. Export performance in individual regions has risen on higher exports of

mainstay commodities, such as mining products and CPI in Sumatra and Kali-Sulampua and

chemicals in the Jabalnustra region. In analysis by major export destinations, exports from

individual regions have shifted from Japan, America and Europe as in the past to ASEAN and

China, due to the more advanced recovery in these economies. Sumatra and Kali-Sulampua

have even increased their share of exports to India, particularly for CPO and coal. Indications

point to strengthening investment in line with the mounting pace of economic activity.

Reflecting this is the positive growth in the indicators for cement consumption growth

and capital goods imports. In the area of Regional Government investment, increases have

been made in capital expenditures. The higher investment has been channelled mainly into

infrastructure projects, such as construction of roads, dams, bridges and airports. In analysis

by business category, the industry sector has picked up in response to improving domestic

and external demand. More robust industry performance is reflected in production capacity

expansion and higher raw materials imports in all regions. In the mining sector, performance

has climbed largely from increased production of non-oil and gas mining products led by coal

and copper. In contrast, oil and natural gas production continues on a slowing trend.

Concerning prices, inflation remained at modest levels in Q1/2010. Low inflationary

pressure in Q1/2010 was indicated by March 2010 deflation at 0.14% (mtm), bringing

annual CPI inflation to 3.43% (yoy). The success in curbing inflation at this low level is partly

attributable to the appreciation in the rupiah and adequate levels of supply in responding

to increased demand. Besides this, the low inflation in March 2010 also resulted from a

moderation of inflationary pressures from volatile foods (mainly rice), due to the onset of

the harvest season in some regions, and minimum inflationary pressure from administered

prices.

The balance of payments maintained an estimated solid position in Q1/2010,

supported by recovery in the world economy. Projections point to a current account

surplus, consistent with the steady improvement in exports, particularly of resource-based

commodities including coal and copper. Conversely, imports have also climbed in response to

more robust domestic and export demand. The capital and financial account similarly recorded

General Review

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an estimated Q1/2010 surplus on the strength of capital inflows and issuance of government

foreign currency bonds. Risk indicators for Indonesia have improved, as reflected in the all-

time low in the credit default swap (CDS) indicator for Indonesia, narrowing yield spread

for Indonesia Government Bonds over US Treasury Notes and the upgrading of Indonesia’s

rating. Taken together, international reserves at end-March 2010 stood at 71.8 billion US

dollars, equivalent to 5.8 months of imports and servicing of official external debt.

The solid performance in the balance of payments underpinned an appreciating

trend in the rupiah. Measured as an average for Q1/2010, the rupiah appreciated by an

overall 2.2% to Rp 9,254/USD. At end Q1/2010, the rupiah stood at Rp 9,090/USD, having

gained 3.7% (point to point). The strengthening of the rupiah was supported by conducive

conditions in macroeconomic fundamentals, reflected in healthy performance in the balance

of payments and improving risk perceptions. Other support for rupiah appreciation came

from the continued attractiveness of returns on rupiah placements, reflected in uncovered

parity (UIP), covered interest parity (CIP) and the relatively high yield spread on Indonesia

Government Bonds surpassing yields in other countries in the region. The appreciation in the

rupiah was also accompanied by stable level of exchange rate volatility at 0.57% compared

to the Q4/2009 level of 0.56%.

Financial sector performance has picked up in line with the recovery in the global

and domestic economy. The JSX Composite Index mounted significantly in Q1/2010 with

gains at 10.2%. This index performance was the highest for any country in the region.

Factors driving the JSX Composite gains include the brightening outlook for the Indonesian

economy, and with it, reduced perceptions of risk, improvement in the credit rating and high

returns on rupiah placements. Also reflecting this was movement in other financial indicators,

such as declining yield on government securities. Considerable excess liquidity remains on

the interbank money market, which has pushed the overnight interbank rate closer to the

lower BI Rate corridor. The Bank Indonesia decision to lengthen the maturities of SBIs for

reasons including financial deepening proved successful, as indicated by the narrowing of

the high-low interest rate spread on the overnight interbank market. Added to this, the

proportion of SBIs in the 3-month tenor soared to 67.0$ from 24.64% at the end of the

preceding quarter. Consistent with the diminishing perceptions of bank risks, deposit and

lending rates saw further decline although less than expected. Looking forward, monetary

policy transmission is predicted to improve in line with strengthening optimism of the banking

system in the condition of the economy.

At the micro level, conditions in the national banking system remain stable. Reflecting

this is the still comfortable level of the capital adequacy ratio (CAR) at 19.3% in February.

Similarly, the gross non-performing loans (NPLs) ratio remains below 4% with the net ratio

at 1%. Besides this, banking liquidity improved further, including liquidity on the interbank

money market. Bank depositor funds similarly recorded growth.

The improvements in the global and domestic economy during Q1/2010 are

forecasted to carry forward into the future. This reinforces the confidence of Bank

Indonesia in a more robust outlook for the Indonesian economy compared to earlier


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forecasts. Economic growth in 2010 is predicted in the 5.0%-6.0% range, up from

the originally projected 5.0%-5.5%. The economy improved not only from the continued

strength of consumption, but also higher exports in line with the global economic recovery.

Rising demand accompanied by improvement in the investment climate is expected to drive

significant growth in investment. The improvement in the economy is forecasted to carry

forward into 2011 with growth possibly reaching 6.0%-6.5%. Rising demand matched by

capacity for supply-side response is expected to keep future inflationary pressures at a modest

level. A complete elaboration of the medium-term outlook for the economy is presented the

Indonesian Economic Review 2009, accessible on the Bank Indonesia website.

On 6 April 2010, the Bank Indonesia Board of Governors decided to maintain the

BI Rate at 6.5% with an interest rate corridor at +/- 50 bps around the BI Rate.

Key to this decision was the assessment that the 6.5% level in the BI Rate remains

consistent with achievement of the 5%+1% inflation target for 2010. The present

monetary policy stance is also regarded conducive to the economic recovery process

and operation of the bank intermediation function.

Latest Macroe conomic Indicators

5

2. Latest Macroeconomic Indicators

The continuing process of global economic recovery has also provided a boost to domestic

economic performance. During Q1/2010, the increasingly broad-based global economic

recovery was supported by solid economic performance in Asia with positive impact on the

domestic economy. The better than forecasted growth in Q1/2010 came in response to

strengthening of exports and also received support from indications of rising investment.

More robust demand in trading partner nations coupled with high commodity prices

boosted export performance. In a similar vein, business optimism for improvement economic

conditions, improvements in the domestic investment climate and plans for government-

sponsored infrastructure projects strengthened investment performance. Household

consumption maintained an upward trend, bolstered by strong public purchasing power and

buoyant consumer optimism. On the supply side, rising exports and imports are expected

to strengthen performance in the manufacturing and trade, hotels and restaurants sectors.

Growing export demand will generate a positive contribution for manufacturing, while higher

exports will bring greater activity to the trade, hotels and restaurants sector. On the other

hand, agriculture is expected to show reduced growth in Q1/2010, mainly due to the shift

in the harvest season to early Q2/2010. Other sectors expected to see brisk growth are the

electricity, gas and water utilities sector, primarily from the continuation of the kerosene

conversion programme in some regions and commissioning of several powerplants in the

Phase I 10,000MW project, and the transport and communications sector due to market

penetration of the telecommunications business.

DEVELOPMENTS IN THE WORLD ECONOMY

Estimates point to added momentum in global economic recovery in Q1/2010. Emerging

markets, led by Asia, again provided the driving force accelerating the improvement in the

world economy. Developed economies are also predicted to chart positive growth despite

the twin challenges of high unemployment levels and tight lending. However, recovery in

the European Union lags somewhat due to the fiscal crisis in countries such as Greece and

weakness of consumption indicators. Production in advanced economies is on a solid growth

track due to the success of the fiscal stimulus in boosting industry activity, a development

supported by low inventory levels. In developing nations, solid domestic demand in China is

driving the strong demand for imports from Asia with a spillover effect on growth in other

economies in the Asian region.

In Q4/2009, the US economy reported solid growth on the back of strengthening activity

in industry. The fiscal stimulus launched by the US government succeeded in boosting

production, which also benefited from decline in inventory levels. The US economy reported

Q4/2009 growth at 5.6% (qtq, annualised), with positive year-on-year growth at -0.1%.

As a result, the US economy is expected to chart positive growth for Q1/2010. The latest

information suggests a renewed surge in consumption in the US as worker lay-offs are brought

under control. Stronger household consumption is reflected in steady growth in retail sales


6

for 4 months in a row. An added factor in the rising consumption is the slowing rate of

worker lay-offs and a levelling off in the unemployment rate, now at 9.7%. The conducive

condition of the labour market is reflected in the decline in average initial jobless claims in

Q1/2010 to 467 thousand from 500 thousand one quarter earlier. In further developments,

negative growth in payroll figures is progressively easing. The production side in the US is

gathering force with indications of entering an expansionary phase. The US government

fiscal stimulus through infrastructure projects has given added impetus to US production.

On the other hand, mounting retail sales have resulted in drawing down of inventories, with

business responding by increasing production as reflected in the rising purchasing manager

index (PMI) and industrial production index.

Global financial market performance resumed an upward trend after a downturn halfway

through the quarter, triggered by uncertainties over resolution of the fiscal crisis in Europe.

Reflecting the growing investor optimism in the global financial market were the gains on

stock markets in advanced economies during Q1/2010. Despite this, stock markets tumbled

briefly on reports of burgeoning fiscal deficits in the GIPSY nations (Greece, Ireland, Portugal,

Spain and Italy) and lack of clear resolution to this problem. Near the end of Q1/2010, investor

risk appetite rebounded after announcement of a solution to fund the Greek fiscal deficit

involving the European Union and IMF. Global markets also picked up after the release of

data pointing to steady improvement in global economic fundamental and corporate financial

statements consistent with forecasts.

In Asia, economic recovery progressed rapidly during Q4/2009, with growth back in positive

territory. In most Asian economies, growth has rebounded following the steep decline in

the first half of 2009. Externally oriented countries in Asia saw significant improvement in

line with robust demand for exports to China and India. Added to this was the escalating

trend in domestic demand buoyed by positive wealth assets in line with rising housing and

stock market prices in Asia and prolonged low interest rates. At the same time, other Asian

economies more reliant on domestic demand have maintained positive trends. Looking

forward, the economies of China and India remain in the forefront as the economic

powerhouses of Asia. Estimated growth in China and India during Q1/2010 is 11.1% (yoy)

and 7.9% (yoy).

World inflationary pressures during Q1/2010 were comparatively mild. According to

composite data on inflation outcomes, world inflationary pressure held at a relatively stable

level compared to the preceding quarter. World inflation in March 2010 was recorded at

3.1% (yoy), unchanged from one quarter earlier. Indications suggest that the mounting level

of international commodity prices has not escalated inflationary pressure, given the lack of

full recovery in world economic activity.

Monetary policy remained accommodative despite initial signs of tightening on some

emerging markets. In Q1/2010, most major central banks, such as the Fed, BoJ and ECB, kept

a lid on interest rates in order to promote domestic economic recovery. The Fed decided to

hold its rate in the 0%-0.25% range due to high unemployment and still modest forecast for

inflation. Similarly, the ECB held its rate at 1.0% to create a conducive climate for resolution


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of the Greek fiscal deficit crisis. In other actions, the BoJ expanded its 3-month loan facility to

20 trillion yen (222 billion US dollars), double the previous level, to stimulate inflation in the

medium term, even though interest rates have been held at a very low 0.1%. Some central

banks in Asia’s emerging markets and central banks in advanced nations have embarked on

monetary tightening. Signs of monetary tightening were clearly evident in China and India,

which raised their minimum statutory reserve requirements by 100 bps and 75 bps during

Q1/2010. Some of Asia’s central banks, including Malaysia and India, have already raised

their policy rates. Central banks in developed nations such as Australia and Israel have also

raised their reference rates in response to growing inflationary pressure while their economies

have already charted expansion.

ECONOMIC GROWTH

Aggregate Demand

Economic growth mounted higher in the estimates for Q1/2010. The sharp rise in exports and

persistently strong levels of household consumption have brought continued improvement

in economic growth. GDP growth in Q1/2010 is estimated ahead of

the previous quarter at 5.7% (yoy). Key to this are the gains evident in

leading indicators for the GDP (Graph 2.1).

GDP growth is estimated higher on the back of strengthening exports

and household consumption (Table 2.1). Exports showed improved

growth in line with renewed activity in the global economy and high

international commodity prices. Imports are also estimated higher in

response to mounting external demand for manufactured goods. With

export showing stronger performance, both government and private

sector investment are expected to climb. At the same time, consumption

maintained an upward track, despite slower growth in preliminary

figures for Q1/2010. This is explained more by the base effect factor

from the preceding year, when consumption soared around the time

of the parliamentary elections.

Table 2.1

Economic Growth – Demand Side

Household consumption in Q1/2010 is estimated to have maintained positive expansion.

Confirmation of this is visible in the steady improvement in leading indicators for household

I II III IV I II III IV I*I t e m

Table 2.1

Economic Growth - Demand Side

* Bank Indonesia Projection

Total Consumption 4.9 5.5 5.5 6.3 6.4 5.9 7.3 6.3 5.4 5.9 6.2 4.4

Private Consumption 5.0 5.7 5.5 5.3 4.8 5.3 6.0 4.8 4.7 4.0 4.9 3.4

Government Consumption 3.9 3.6 5.3 14.1 16.4 10.4 19.2 17.0 10.3 17.0 15.7 12.3

Gross Fixed Capital Formation 9.4 13.9 12.2 12.3 9.4 11.9 3.5 2.4 3.2 4.2 3.3 6.9

Export Good and Services 8.5 13.6 12.4 10.6 2.0 9.5 -18.7 -15.5 -7.8 3.7 -9.7 19.0

Import Good and Services 9.0 18.0 16.1 11.1 -3.7 10.0 -24.4 -21.0 -14.7 1.6 -15.0 21.1

GDP 6.3 6.2 6.3 6.2 5.3 6.0 4.5 4.1 4.2 5.4 4.5 5.7

20072008

20082009

20092010

% Y-o-Y, Base Year 2000

Graph 2.1

GDP Leading Indicator

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consumption (Graph 2.2). Growth in household consumption was supported by adequately

robust levels of public purchasing power. The average 8.8% (yoy) increase in Provincial

Minimum Wage levels in early 2010, followed by the 5% raise for civil servants, military and

police, was one factor bolstering public purchasing power. The generally stable level of farmer

terms of trade and labour wages in February 2010 is one indicator of the buoyant private

incomes. Alongside this, public optimism for their incomes has potential to boost household

consumptions to even higher levels. Indications of strengthening household consumption

are also visible in higher levels of consumption credit in the banking system. However,

when compared to realised household consumption for Q1/2010, household consumption

growth during the period under review is estimated lower than during Q1/2009 due to heavy

spending by non-government organisations in advance of the parliamentary elections (base

effect factor). In the overall analysis, household consumption maintained positive expansion

in Q1/2010 at an estimated 3.4% (y-o-y).

Developments in leading indicators also support higher levels of

household consumption in Q1/2010. Consumption of durables, such

as sales of cars, motorcycles and electronic goods, maintained high

growth (Graph 2.3). The retail sales index (IPE) for February 2010 reached

209.2 with growth at 41.3% (yoy), ahead of 40.3% (yoy) one month

earlier. The rise in the IPE is attributable to steady improvement across

several commodity categories, such as food and tobacco, clothing

and accessories and stationery. In similar movement, the consumer

confidence index is also on the rise. Stronger growth in consumption is

also reflected in more vigorous growth in consumer goods imports as

of February 2010. Indicators related to consumer financing, such as real

M1 growth, have also maintained an upward trend.

Investment showed improvement during Q1/2010, responding to

upward trends in domestic and external demand. The upswing in

investment growth is consistent with leading investment indicators that

point to rising investment compared to the preceding quarter (Graph

2.4). Higher investment was also reflected in more rapid growth of

capital goods imports (Graph 2.5) and realised construction investment,

as indicated by high levels of cement consumption. At the same

time, buoyant business optimism over increased foreign orders and a

conducive investment climate had a positive effect on investment growth

in Q1/2010. In similar developments, investment growth in Q1/2010

reached an estimated 6.9% growth (yoy), up from the preceding

quarter. In analysis by structure, investment growth in Q1/2010 was

again dominated by construction.

Added confirmation of improved investment growth is offered by various

leading indicators. Rising levels of non-construction investment were

reflected in the growing trend in capital goods imports as of February

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Graph 2.3

Sales of Electronic Goods

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Graph 2.2

Private Consumption Leading Indicator


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2010. The same trend was also reflected in higher growth in cement

consumption (Graph 2.6) as of February 2010 consistent with work

under way in the construction sector and infrastructure projects. These

developments in investment activity were also borne out in the general

improvement in realised FDI and domestic investment projects at the

end of 2009. Reinforcing this is information published by the Investment

Coordinating Board (BKPM) projecting an increase in realised investment

in the range of 9.2-11.7 billion US dollars over the same period in 2009.

Besides this, higher investment benefited from greater financing support,

as demonstrated by the onset of renewed growth in investment credit

(Graph 2.7).

Export growth strengthened in response to the steady improvement

in trading partner economies and commodity prices. Reflecting this

was rising demand in developed nations, such as the United States,

and emerging markets led by China (Graph 2.8). The upward trend in

production indices, consumer confidence levels and business sentiment

in the G3 nations and China as of February 2010 provided an added

boost for accelerated export growth. In other developments, the upward

trend in commodity prices on the international market has had a positive

effect on global trade volume, reflected in the Baltic Dry index. Trade

with other countries, such as India, is also expected to expand with the

conclusion of the ASEAN-India Free Trade Agreement (AI-AFTA) and

the full launching of the ACFTA scheduled for early 2010. According to

the latest data from the Central Statistics Agency (BPS), February 2010

exports reached 11.20 billion US dollars, representing a dramatic fall of

57.05% (yoy) from February 2009. In response to these developments,

Q1/2010 export growth is estimated ahead of the previous quarter at

19.0% (yoy). Growth in non-oil and gas exports was again driven by

primary commodity exports led by mining products, notably coal, and

agricultural products such as palm oil.

Signs point to a continued positive trend in import growth during

Q1/2010, consistent with strong domestic demand and rising demand

from the external sector. This is visible in the improvement in leading

indicators for imports compared to one quarter earlier (Graph 2.9).

Following the resumption of a positive trend at end of year, imports in

February were up in both annual and monthly measures. According to

the latest BPS data, February 2010 exports reached 9.50 billion US dollars,

an increase of 63.23% (yoy) from the same period one year before. In

response to these developments, Q1/2010 import growth is estimated

at 21.1% (yoy). For the time being, overall import growth continues to

be driven by more vigorous expansion in imports of raw materials and

intermediate inputs. Analysed by 2-digit HS commodity classification,

Graph 2.4

Investment Leading Indicator

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Graph 2.5

Growth of Capital Goods Imports

Graph 2.6

Growth of Cement Consumption

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10

import growth in February 2010 was driven by higher levels of imports

related to capacity expansion, such as machines, mechanical tools,

electrical motors and other electrical equipment.

Government Financial Operations

Government financial operations in January-February 2010 were

marked by improved performance in budget revenues and expenditures

compared to 2009. Like in previous years, the budget outcome in the

first two months of 2010 resulted in a surplus, with the surplus in

2010 comparatively unchanged from 2009. Nevertheless, the budget

outcome against target represented an improvement over the past year.

Revenues and grants reached 11.4% of the budget target, ahead of

the 2009 performance of 10.7%. This improvement was funded largely

from stronger taxation revenues. A similar condition was observed in

state expenditures at 9.3% of the budget target, up slightly from 9.2%

of target under the 2009 budget. Key to this was a higher rate of

expenditure disbursements to the regions. At the same time, realised

capital expenditures at the start of the year were minimal. In regard to

financing, issuance of government securities reached one third of the

budget target due to conducive conditions on the government securities

market, even though financial operations continued to post a surplus.

Strengthening economic activity in 2010 has boosted performance in

the taxation sector. During the first two months of 2010, tax receipts

reached 12.2% of the budget target, ahead of the 11.5% achieved in

2009. Higher taxation revenues were generated by VAT, export taxes

and excise duties. Indications suggest that rise in VAT and export tax

receipts is attributable to upbeat economic activity, including higher

exports. Aside from global conditions, the increase in Export Tax revenues

is also the result of a policy decision to apply a higher export surcharge

on crude palm oil (CPO) in keeping with price developments on the

international market.1 In contrast, income tax revenues saw relative

decline, particularly in the oil and natural gas sector. Lower oil and natural

gas related revenues were also reflected in non-tax revenues. However,

measured against budget targets, non-tax receipts were similar to the

previous year at 8.6% of target, due to lower targets.

Improved absorption of government expenditures was supported by

increased transfers to the regions. As of February 2010, realised transfers

to regions came to 16.4% of the budget target. This represented an

improvement over the 14.7% of the previous year in keeping with

larger payments of Profit Sharing Funds and Special Allocation Funds.

However, for the most part, only limited improvement took place in

1 CPO export tax was raised from 0% in 2009 to 3% in early 2010 in response to increased CPO prices.

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Graph 2.7

Investment Credit Growth and Gross Fixed Capital Formation

Graph 2.8

Export Growth to Advance Countries

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Graph 2.9

Import Leading Indicator

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11

state expenditures due to the low rate of central government expenditures at only 6.2% of

the budget target, down from the previous year’s level of 6.7%. This is explained by the still

low rate of non-discretionary expenditures, such as Subsidies and Debt Interest. Minimum

expenditures were also recorded in Capital Expenditures, which reached only 2.3% of the

budget target. However, expenditure outcomes for Personnel and Social Aid were up from

the same period last year.

In regard to financing, strong interest among market actors resulted in issuance of

Government Securities ahead of target during Q1/2010. Total issuance of Government

Securities and Sharia Government Securities in Q1/2010 reached about 66.5 trillion rupiahs,

or 38% of the budget target. However, this achievement still fell short of 2009, due to

the size of the global bond offering in the first quarter of that year. The high volume of

government securities issues resulted not only from keen interest among market actors, but

also conducive conditions on the government securities market reflected in lower yield in

almost all tenors on the government securities secondary market compared to the end-of-

year position in 2009. This condition also affected yield on the primary market, which also

narrowed in March 2010.

Aggregate Supply

Business sector performance in Q1/2010 pointed to improving conditions in keeping with

upbeat developments in sectoral indicators (Table 2.2). The trade, hotels and restaurants

sector, transport and communications, construction and the financial services, leading and

general services sector reported higher growth in Q1/2010 compared to one quarter earlier.

Gains in the trade, hotels and restaurants sector were driven mainly by rising activity in the

wholesale (imports) subsector and were also linked to the launching of the Asean China

Free Trade Agreement (ACFTA). Similarly, expansion in the transport and communications

sector again received impetus from performance in the telecommunications subsector.

The leading contributors to GDP growth in Q1/2010 are expected to be the transport and

% Y-o-Y, Base Year 2000

I II III IV I II III IV I*I t e m

Table 2.2

Economic Growth – Supply Side

20072008

20082009

20092010

Agriculture 3.4 6.4 4.8 3.2 5.1 4.8 5.9 2.9 3.3 4.6 4.1 4.5

Mining and Quarrying 2.0 -1.6 -0.4 2.3 2.4 0.7 2.6 3.4 6.2 5.2 4.4 5.0

Manufacturing 4.7 4.3 4.2 4.3 1.8 3.7 1.5 1.5 1.3 4.2 2.1 4.2

Electricity, Gas and Water Supply 10.3 12.3 11.8 10.4 9.3 10.9 11.2 15.3 14.5 14.0 13.8 14.0

Construction 8.6 8.2 8.3 7.8 5.9 7.5 6.2 6.1 7.7 8.0 7.1 8.1

Trade, Hotels and Restaurant 8.4 6.7 7.7 7.6 5.5 6.9 0.6 0.0 -0.2 4.2 1.1 5.1

Transportation and Communication 14.0 18.1 16.6 15.6 16.1 16.6 16.8 17.0 16.4 12.2 15.5 14.2

Financial, Rental and Business Service 8.0 8.3 8.7 8.6 7.4 8.2 6.3 5.3 4.9 3.8 5.0 4.2

Services 6.6 5.5 6.5 7.0 5.9 6.2 6.7 7.2 6.0 5.7 6.4 5.2

GDP 6.3 6.2 6.3 6.2 5.3 6.0 4.5 4.1 4.2 5.4 4.5 5.7



12

communications sector, manufacturing and the trade, hotels and restaurants sector. Similarly,

the dominant sectors of the economy, like before, are manufacturing, the trade, hotels and

restaurant sector and agriculture.

Manufacturing performance in Q1/2010 maintained an upward track with growth predicted

to remain stable. Rising external demand was a positive factor in manufacturing output,

particularly for export-oriented industries such as in the transportation equipment, machinery

and tools subsector, chemicals and rubber goods, textiles, leather goods and footwear and

the wood-based and forestry products subsector. Indicators of demand in the domestic

industry sector, such as car and motorcycle sales, have shown an improving trend in line

with adequately robust levels of public purchasing power. Confirmation of industry sector

performance also comes from leading indicators for the manufacturing sector, which point to

an expansion phase. Similar trends are also visible in the BI Production Survey index, capacity

utilisation and imports of industrial raw materials, which have maintained an upward trend

since mid-Q1/2010. Raw material imports soared by as much as 68.9% (yoy) alongside

increases in the production index and capacity utilisation at 5.7% (yoy) and 7.3% (yoy) in

January 2010. In regard to financing, banks reported stable growth in industry lending as

of mid-Q1/2010, although below the average growth for 2009.

The trade, hotels and restaurants sector charted higher estimated growth in Q1/2010. Key

factors in the performance of the trade, hotels and restaurants sector are rising imports and

stronger manufacturing performance. Imports charted 63.23% growth (yoy) in February

2010, up from the same month one year before. At the same time, the upward trend in

manufacturing performance augurs for an increase in the volume of goods traded within

the trading sector. On the other hand, modest slowdown is forecasted for agriculture and

mining, which also affect performance in the trade sector. Indications of rising trade sector

performance are also reflected in the growth in the real sales index in the BI Retail Survey and

hotel occupancy rates in Bali. During February 2010, growth in the real sales index mounted

from 36.5% (yoy) in January 2010 to 40.0% (yoy). On the financing side, bank lending to

the trade sector remained largely stable.

Signs in the agriculture sector pointed to slowing performance in Q1/2010 explained mainly

by the shift in the rice harvest. In 2010, the main harvest season is predicted for March

and April. The shift in the planting season at the end of 2009 portends to concentrate the

harvesting of the rice crop in April. As a result, crop production at the end of Q1/2010

was lower than for the same period one year earlier. A reasonably good rice crop is still

expected during the harvest, given the lower rate of harvest failures from floods or other

causes during the January-February 2010 period compared to the similar periods over the

past 5 years. Based on the First Forecast Figures (ARAM I) for 2010, published by BPS, rice

production is expected to mount only 0.88% over the previous year to 64.9 million tons.

Although below the initial government target, this forecasted rice production is still sufficient

to supply domestic requirements. Alongside this, Q1/2010 performance in the estates

subsector is expected to bolster agriculture sector performance, due to brisk exports of estate

commodities. On the financing side, bank lending to the agriculture sector maintained a

comparatively stable trend.


13

The mining sector again reported improved performance in Q1/2010. Improvement in this

sector was reflected in various leading indicators, including exports of coal, nickel, copper,

ores, matte and metal concentrates, in addition to the upward trend in oil production as of

early Q1/2010. Key to this was mounting demand in trading partner nations. On the other

hand, external demand for coal is also supported by the long-term export sales system. In

regard to financing, credit to the mining sector reported expansion as of mid-Q1/2010.

Estimated performance in the transport and communications sector is up in Q1/2010

compared to one quarter before. This is indicated in more robust movement in several

leading indicators for the transport and communications sector. The vigorous growth in

the communications subsector is reflected in the incessant rise in numbers of cellular phone

subscribers as of Q4/2009. Major cellular operators report increased numbers of customers.

Besides the cellular market, expansion in the telecommunications sector is also driven by the

soaring use of the internet. In similar developments, indications of mounting performance in

the transport subsector are evident in air and rail passenger numbers as of February 2010,

with growth running at 23.3% (yoy) and 1.4% (yoy). Brisk growth as of early Q1/2010

was also reported in another indicator, namely cargo traffic at Indonesia’s five major ports

(Belawan, Tanjung Priok, Tanjung Perak, Balikpapan and Makassar), at 5.6% (yoy). In regard

to financing, bank lending to the transport and communications sector expanded at a slightly

slower rate until mid-Q1/2010.

Construction sector growth improved during Q1/2010 to an estimated 8.1% (yoy). Leading

indicators point to more robust growth in the construction sector. Among these indicators

are cement consumption and production, both on the rise as of mid-Q1/2010. In February

2010, cement consumption growth strengthened slightly from 13.2% (yoy) in January 2010

to 13.4% (yoy). At the same time, cement production saw growth climb from 13.3% (yoy)

in January 2010 to 14.5% (yoy) in February 2010. In regard to financing, bank lending to

the construction sector is estimated to have halted decline as of February 2010.

Regional Economic Performance

Estimates point to improved economic growth at the regional level,

supported by the buoyant economies in Jakarta, Sumatra and the Kali-

Sulampua region. During this period, the launching of the AC-FTA has

opened new opportunities for regions with resource-based production.

The performance of the Indonesian economy showed significant

improvement in Q4/2009 with growth at 5.4%, bringing overall

economic growth in 2009 to a respectable 4.5% (yoy). In general terms,

the driving force for growth in 2009 came from robust consumption in

Jakarta and Jabalnustra and exports from Sumatra and the Kali-Sulampua

region to China and India. Strong consumption at the regional level was

supported in part by high rates of realised consumption expenditures

in Regional Budgets that averaged 92.6%, up from 83.1% in 2008.

Expenditure growth was particularly strong in spending on goods/

services and social aid.

Graph 2.10

Export Volume Growth

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14

The renewed vigour in regional economies is estimated to have carried

forward into Q1/2010, bolstered by rising growth in the economies of

Sumatra and Kali-Sulampua and buoyant economic growth in Jakarta.

On the demand side, exports were up for estate crops (CPO, coffee) and

mining products (coal, nickel) in Sumatra and the Kali-Sulampua region

(Graph 2.10), while consumption showed a slowing trend. Investment

showed renewed improvement, particularly in Jakarta alongside rising

private capital expenditures. In disaggregation by sector, industry was

up in Jakarta and the Jabalnustra region with support from mining

in Sumatra and the Kali-Sulampua region and trade in Jakarta and

Sumatra. The launching of the AC-FTA has created fresh opportunities

for CPO and coffee exporting regions in Sumatra and mining exports

from Kali-Sulampua. Despite this, the textiles and textile products and

food processing industries in Jabalnustra face challenges, although

opportunities loom for other industries (furniture, handicrafts).

While regional inflation was quite low during Q1/2010, some regions are

projected to have above national inflation due to distribution problems.

Most of the regions with above national inflation are found in the

Kali-Sulampua region. The low inflation in the regions is explained by

the onset of harvest in March in some regions, while weather-related

bottlenecks hampering the distribution of goods is a factor driving up

prices in regions other than Jakarta. On the demand side, the reasonably

strong public purchasing power in the regions has capacity to respond

to increased production. Despite this, difficulties arise in relation to tight

supply (sugar, rice) and even potential for inflationary pressure from

diminishing cargo traffic to Java and outside Java.

BALANCE OF PAYMENTS (BOP)

Buoyant domestic macroeconomic conditions and positive external conditions were key to

Indonesia’s solid external performance during Q1/2010. Widespread positive sentiment over

the recovery in the world economy was again the primary factor in Indonesia’s strong balance

of payments performance, particularly in merchandise trade. Overall, the Q1/2010 balance

of payments posted an estimated surplus. With this surplus, international reserves reached

71.8 billion US dollars, equivalent to 5.8 months of imports and servicing of official external

debt. The improved export performance is indicated as driven by positive developments in

commodity prices and strong demand for resource-based commodities in some nations,

and particularly emerging markets. Nevertheless, the greater absorption capacity of the

domestic economy has spurred imports, thus offsetting the rise in export turnover. Taken

together, the merchandise trade balance posted an estimated surplus. At the same time,

the relatively brisk recovery in Asia has given added attraction to investment in financial

assets. Despite temporary shocks brought on by negative sentiment over the fiscal instability

Graph 2.11

Growth of Regional Cement Consumption

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Graph 2.12

Inflation in Jakarta

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15

in Greece, the capital and financial account recorded a higher portfolio capital surplus on

the back of strengthening investor interest. However, the increased surplus was offset by

higher volume of overseas placements of domestic assets and the deficit in private external

debt transactions.

The Current Account

The current account is expected to record yet another surplus, even though slightly below

Q4/2009. Like before, the trade balance makes up the largest share of the current account

surplus. Contributing to the estimated current account surplus was a decline in the services

account (due to reduced payments for travel services) and income account (explained by

lower interest payments on corporate foreign borrowings).

The sustained process of global economic recovery has brought improvement to exports,

which in turn has bolstered performance in the current account. Data for the January-February

2010 period reveals that resource-based export commodities showed as somewhat better

trend than manufactured products. This condition is expected to persist in March 2010 due

to the shift of the world economic growth base to emerging markets, which comprise the

leading markets for raw materials exported by Indonesia. Alongside this, only limited gains are

expected in manufactured exports, due to the slow rate of recovery in advanced economies.

Movement in commodity prices also provided an uplift for exports. At the end of the quarter,

prices had risen for the majority of Indonesia’s mainstay non-oil and gas export commodities.

Fundamentals, in this case strong sentiment over global economic recovery, comprised the

factor driving commodity prices on the international market. However, the services account,

representing another component in the current account, is projected to decline as a result of

the higher outcome for foreign currency earnings from tourists, while improvement in the

income account will result in part from lower interest payments on external debt.

The Capital and Financial Account

Estimates for the capital and financial account in Q1/2010 point to another surplus. This

surplus is buoyed, among others, by an expected increase in foreign direct investment flows,

primarily in the non-oil and gas sector. The rise in FDI inflows is explained largely by the

expected improvement in the domestic economy alongside mounting commodity prices. In

overall terms, improvement in the investment climate is also reflected in the upward trend

in investment involving both cash calls and loans. On the portfolio side, robust domestic

macroeconomic conditions and relatively high returns on rupiah placements have helped

boost short-term capital inflows. Foreigners have stepped up their fund placements in SBIs

and government securities.

International Reserves

Following the latest developments in the current account and the capital and financial account,

international reserves at end Q1/2010 reached 71.8 billion US dollars, a level equivalent to

5.8 months of imports and servicing of official external debt.


16

3. Monetary Indicators and Policy Q1-2010

The ongoing recovery in the global economy is showing more encouraging trends. This

favourable turn in external developments combined with the solid condition of the domestic

economy underpinned movement in the exchange rate and inflation during Q1/2010. The

rupiah exchange rate strengthened in value during Q1/2010. The average value of the rupiah

appreciated 2.2% to Rp 9,254 to the US dollar with volatility stable at 0.57% in Q1/2010

compared to 0.56% in Q4/2009. Concerning prices, inflationary pressure began mounting

slightly in Q1/2010. Measured annually, CPI inflation in Q1/2010 reached 3.43% (yoy), up

from the end-2009 level of 2.78% (yoy). This surge is explained primarily by rising inflationary

pressure from non-fundamentals, led by volatile foods inflation, while inflationary pressure

from fundamentals reflected in core inflation has in fact eased.

In other developments, improvement was observed in monetary policy

transmission through various channels. In the interest rate channel,

monetary policy transmitted smoothly to interbank money market and

deposit rates. Added to this, lending rates recorded further decline. In the

credit channel, monetary policy transmission saw improvement during

Q1/2010. Credit expansion in February 2010 mounted to 9.4% (yoy),

up from the 2009 level of only 8.7% (yoy). Similarly, monetary policy

transmission on the capital market, government securities market and

mutual funds market was also positive. On the stock market, the JSX

Composite mounted significantly with gains outperforming other markets

in the region. On the government securities market, yield eased in almost

all tenors. In other developments, the mutual funds market also showed

positive movement in line with performance of underlying assets.

RUPIAH EXCHANGE RATE

The rupiah maintained positive performance during Q1/2010. The

steady improvement in the global economic recovery and growing

strength of Indonesia’s domestic economic fundamentals has provided

positive support for the exchange rate. In averages for the period, the

rupiah gained 2.2% to Rp 9,254 to the US dollar (Graph 3.1). This

appreciation was accompanied by subdued volatility (Graph 3.2). At

end-Q1/2010, the rupiah closed at Rp 9,090 to the US dollar.

Rising negative sentiment on global financial markets in response

to the fiscal deficit problems affecting some European nations bore

down temporarily on Asia’s regional currencies, including the rupiah.

The fiscal deficits sustained by the GIPSY countries (Greece, Ireland,

Portugal, Spain and Italy) fuelled jitters over the sustainability of global

Graph 3.1

Average Rupiah Exchange Rate

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Graph 3.2

Rupiah Exchange Rate Volatility

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Monetary Indicators and Policy Q1-2010

17

economic recovery. However, the steady improvement in the global

economy and especially in Asia restored stability to Asia’s regional

currencies and even prompted an appreciating trend in line with rising

investor confidence in the economy of the Asian region.

While influenced by external conditions, the appreciation in the rupiah

was also bolstered by the solid condition of the domestic economy.

The Indonesian economy managed a respectable performance

with 5.4% growth (yoy) in Q1/2010. At the same time, inflation

in Q1/2010 remained comfortably low. These twin achievements

combined with positive performance in the balance of payments

paved the way for rupiah appreciation during Q1/2010. The solid

performance of the domestic economy imbued foreign investors

with growing confidence. Strengthening investor confidence in the

Indonesian economy was signified by the upgrading of Indonesia

bond ratings by two international rating agencies, Fitch and S&P.

The two agencies raised Indonesia’s rating to BB+ with positive

outlook, so that now, Indonesia’s position is just 1 notch below

investment grade.

The solid condition of economic fundamentals was matched by

improvement in perceptions of domestic risks. The Credit Default

Swap (CDS) indicator for Indonesia remained low at 163 bps. This

was consistent with behaviour in other risk indicators. Yield spread

for Indonesia government bonds over US T-Notes registered decline.

Movement in the EMBIG index, which measures risks in emerging

markets, remained stable and even narrowed from 294 at end-2009

to 261 at the end of Q1/2010 (Graph 3.3). At the same time, the

swap premium, an indicator of expected direction of movement in

the rupiah, remained stable in all tenors (Graph 3.4).

The improvement in domestic risks bolstered the attractiveness of

rupiah-denominated investments. Rupiah returns were reflected in

the level of Uncovered Interest Parity (UIP) at 6.33%, still the highest

compared to other countries in Asia (Graph 3.5). Improvement in the

risk premium provided added attraction for investment in the rupiah,

reflected in the rising trend in Covered Interest Parity (CIP) indicator

so far in 2010. At the end of March 2010, the CPI indicator stood at

4.69%, higher than for any other country in Asia (Graph 3.6).

INFLATION

Inflation remained at subdued levels in Q1/2010. Measured annually,

CPI inflation in Q1/2010 was recorded at 3.43% (yoy), up from the

end-2009 level of 2.78% (yoy) (Graph 3.7). Despite edging upwards,

Graph 3.3

Risk Perception Indicators

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Graph 3.4

Swap Premium in Various Tenors

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Graph 3.5

UIP for Countries in the Region

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18

CPI inflation remained well within comfortable limits. Reflecting this

is the downward trend in CPI inflation over the months, with March

2010 even recording deflation at 0.14% (mtm).

The higher CPI inflation in Q1/2010 compared to end-2009 was

fuelled mainly from pressure in the volatile foods category. The delay

in the rice harvest led to some shortages that in turn boosted prices.

Alongside this, low imported inflation, modest inflation expectations

and absence of strategic Government decisions proved adequate to

offset pressure in the volatile foods category and thus keep inflation

at a subdued level.

Disaggregated by category of expenditure, inflationary pressure

during Q1/2010 came mainly from the foodstuffs and processed food

categories (Graph 3.8). Strong pressure from escalating prices for rice

and other commodities early in the quarter pushed the foodstuff index

to 129.59 in Q1/2010, up from the end-2009 level of 127.46. Besides

this, indices for other categories of goods, such as processed foods,

also mounted significantly over the preceding period due to price

increases in products made with rice and granulated sugar.

Core inflation eased during Q1/2010. Measured annually, core

inflation was recorded at 3.56% (yoy), down from the end-2009 level

of 4.28% (yoy). This decline came in response to external and domestic

factors. On the external side, low international commodity prices and

the appreciating trend in the rupiah curbed imported inflation. While

inflation in trading partners did rise in line with the recovery in the

world economy, this did not have a significant effect on core inflation

(Graph 3.9). This was reflected in inflation indicators, including lower

inflation in imported commodities and the import wholesale price

index (Graph 3.10).

On the domestic front, solid economic fundamentals helped curb

inflation expectations. The fairly strong economic growth at 5.4% in

Q4/2009, low inflation and appreciating exchange rate had a positive

effect on inflation expectations. Results from the Consensus Forecast

(CF) survey in March 2010 point to a moderating trend in inflation

expectations during 2010, while in 2011, expectations of inflation

are predicted to be stable (Graph 3.11). Other surveys, namely the

Consumer Survey and the Bank Indonesia Retail Sales Survey, also

reflect comfortable levels of consumer and trader expectations (Graphs

3.12 and 3.13).

Concerning the output gap, renewed growth in demand was still

met by adequate supply-side response. Pressure from the output gap

on inflation has thus been kept at a minimal level. Indications of an

Graph 3.6

CIP for Countries in the Region

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Graph 3.7

Inflation

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Graph 3.8

Inflation by Category

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19

onset of rising demand were visible in the upward turn in real sales

growth (Graph 3.14). Increases took place mainly in the clothing and

accessories category and in construction. In other developments,

supply-side indicators reflected in the manufacturing production

index began showing a rising trend (Graph 3.15). This is consistent

with capacity utilisation in manufacturing, which is also on an upward

trend (Graph 3.16).

Volatile foods inflation began to mount during Q1/2010. The volatile

foods category recorded 4.41% inflation (yoy), up from the end-2009

level of 3.95% (yoy). This increase was driven mainly by high rice

prices in early Q1/2010, due to the effect of the delayed harvest and

distribution constraints. The escalation in rice prices in turn boosted

prices in the processed foods category, particularly for products made

from rice. Nevertheless, this condition was resolved towards the end

of the period. In March 2010, rice supplies improved with the effect

of curbing further price increases for rice and even producing deflation

in the volatile foods category at 1.14% (mtm) during that month.

In the administered prices category, inflationary pressure during

Q1/2010 was minimal due to the absence of strategic policy decisions.

With no Government plan put into effect for changes in administered

prices during Q1/2010, administered prices inflation was kept at a

low level. Cigarettes and household fuels were the two dominant

commodities with contributions to inflation in the administered prices

category at 0.06% and 0.03%. By comparison, gasoline accounted

for a mere 0.02% contribution to inflation during Q1/2010. This was

related to the 87.8% rise in international crude oil prices since the

beginning of the year. Taken together, administered prices inflation

in Q1/2009 reached 0.71% (qtq) or 2.31% (yoy).

MONETARY POLICY

Interest Rates

Monetary policy transmission operated smoothly through the short-

term interest rate channel during Q1/2010. This was enabled in

particular by the excess levels of bank liquidity that steered the O/N

interbank rate on a downward course for the lower limit of the

BI Rate corridor. The daily average O/N interbank eased 11 bps to

6.19%, or 31 bps below the BI Rate (Graph 3.17). This movement

was then transmitted to interbank rates in longer tenors, bringing

improvement to the interbank market interest rate structure. Like

movement in the O/N interbank rate, interbank rated in above O/N

tenors also eased in about the same magnitude (Graph 3.18). The

Graph 3.9

Inflation of Trading Partner Countries and Exchange Rate

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Graph 3.10

Imported Commodies Inflation, Core Inflation,

and WPI Imports

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Graph 3.11

Inflation Expectations – Consensus Forecast


20

weighted average interbank rates in the 2-6, 8-26 and above 30 day

tenors came down by 7-11 bps, except for the 27-30 tenor which

fell by a steeper 57 bps. This is an indication of steady improvement

in perceptions of counterparty risk in line with the ongoing easing of

risks on the money market.

Monetary policy transmission improved in the deposit rate channel.

The improvement in transmission took place in periods of no change

and also decline in the BI Rate. In Q1/2010, indications point to

18bps reduction in 1-month deposit rates (Table 3.1). Accordingly,

the BI Rate maintained at 6.5% since September 2009 met with

positive response in a total 117 bps decline in 1-month deposit

rates (as of February 2010), an improvement when compared to

the previous period of no change in the BI Rate (August 2007 until

January 2008). From December 2008 to February 2010, 1-month

deposit rates came down by 335 bps in response to a total 300 bps

reduction in the BI rate, representing a similar improvement over

the preceding period of BI Rate decline (May 2006 until July 2007)

when deposit rates eased 283 bps in comparison to the total BI Rate

reduction of 425 bps.

The decline in deposit rates was accompanied by improvement in

the deposit rate structure in various tenors. Reflecting this was the

comparatively flat structure in deposit rates, although 12-month

deposit rates remained above rates in the 24-month tenor.

In analysis by category of bank, the steepest decline in time deposit

rates took place at foreign and joint venture banks. During Q1/2010,

foreign and joint venture banks lowered deposit rates by 20 bps,

the steepest reduction for any category of bank. By comparison,

state owned banks lowered rates by -12 bps, Regional Development

Banks by -10 bps and private banks by -7 bps. Despite this, during

the period of no change in the BI Rate (since September 2009), state

owned banks have pursued the most aggressive cuts in their deposit

rates at 149 bps, with private banks next at 102 bps. Concerning level

of rates, foreign and joint venture banks offer the lowest average

deposit rate (7.3%), while Regional Development Banks offer the

highest average rates (8.7%).

Monetary policy transmission is continuing in the credit channel.

In Q1/2010, lending rates showed indications of continued decline

alongside easing bank perceptions of economic risks. Average decline

in lending rates as of February 2010 (from September 2009) reached

56 bps, or only half of the fall in 1-month deposit rates at 117 bps.

Graph 3.12.

Consumers’ Inflation Expectation

(Bank Indonesia Consumers Survey)

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Graph 3.13.

Retailers’ Inflation Expectation

(Bank Indonesia Retail Sales Survey)

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Graph 3.14

Real Sales Growth

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21

This is partly explained by persistently high perceptions of lending risk and bank efforts

to maintain high margins amid low demand for credit.

In analysis by category of use, rates for working capital credit have

declined by a more significant magnitude. With perceptions of

economic risk easing in the banking system, working capital credit

rates are estimated to be falling more aggressively, while rates for

consumption credit are predicted to be thinner than for other rates,

due to the less elastic nature of this lending to changes in interest

rates (Table 3.1). In analysis by category of bank, state-owned banks

in aggregate terms offered the lowest credit interest rates. The

highest average working capital credit rate were offered by private

domestic banks and Regional Development Banks, while foreign

and joint venture banks, like before, charged the steepest interest

rates on consumption credit.

Funds, Credits, and the Money Supply

Estimates point to slowing growth in depositor funds during

Q1/2010 in keeping with the historical trend at the start of the

year. As of February 2010, funding growth reached only 9.3%

(yoy), down from the end-2009 expansion of 12.5% (yoy) (Graph

3.19). In response to these developments, the depositor funds

position in Q1/2010 (as of February 2010) narrowed by Rp 41.4

trillion to Rp 1,931.6 trillion. When compared to the same period

one year earlier (February 2009), depositor funds were in fact up by

Rp 13.8 trillion. This occurred because during the crisis, members

of the public were reluctant to draw on their funds for economic

activity and preferred to keep their funds in banks. The resumption

Interest Rate (%) Jan Feb Mar Apr May June July Augt Sept Oct Nov Dec Jan Feb Mar

Quarter I-2009 Quarter II-2009 Quarter III-2009

Table 3.1

Interest Rate Movements

BI Rate 8.75 8.25 7.75 7.50 7.25 7.00 6.75 6.50 6.50 6.50 6.50 6.50 6.50 6.50 6.50

Deposit Guarantee 9.50 9.00 8.25 7.75 7.75 7.50 7.25 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00

1-month Deposit (Weighted Average) 10.52 9.88 9.42 9.04 8.77 8.52 8.31 7.94 7.43 7.38 7.16 6.87 7.09 na na

Base Lending Rate 14.18 13.98 13.94 13.78 13.64 13.40 13.20 13.00 12.96 13.01 12.94 12.83 12.65 12.66 12.65

Working Capital Credit 15.23 15.08 14.99 14.82 14.68 14.52 14.45 14.30 14.17 14.09 13.69 13.69 13.75 na na

Investment Credit 14.37 14.23 14.05 14.05 13.94 13.78 13.58 13.48 13.20 13.20 13.03 12.96 13.24 na na

Consumption Credit 16.46 16.53 16.46 16.48 16.57 16.63 16.66 16.62 16.67 16.53 16.47 16.42 16.32 na na

Quarter IV-2009 Quarter I-2010

Graph 3.15

Manufacturing Production Index (SP)

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Graph 3.16

Manufacturing Capacity Utilisation (SP)

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22

of normal developments in depositor funds in Q1/2010 in line with

the historical trend is a positive indication for economic activities in

the population during Q1/2010.

In other developments, credit expansion during Q1/2010 took a

positive turn. Credit growth in Q1/2010, including channelling,

reached 9.4% (yoy), up from the end-2009 level of 8.7% (yoy) (Graph

3.19). When compared to end-2009, the credit position in Q1/2010

(as of February 2010) had narrowed further by Rp 11.2 trillion.

However, when compared to the same period on year earlier (February

2009), the decline in the credit position at that time was considerably

greater than at the present. This indicates an improvement in credit

expansion over the preceding year, a development also confirmed by

the improved monthly change in credit in February 2010 compared to

performance over the past 3 years. The credit trend is forecasted to

improve further in keeping with the recovery under way in domestic

and external demand.

Improvement in monetary policy transmission through the credit

channel was observed on both the demand side and supply side.

On the demand side, stronger credit expansion was driven by

the onset of recovery in domestic and external economic activity

accompanied by decline in loan interest rates, as indicated by the

narrowing spread between lending rates and the BI Rate. On the

supply side, bank perceptions of economic risk were beginning to

improve, a development that contributed towards decline in loan

interest rates.

In analysis by category of use, consumption credit and investment

credit maintained positive growth, in contrast to the still negative

growth in working capital credit. In February 2010, working capital

credit continued to record negative expansion at 4.8% (yoy). At

the same time, growth in investment credit and consumption

credit reached 14.7% (yoy) and 34% (yoy). The highly aggressive

expansion in consumption credit boosted the aggregate level of

credit expansion. In disaggregation by currency, stronger lending

growth in Q1/2010 was primarily visible in rupiah-denominated

credit, while credit in foreign currencies (USD) continued to show

negative growth.

In analysis by sector, the improvement in credit expansion was

contributed mainly by the miscellaneous sector. During Q1/2010,

the miscellaneous sector underwent accelerated credit expansion

at 43.5% (yoy), up from 18.8% (yoy) at the end of the preceding

Graph 3.17

Interbank O/N Rate & Monetary Instrument

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Graph 3.18

Interbank Rate in Various Tenors

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Graph 3.19

Funding, Credit Growth, and BI Rate

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23

year (Graph 3.20). Other sectors also reporting accelerated lending

growth were mining, transportation and social services. The

electricity, gas and water utilities sector also reported brisk lending

growth. In other areas, the onset of improvement in external

conditions is expected to bring improved lending growth to the

manufacturing and trade sectors in response to mounting external

demand.

Economic liquidity and particularly M1 maintained steady expansion

during Q1/2010. Growth in M1 economic liquidity, on a steady

rise since October 2009, reached 13.7% (yoy) in February 2010

(Graph 3.21). Higher than expected economic growth alongside

lower than expected inflation were the twin factors contributing

to the steady M1 growth. M1 growth came largely from additional

demand deposits while currency outside banks also showed a rising

trend. The growth in demand deposits held by individuals and

miscellaneous private business entities1 was consistent with credit

expansion. Besides this, growth in personal demand deposits was

consistent with movement in the JSX Composite Index (JCI), reflecting

increased public activity in conducting transactions in the financial

sector. Indications suggest that this continued in Q1/2010 in response

to positive returns on the stock market. These conditions confirm

the steady improvement in domestic liquidity conditions. In other

developments, growth in M2 and Rupiah M2 economic liquidity as

of February 2010 was recorded at 10.4% and 12.3% (yoy), down

from the end-2009 growth at 13.2% and 14.0% (yoy) (Graph 3.21).

The M2 and Rupiah M2 positions narrowed by Rp 44.4 trillion and

Rp 40.8 trillion due to reduction in quasi-money components at the

beginning of the year.

Financial Markets

The JSX Composite Index showed positive performance during

Q1/2010. During the quarter, the JSX Composite mounted 10.2% to

close at 2,777.3. The Bank Indonesia decision to hold the BI Rate at

6.5% at the end of Q1/2010 was one factor bolstering index gains.

This policy was translated by the market as a move by Bank Indonesia

to boost economic growth momentum while keeping inflation on

course for the inflation target for 2010. Added to this, the buoyant

5.4% economic growth in Q4/2009 alongside the upgrading the

sovereign bond rating by S&P and Fitch paved the way for the JCI to

chart the highest gains of any country in the region 2

1 Monetary Data from Commercial Bank Reports as of December 2009.2 ahead of other stock markets including Vietnam, Thailand, Philippines, Malaysia, Singapore, China, Hongkong, India, UK, Japan

and the US. During this time, the usually high-performing stock markets in China and India in fact reported relatively constrained

Graph 3.20

Credit Growth by Sector

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Graph 3.21

Nominal Growth of M1 and M2

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Graph 3.22

JCI and Net Foreign Buying

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24

In other areas, the relatively secure position of micro fundamentals

of issuing companies provided added boost to the JCI during

Q1/2010. These issuer fundamentals were reflected in the ability

of most companies who have released financial statements to

post operating profit. Some, in fact, managed to increase their

operating profit. The average rise in operating profit during 2009

came to 23% (yoy). The improvement in profitability indicators

was accompanied by a downward trend in Debt to Equity Ratios

(DER). Average DER for listed companies narrowed from 3.7% in

2008 to 3.1% in 2009. This in turn led to improvement in sectoral

rating by some agencies.

Analysed by sector, the rise in the JCI was reflected in sectoral

developments, except in infrastructure. The sectoral movement in

the JCI was consistent with the strong fundamentals of the issuing

companies. Commodity-based sectors, such as mining and estates,

showed renewed growth despite a sharp dip in February 2010.

Expansion plans announced by some listed mining companies

also boosted positive sentiment in that sector. Mining sector gains

were the result of a 3.5% rise in world oil prices (WTI) and 0.8%

drop in the Baltic Dry Index. In a similar vein, capitalisation in

tradable sectors3 widened from 47.7% to 48.9% of total market

capitalisation.

The gains in the JCI took place amid limited foreign capital inflows

during Q1/2010. Global financial market conditions were marked

by renewed turbulence in February 2010 that triggered heavy

net selling by foreign investors. The financial market turmoil was

triggered by uncertainty over the resolution of fiscal problems in the

PIGS countries (Portugal, Ireland, Greece and Spain) and a bearish

mood that hit US markets after the US consumer confidence index

plunged to the lowest level in the past 10 months. However, in

subsequent developments, foreign investors returned to the market

following predictions that developing nations would apply an exit

policy ahead of advanced nations, which have also taken a softer

stance over inflation. Taken together, foreign investors recorded a

net purchase in Q1/2010 at Rp 3.68 trillion, up from the Q4/2009

level of Rp 2.52 trillion. (Graph 3.22). This was followed an growth

in trading volume on the domestic stock market to Rp 4.12 trillion

per day in Q1/2010, compared to only Rp 3.93 trillion per day in

Q4/2009 (Graph 3.23).

growth.3 Encompassing mining, estates, basic industry, multifarious industry and consumer goods.

Graph 3.23

JCI and Trading Volume

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Graph 3.24

Yield SUN, BI Rate and 1 month SBI

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Graph 3.25

Yield SUN and CDS

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25

On the Government Securities market, the Bank Indonesia decision

to keep the BI Rate on hold met with almost equal response from

Government Securities in all tenors except 1 year. This development

in government securities is explained by market expectations of

minimum inflationary pressure in the short run, supported by

exchange rate stability, that will not lead to pressure for further

adjustment in the BI Rate. Another factor bolstering the performance

of government securities was the upgrading of the sovereign bond

rating to near investment grade. Alongside this, the 55 bps widening

in the yield on 1 year tenors is explained more by problems with

thin liquidity. Following this, yield on government securities in

short, medium and long tenors eased by 13 bps, 74 bps and 64

bps (Graph 3.24).

The reduced yield on Government Securities during Q1/2010 is closely

related to conditions on global financial markets. Despite some brief

turmoil in February 2010 resulting from uncertainty over rescue

in the PIGS nations, global financial markets managed to resume

movement towards recovery. Over time, performance recovered on

global financial markets after global monetary policy resumed a low

interest rate policy. Indicators supporting this include reductions in

EMBIG and CDS risks. The EMBIG and CDS positions at end-Q1/2010

stood at 259.2 and 158.2, down from the end-Q4/2009 levels of

294.2 and 192.0 (Graphs 3.25 and 3.26).

The improving risk on global financial markets in turn encouraged

foreign capital inflows into the government securities market.4 In

Q1/2010, the net foreign purchase on the government securities

market reached about Rp 24 trillion, up from the Q4/2009 net foreign

purchase of only about Rp 14 million. With foreign capital inflows

on the rise, market liquidity for government securities also improved.

Trading volume in government securities improved on average to

Rp 4.1 trillion per day in Q1/2010 from the Q4/2009 average at Rp

3.3 trillion per day (Graph 3.27). Mounting trading activity on the

government securities market was not matched by frequency of daily

trading, which fell to 247 transactions per day in Q1/2010 from the

Q4/2009 frequency recorded at 260 transactions per day (Graph

3.28).

Improvement in underlying asset performance, led by stocks and

Government Securities, has paved the way for brisk gains in mutual

funds. High-growth categories of mutual funds include equity

4 Government Securities position including Sharia Government Securities and Treasury Notes.

Graph 3.26

Yield SUN and EMBIG

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Graph 3.27

Govt Securities Trading Value

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Graph 3.28

Frequencyof Govt Securities Trading

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26 2626

funds, fixed income and mixed funds, while debt securities funds

were generally stable. Indices for equity funds, fixed income funds

and mixed funds were up by 7.9%, 3.2% and 8.9%. In response to

these developments, NAV in February 2010 reached Rp 113 trillion,

with potential to climb 30% in 2010.

Graph 3.29

Mixed Mutual Fund Index,

Fixed Income, and Stock

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Outlook for the Indonesian Economy

27

4. Outlook for the Indonesian Economy

Economic growth in Indonesia is on course for 5.5%-6.0% in 2010 and may climb to

6.0%-6.5% in 2011. Accordingly, the outlook for the Indonesian economy is brighter than

earlier predictions. The faster than expected global economic recovery underpins the more

optimistic outlook for world economic growth. The recovery in the world economy is being

driven mainly by Asia’s emerging markets. With this recovery under way, volume of world

trade is predicted to expand ahead of earlier projections. Given these changes in external

conditions, the recovery in trading partner nations will provide added impetus for Indonesian

exports comprising both resource-based commodities and manufactured goods. At the same

time, the improvement in the investment climate and vigorous consumption will support

economic growth on the domestic front. Improvement in the investment climate is reflected

in the upgrading of Indonesia’s sovereign credit rating. This rise in investment activity in

combination with more robust export performance will help to generate higher private

incomes. In analysis of balance of risks, world trade volume is the primary factor influencing

exports and the contribution of exports to economic growth.

Concerning prices, the overall level of future inflation is forecasted to remain on track with

the prescribed target at 5%+1% in 2010 and 2011. No significant inflationary pressure is

predicted for the first half of 2010. In disaggregation by source, inflationary pressure from

externals will come mainly from rising inflation in trading partner nations in line with forecasts

of improvement in the global economy and mounting international commodity prices. On

the domestic front, inflationary pressure is predicted from increased demand, in keeping

with the forecasted improvement in the domestic economy. However,

this forecast involves a number of risks that may arise if production

and expectations deviate from the devised scenario.

ASSUMPTIONS AND SCENARIOS

International Economic Conditions

The faster than predicted global economic recovery underpins the

more optimistic outlook for world economic growth. Economic

recovery will be driven mainly by Asia’s emerging markets in

keeping with robust exports and buoyant domestic demand. In

Asia in particular, the fiscal stimulus in China has put the Chinese

economy on the road to rapid recovery and stimulated activity in

China’s manufacturing sector. By comparison, economic growth in

Europe lags behind due to high levels of unemployment and fiscal

deficit problems in some European nations. Despite this, the strong

fundamentals of Asian economies ensured only limited spillover effect

of the European Union fiscal crisis.

Table 4.1

World Economic Outlook Projection (% yoy)

2010 2011 2008 2009

Projection

World Output 3.0 -0.8 3.9 4.3

Advanced Economies 0.5 -3.2 2.1 2.4

United States 0.4 -2.5 2.7 2.4

Euro Area 0.6 -3.9 1.0 1.6

Japan -1.2 -5.3 1.7 2.2

Other Advaced Economies 1.7 -1.3 3.3 3.6

Emerging and Developing Economies 6.0 2.0 6.0 6.3

Africa 5.3 1.8 4.2 5.3

Central Eastern Europe 3.1 -4.3 2.0 3.7

Commenwealth of Independent States 5.5 -7.5 3.8 4.0

Developing Asia 7.6 6.4 8.3 8.3

China 9.0 8.5 10.0 9.7

India 7.3 5.6 7.7 7.8

Middle East 5.3 2.2 4.5 4.8

Western Hemisphere 4.2 -2.3 3.7 3.8

Source: MF, World Economic Outlook Update January 2010


28

The improvement in the world economy has prompted the IMF to revise its forecast for world

economic growth in the January 2010 edition of the World Economic Outlook Update to

3.9% in 2010, climbing to 4.3% in 2011. This compares favourably with the earlier forecast

at 3.1% for 2010 (IMF, World Economic Outlook, October 2009). Developing nations,

dominated by China and India, are predicted to chart 6.0% growth in 2010, on par with

performance in 2008. Advanced nations are predicted to grow at 2.1% in 2010 and 2.4%

in 2011 (Table 4.1).

With this recovery under way, volume of world trade is predicted to expand ahead of earlier

projections. In January 2010, the IMF and World Bank forecasts for growth in world trade

volume in 2010 were revised upwards to 5.8% and 4.3% (yoy), dramatically higher than

the earlier forecasts of 2.5% and 3.8%. For 2011, these multilateral institutions predict

that world trade volume will mount again by 6.3% and 6.2% (yoy). Another international

agency, the World Trade Organisation (WTO) forecasts world trade volume to mount in

2010 by a steep 9.5% (yoy).

Fiscal Policy Scenario

In response to macroeconomic developments, the Government plans amendments to the

2010 Budget or the Draft Revised 2010 Budget. The revisions to the 2010 Budget are aimed

at (i) anticipating changes in macroeconomic indicators, (ii) safeguarding price stability

for domestic goods and services and (iii) accelerated implementation of priority national

development programmes in 2010 and the medium-term. These changes have widened the

Budget deficit from the previous 1.6% of GDP to 2.1% of GDP, due to the greater increase

in expenditures compared to revenues.

On the revenues side, increased revenues are projected from oil and natural gas, following

the upward revision in the assumed crude oil price. On the expenditures side, the budget

envisages added spending to accommodate changes in macroeconomic assumptions,

maintain price stability for goods and services, accommodate budget expenditures for priority

development programmes not previously included within the 2010 Budget and maintain

the ratio of the education budget at 20% of total state expenditures. In regard to deficit

financing, most of the increased deficit will be funded from additional funds in the budget

financing surplus.

ECONOMIC GROWTH OUTLOOK

Economic growth in Indonesia may reach 5.5%-6.0% in 2010 (ahead of the originally

forecasted 5.0%-5.5%) before climbing to 6.0%-6.5% in 2011. Accelerating economic

activity will be supported by improvement on the external side and buoyant domestic

consumption. Externally, exports of goods and services will be driven mainly by the recovery

in the global economy, encompassing both developed nations and developing economies.

Recovery in Indonesia’s trading partner nations will provide an uplift for Indonesia’s exported

goods. This in turn will fuel growth in export-related sectors, such as manufacturing and


29

trade. Besides the upward trend in exports, household consumption is also predicted to

maintain high growth on the strength of rising incomes caused by the income effect from

more vigorous exports as well as sustained levels of consumer confidence.

Outlook for Aggregate Demand

Household consumption is predicted to maintain robust growth at 4.5%-5.0% in 2010

and 2011. High growth in household consumption is expected from improvements on the

external side. Exports, which showed positive performance in Q4/2009, will produce an

effect of boosting private incomes. Reflecting this are income expectations 6 months forward

published in the Bank Indonesia Consumer Survey.

On the other hand, a more conducive investment climate and a buoyant outlook for the

economy will encourage investors to invest in increased production capacity and business

expansion. Higher investment will also contribute to rising incomes, paving the way

for stronger public purchasing power. The forecast for brisk acceleration in household

consumption is also supported by healthy levels of consumer confidence and inflation. Various

indicators point to heartening developments and even a steadily rising trend. Growth in

motorcycle and car sales is mounting significantly. Similarly, imports of consumption goods

are climbing at an accelerated rate.

Growth in government consumption is projected to slow in 2010 to 5.9%-6.9% before

climbing back to about 8.8%-9.8% in 2011. In 2010, government consumption is forecasted

to ease at the central and regional levels due to reduced allocations of social aid and

miscellaneous expenditures. In 2001, however, higher allocations of personnel and material

expenditures and renewed increases in social aid funds will prompt renewed acceleration

in government consumption. Besides this, more fiscal balance funds will be channelled to

the regions in line with the forecasts of increased taxation and revenues and government

revenues from oil and natural gas production.

I II III IVI t e m

Table 4.2

Forecast of Economic Growth - Demand Side


Private Consumption 5.3 6.0 4.8 4.7 4.0 4.9 4.5 - 5.0 4.8 - 5.3

Government Consumption 10.4 19.2 17.0 10.3 17.0 15.7 5.9 - 6.9 8.8 - 9.8

Gross Fixed Capital Formation 11.9 3.5 2.4 3.2 4.2 3.3 8.8 - 9.3 10.8 - 11.3

Export Goods and Services 9.5 -18.7 -15.5 -7.8 -3.7 -9.7 10.2 - 11.0 11.0 - 12.0

Import of Goods and Services 10.0 -24.4 -21.0 -14.7 1.6 -15.0 12.5 - 13.5 14.8 - 15.8

GDP 6.0 4.5 4.1 4.2 5.4 4.5 5.5 - 6.0 6.0 - 6.5

20082009

2010* 2011*2009

YOY, Base Year 2000


30

Improvements in the investment climate and the brighter economic outlook will accelerate

investment growth. Investment is forecasted to grow at 8.8%-9.3% and 10.8%-11.3% in

2010 and 2011. Further improvement in the investment climate is expected in 2010 with

the upgrading in credit ratings issued by international rating agencies. On 25 February 2010,

Fitch Ratings elevated Indonesia’s sovereign rating to BB+ from the previous BB with stable

outlook. With this rating upgrade, Indonesia is now just 1 notch below investment grade.

In further developments, on 12 March 2010 S&P also updated Indonesia’s sovereign rating

from BB- to BB.

Optimism for a bright investment outlook was also borne out in a number of Bank Indonesia

surveys. In the Market Perception Survey, 80.3% of respondents claim that 2010 is an

opportune time for investment, while the Business Activity Survey points to a future rise in

investment value. On the other side, accelerated growth in household consumption and

recovery in exports will stimulate activity on the production side. Indications of this are

visible in indicators such as raw materials imports and capital goods imports, on the rise

since Q4/2009.

In analysis by investment category, non-construction investment is forecasted to chart high

growth. The relatively low cost of credit and conducive fundamentals in the economy are

key factors driving growth in non-construction investment. Although the BI Rate has seen

no further cuts since August 2009, loan interest rates are predicted to ease further due

to the time lag in monetary policy. Historically, more affordable lending rates have been

followed by higher growth in non-construction investment due to expectations of higher

disbursements of investment credit.

Alongside this, stable growth is forecasted for construction investment in 2010 and 2011.

Growth in construction investment will be boosted by ongoing government programmes

related to infrastructure and the boom in property developments. Among the various

indicators reinforcing optimism for construction investment growth are cement consumption

and cement sales, both on an upward trend.

The improving trend in global economic developments will boost demand for goods from

Indonesia with exports forecasted to climb 10.2%-11.0% in 2010 and 11.0%-12.0% in 2011.

In analysis by characteristics of export destinations, Indonesia’s trading partners comprise

both developing nations (such as China, India and the ASEAN countries) and advanced

economies (led by the US, Japan and Europe). However, distribution of Indonesian exports

by destination country has unfolded in different directions. Exports to developing markets

have progressively expanded their share, in contrast to exports to the developed world.

As a result, Indonesia’s exports have potential for accelerated growth in the future, given

that developing nations tend to achieve higher rates of economic growth compared to

advanced economies. The potential for accelerated exports from Indonesia is reflected in the

economic growth forecasts for Indonesia’s trading partners. The IMF predicts that growth

in the developing may reach 6.0% in 2010 and 6.3% in 2011. At the same time, advanced

economies are predicted to grow at 2.1% in 2010 and 2.4% in 2011.


31

The export outlook is not only supported by expanding demand in trading partner nations,

but also by the characteristics of Indonesia’s exports, most of which comprise resource-based

commodities. In the second half of 2009, when the global economic recovery began to set

in, exports of resource-based commodities contributed more to growth than manufactured

products. These commodities consist of agricultural products (such as rubber, timber and

seafood), mining products (such as coal, nickel and copper) and crude palm oil (CPO).

Resource-based commodities are used as inputs at the beginning of production chains to

produce secondary goods, such as manufactured products. In the aftermath of the crisis,

production activity will forge ahead at an intensified pace, generating increased demand

for Indonesia’s exports.

At the same time, manufactured products will also pick up in keeping with the brighter outlook

for economic recovery, particularly in developed economies. Indonesia’s manufactured exports

include chemicals, paper and textiles.

Export growth and mounting domestic demand will provide added momentum for imports of

goods and services with growth expected at 12.5%-13.5% in 2010 and climbing to 14.8%-

15.8% in 2011. The rebound in exports, mainly to trading partner nations, will create added

demand for raw materials from domestic and foreign sources. Raw material needs from other

countries will be supplied through imports, resulting in increased growth of imports of goods

and services. The strong relationship between exports and supply of needed imported raw

materials is visible in the parallel growth in exports and imports.

On the domestic front, mounting investment activity will also lead to higher imports of

capital goods and use of imported raw materials. Imports of capital goods consist of, among

others, machines and mechanical tools, electrical equipment and other goods. Imported raw

materials include iron and steel, chemicals and other products used as inputs in the domestic

manufacturing sector. In addition to imports for the purposes of domestic investment,

other import activities are conducted to supply needed household consumption goods. The

dominant consumer goods imports include food stuffs and processed beverages, clothing

and also motor vehicles.

Outlook for Aggregate Supply

In most cases, the latest GDP sector forecasts have been revised upwards from original

levels. Recovery in trading partner nations has spurred higher growth in export-oriented

manufacturing. In a similar vein, the trade sector has begun showing renewed vigour,

boosted by rising imports.

Agriculture sector growth in 2010 is forecasted higher than in the preceding year (reaching

4.1%-4.4%), despite the adverse effects of the El Nino phenomenon. Following this in 2011,

agriculture is projected to grow at 4.4%-4.6%. Agriculture sector performance is envisaged

to benefit from full government support. The government is working intensively to prepare

for and monitor regions with potential to suffer drought due to the effects of El Nino. The

government will also provide in the form of water pumps and high quality seeds. Besides


32

this, the government plans to maintain rice self-sufficiency within the framework of food

resilience. The food resilience and self-sufficiency programme has prompted the government

to develop the agricultural sector through expansion of arable land, provision of high quality

seeds and improvement to agricultural infrastructure.

The government drive for agricultural expansion is now focused on 3 areas: Dumai (Riau),

North Sumatra (former Inalum area) and Merauke (Papua). In Dumai and North Sumatra,

expansion of agricultural land is part of the plan to develop these areas into production

centres for crude palm oil (CPO). In Merauke, Papua, the government is developing vast food

estates for cultivation of oil palm, soy beans, sugar cane, corn and rice. So far, 500 thousand

hectares have been planted with corn since 2008. The development of these corn estates is

intended to support national food self-sufficiency.

To strengthen rice production, the government is promoting the development of high

yield rice cultivation. The Agricultural Research and Development Agency at the Ministry

of Agriculture reports that it has developed 7 varieties of hybrid rice, i.e. Galur CMS A1,

Galur CMS A2, Galur Restorer R.17, Galur Restorer R.32, Hipa 5 Ceva, Hipa 6 Jete and IR

8025A/BR827-35. However, the productivity of these hybrid seeds is suffers in comparison to

varieties developed in China. Competition from Chinese rice in terms of price and productivity

will become a major challenge in 2015. To address this, the government will encourage

researchers at the Ministry of Agriculture to develop and produce varieties of high yield rice

that are competitive with China.

Corn consumption is predicted to mount steadily. The government drive to promote

consumption of corn by the public is intended to reduce dependence on rice in basic diet. In

addition, the development of corn estates is driven by growing demand from poultry farms.

Poultry production is forecasted to expand by a brisk average 30% and corn is the primary

raw material for feed production for poultry farming.

Mining sector growth in 2010 is forecasted at 4.2%-4.4% and in 2011 at 4.4%-4.6%.

The decline in mining production is reflected in the reduced sales target for gold in 2010

I II III IVS e c t o r

Table 4.3

Forecast of Economic Growth - Supply Side


Agriculture 4.8 5.9 2.9 3.3 4.6 4.1 4.1 - 4.4 4.4 - 4.6

Mining and Quarrying 0.7 2.6 3.4 6.2 5.2 4.4 4.2 - 4.4 4.4 - 4.6

Manufacturing 3.7 1.5 1.5 1.3 4.2 2.1 4.1 - 4.4 4.4 - 4.7

Electricity, Gas, and Water Supply 10.9 11.2 15.3 14.5 14.0 13.8 13.6 - 14.2 14.2 - 14.5

Construction 7.5 6.2 6.1 7.7 8.0 7.1 8.1 - 8.5 8.3 - 9.2

Trade, Hotels, and Water Supply 6.9 0.6 (-0.0) (-0.2) 4.2 1.1 5.1 - 5.5 5.7 - 6.2

Transportation and Communication 16.6 16.8 17.0 16.4 12.2 15.5 12.6 - 14.3 12.8 - 14.2

Financial, Rental, and Business Services 8.2 6.3 5.3 4.9 3.8 5.0 4.9 - 5.3 5.5 - 5.9

Services 6.2 6.7 7.2 6.0 5.7 6.4 4.9 - 5.2 5.7 - 6.0

GDP 6.0 4.5 4.1 4.2 5.4 4.5 5.5 - 6.0 6.0 - 6.5

20082009

2010* 2011*2009

YOY, Tahun Dasar 2000


33

compared to the preceding year. This target was determined with consideration for expected

gold content and ore production levels. Furthermore, Indonesia’s oil and gas production is

projected short of desired levels. The flagging production of Indonesian oil and natural gas

has several causes: (i) ageing wells with an average natural decline of 12%, necessitating

the discovery of new wells, (ii) most production equipment is at the end of its useful life,

requiring added investment for maintenance or replacement and (iii) limited budget for oil

and gas exploration.

Mining sector performance will be driven mainly by coal. In 2010, coal production is expected

to surpass production in 2009. Coal production in 2010 is projected at 280 million tons,

ahead of the 2009 output of 250 million tons. The forecast for increased national coal

production is supported by the latest developments, with coal production up significantly

near the end of the first quarter of 2010. Demand for coal is predicted from countries such

as India, China and Japan. Although external demand is forecasted to rise, this will not affect

domestic supplies of coal.

Manufacturing growth is predicted to reach 4.1%-4.4% in 2010 and 4.4%-4.7% in 2011. The

resurgence of the domestic and global economy has fuelled optimism in the manufacturing

sector. The rebound in exports combined with rising purchasing power from external and

domestic sources has boosted production in this sector. The government commitment to

removing the various obstacles to business in areas such as infrastructure (roads and energy)

and the streamlining of various regulations will stimulate growth in this sector.

The food and beverages industry maintained buoyant performance last year, despite the

downturn in other industries. This healthy performance is predicted to carry forward in

the years to come. Bottled water production in 2010 is forecasted at 13.7 billion litres,

representing 7.03% growth over the 2009 production of 12.8 billion litres. The Ministry of

Industry has issued the Indonesia National Standards (SNI) for bottled water production. The

SNI is based on Minister of Industry Regulation No. 69/2009 dated 3 July 2009 concerning

Introduction of Mandatory Indonesian National Standards (SNI) for Bottled Water. The

introduction of the SNI is expected to pave the way for Indonesian bottled water products

to compete on the global market.

At the same time, growing activity in infrastructure development and construction of various

factories will stimulate activity in construction sector-related industries. To anticipate growing

future demand, some cement producers are investing in capacity expansion. The rising

trend in consumption has also prompted expansion in the steel industry and automotive

component manufacturing.

The footwear industry will see the relocation of footwear plants owned by 10 investors from

Taiwan, China, Korea and Thailand. These investors are expected to invest up to 20 million

US dollars. Locations in Indonesia regarded as conducive and strategic for the footwear

manufacturing development envisaged by these investors include Tangerang, Sidoarjo,

Mojokerto, Pasuruan and Bandung. The infrastructure in these areas is regarded as suitable

for development of a manufacturing base. The investment by these ten investors is expected

to create work for about 10,000 new employees. The planned relocation of the foreign


34

footwear manufacturers to Indonesia is driven by the relatively low cost of labour. In addition,

licensing procedures and political conditions in Indonesia have steadily improved.

Improving economic conditions and rising purchasing power are set to push growth in the

trade, hotels and restaurants sector to 5.1%-5.5% in 2010 with growth climbing to 5.7%-

6.2% in 2011. Increased activity in the trade subsector is reflected in the ascending trend in

the retail sales index. With the launching of the Asean-China Free Trade Agreement (ACFTA),

traders will have a more robust source of merchandise supply. Imported goods are expected

to find a substantial market in Indonesia, as reflected in the close linkage of imports with

growth in the trade, hotels and restaurants sector.

Buoyant growth is forecasted in the transport and communications sector in the 12.6%-

14.3% range in 2010 and at 12.8%-14.2% in 2011. Mounting economic activity in tandem

with improvement in economic conditions is expected to boost activity in transportation. To

anticipate rising travel, some airlines are investing in rejuvenation and expansion of fleets

to service new air routes. This investment will be followed by improvements in services to

customers to enable domestic airlines to compete under the ASEAN Open Sky Policy.

To strengthen aviation industry performance, the government has offered a fiscal incentive

through import duty subsidies on aircraft spare parts in Indonesia. Thirty airlines operating

scheduled and chartered flights have taken advantage of this incentive. The 30 airlines will

make use of the fiscal incentive on aircraft spare parts to a ceiling of Rp 312 billion.

In the communications subsector, telecommunications industry providers are focusing on

the development of broadband for greater penetration of the internet. Expansion of mobile

broadband services will help raise the standard of living in society in social and in economic

terms. This will be possible if broadband services become available in adequate quantity and

proper quality. To this end, the Ministry of Communications and Information Technology is

determined to expand broadband coverage in order to boost economic growth. To develop

mobile broadband, the Government has issued 8 WiMAX licences in various zones since July

2009, with commercial services slated for early 2010.

The construction sector is expected to forge ahead with growth at 8.1%-8.5% in 2010

and 8.3%-9.2% in 2011. The forecast is for activity in the construction sector to be driven

by construction of infrastructure. The Government has committed itself to improving

the condition of Indonesia’s infrastructure in order to accelerate the pace of economic

development. About 1,900 MW of the 10,000 MW Phase I energy project entered operation

in 2009. An additional 2,400 MW will be ready in 2010 and 5,000 MW in 2011. The 10,000

MW project components ready for operation in 2010 are the Labuan thermal power plant

units 1 and 2, the Rembang thermal power plant units 1 and 2, the Suralaya thermal power

plant, Indramayu thermal power plant units 1, 2 and 3 and Paiton. The operation of some of

the thermal power points in the 10,000 MW energy programme is expected to strengthen

the Java-Bali power grid system, which faces an annual 7% rise in electricity demand.

In the phase II 10,000 MW energy project, tendering will not commence until mid-April

2010 and powerplants are expected to come into operation in 2014. The development of


35

the phase II 10,000 MW energy project will be divided into several schedules. In Schedule I,

3,976 MW capacity will be completed in 2010. Following this will be Schedule II for 3,500

MW. The remainder will be completed in the final schedule. Investment in the phase II 10,000

MW project is forecasted at 16.34 billion US dollars, divided into 15.96 billion dollars for

powerplant construction and 383 million US dollars for transmission lines. These projects are

being funded by the State Budget, PT PLN cash flow, the Japan International Cooperation

Agency (JICA), loans from China and the Asian Development Bank (ADB). The powerplant

projects slated for construction will run on renewable energy sources, coal and gas.

Growth in the financial services, leasing and general services sector is predicted at 4.9%-5.3%

in 2010, climbing to 5.5%-5.9% in 2011. The more vigorous pace of economic activity is

expected to strengthen demand for financial intermediary services. Similarly, with signs of

more robust recovery under way in the global and domestic economy, banks are expected to

show progressively improved response to future interest rate movements. Some banks have

declared their willingness to support advancement in the real sector, and particularly MSMEs.

This will pave the way for more accessible and affordable funding for economic activities.

INFLATION FORECAST

Concerning prices, no significant inflationary pressure is predicted to emerge during the first

half of 2010. In an overall perspective, future inflation is forecasted to remain on track with the

prescribed target at 5%+1% in 2010 and 2011. In 2010, external side inflationary pressure

is contributed mainly by rising inflation in trading partner nations in line with forecasts of

improvement in the global economy and mounting international commodity prices. On the

domestic front, inflationary pressures are predicted from increased demand, in keeping with

the forecasted improvement in the domestic economy. This is indicated in the modest rise

in total capacity utilisation. Countering this is a moderating trend in inflation expectations,

evident in various survey findings pointing to reduced inflation expectations in 2010. The

improvement in inflation expectations is consistent with the Bank Indonesia commitment to

keep inflation on track with the targeting range. Concerning volatile foods inflation, adverse

weather conditions with flooding in some rice growing centres is forecasted to generate

only mild inflationary pressure amid rising international food prices.

In 2001, core inflation pressure is expected to keep pace with the ongoing improvement

in the domestic and global economy. Volatile foods inflation, however, is expected to hold

generally stable. The relatively unchanged level of volatile foods inflation is explained largely

by predictions of plentiful food production and smooth distribution as in 2010. Administered

prices inflation is predicted to mount slightly in line with increases in international commodity

prices and world oil prices. Besides this, no increases are expected in 2011 concerning strategic

administered prices, such as subsidised fuels, electricity billing rates and transport fares.


36

RISKS

The more optimistic level of GDP growth compared to earlier forecasts nevertheless carries

a number of risks from external and domestic factors. The heightened uncertainties that

affect this forecast necessitate the use of methods to quantify various risk balances, one of

which is the fan chart.

The steady improvement in the global economic recovery may push world trade volume

beyond forecasted levels in 2010. Along with this growth in volume of world trade, potential

exists for non-oil and gas commodity prices to soar ahead of forecasts.

If world trade activity expands at a higher rate, demand for Indonesian

exports is also predicted to rise. When commodity prices rise, exporters

have greater incentive to boost exports.

Following this in 2011, conditions in the world economy are generally

predicted to improve further. Even so, global risks portend to loom from

(i) possible outbreak of financial system distress, (ii) still limited availability

of credit and (iii) risk of inflation caused by excess global liquidity and

asset price bubbles. For these reasons, there is the risk that global

economic growth could fall short of forecasted levels. Accordingly, 2011

still carries downside risk in the volume of world trade.

A forecast of future GDP based on the above factors and the balance of

risks in 2010 and 2011 is presented in the inflation fan chart (Graph 4.1).

The GDP fan chart also illustrates the heightened levels of uncertainty

in economic growth forecasts for 2011 compared to the 2010 GDP

forecast, as reflected in the widening of the fan chart range from 2010

to 2011.

Like the GDP forecast, the inflation forecast also comes with significant

uncertainties, particularly the risk of hikes in administered prices. Added

risks will also arise if food production and distribution underperform

forecasted levels. Besides the risks that could drive the inflation projection

beyond the forecasted level, other factors exist that could ease inflationary

pressures from rising inflationary expectations. Potential for improvement

in inflation expectations is predicted from growing public confidence in

Bank Indonesia’s efforts for achieving the inflation target. A forecast of

future inflation based on these factors and the balance of risks in 2010

and 2011 is presented in the inflation fan chart (Graph 4.2).

Graph 4.1

Fan Chart GDP 2010-2011

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Graph 4.2

Fan Chart Inflation 2010-2011

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Monetary Policy Response Q1-2010

37

5. Monetary Policy Response Q1 - 2010

In the Board of Governors’ Meeting convened on 6 April 2010, Bank Indonesia decided

to maintain the BI Rate at 6.50%. This decision was taken after careful consideration and

evaluation of economic developments in Q1/2010 and deliberation of the future economic

outlook. In the view of Bank Indonesia, the 6.50% level in the BI Rate remains consistent with

the 5%+1% inflation target for 2010 and the present monetary stance is also conducive to

the economic recovery process and operation of banking intermediation.

Inflation in March 2010 was down from the previous month. In monthly figures, the CPI

recorded 0.14% deflation (mtm), with annual inflation at 3.43% (yoy). These developments

reinforce confidence that overall inflation in 2010 will come within the 5%±1% targeted

range.

Conditions in the banking system are marked by relative stability. Economic liquidity

underwent expansion during Q1/2010. In February 2001, credit expansion showed a positive

trend, climbing to 9.4% (yoy). At the micro level, the banking industry is in stable condition,

as reflected in the high level of the CAR and subdued NPLs gross at 4%.

Looking forward, monetary policy will be consistently directed at maintaining low inflation

while taking account of the drive to accelerate economic recovery. Various actions will be

taken to promote the effectiveness of monetary policy transmission, including efficiency

improvements in the banking system. In addition, Bank Indonesia will also take measures to

manage risks in order to maintain monetary stability and financial system stability. Actions to

be taken include management of excess liquidity in the money market and banking system

to create conducive conditions for maintenance of monetary stability and financial system

stability and to strengthen policy synergy between Bank Indonesia and the Government.

At the central level, this synergy operates through the Inflation Targeting, Monitoring and

Control Coordination Team (TPI) and at the regional level via the Regional Inflation Control

Teams (TPIDs). In these forums, measures are sought to resolve inflationary pressure arising

from supply-side constraints.


38

Statistics

Table 1

Interest Rate of Money Market. Deposits. and Credit

(Percent per Annum)

PeriodInterbank

MoneyMarket*

SBIDiscount

Rate*

Time Deposit Interest Rate Credit Interest Rate

1month

3months

6months

12months

24months

5.95 7.44 6.50 6.93 7.35 8.04 9.42 13.31 13.78

6.95 8.25 6.98 7.19 7.11 7.11 8.05 13.36 13.65

6.92 10.00 9.16 8.51 8.01 8.65 8.82 14.51 14.47

9.44 12.75 11.98 11.75 10.17 10.95 12.39 16.23 15.66

10.28 12.73 11.61 12.19 12.10 12.02 12.64 16.35 15.90

10.23 12.50 11.34 11.70 12.09 12.28 12.61 16.15 15.94

8.90 11.25 10.47 11.05 11.52 12.36 12.47 15.82 15.66

5.97 9.75 8.96 9.71 10.70 11.63 11.84 15.07 15.10

7.52 9.00 8.13 8.52 9.29 10.17 11.73 14.49 14.53

5.58 8.75 7.46 7.87 8.40 9.54 11.73 13.88 13.99

6.83 8.25 7.13 7.44 7.80 8.91 11.24 13.31 13.45

4.33 8.00 7.19 7.42 7.65 8.24 10.83 13.00 13.01

8.01 7.96 6.88 7.26 7.57 7.79 10.06 12.88 12.59

8.43 8.73 7.19 7.49 7.79 7.78 9.91 12.99 12.51

9.37 9.71 9.26 9.45 9.14 9.34 9.83 13.93 13.32

9.40 10.83 10.75 11.16 10.34 10.43 8.62 15.22 14.40

8.04 8.21 9.42 10.65 10.45 11.31 8.33 14.99 14.05

6.96 6.95 8.52 9.25 9.75 11.37 9.03 14.52 13.78

6.30 6.48 7.43 8.35 8.71 10.80 9.14 14.17 13.20

6.28 6.46 6.87 7.48 7.87 9.55 9.10 13.69 12.96

6.18 6.41 7.09 7.31 7.59 9.12 7.68 13.75 13.24

WorkingCapital

Investment

2005Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2006Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2007Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2008Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2009Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2010Qtr. I

* Februari 2010** January 2010

Statistics

39

Table 2

Money Market Transactions

(Billions of Rupiah)

Bank Indonesia Certificate (SBI) 2)

Period Interbank Transaction1) Issuance Repayment Outstandng

2005

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2006

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2007

Qtr. I

Qtr. II

Qtr. III

Qtr.IV

2008

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2009

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

1) Morning Transaction2) Transaction between Bank Indonesia and Commercial Banks only. Since March 1994 includes Repo SBPU.

16,751 369,495 415,784 57,536

18,589 362,770 315,996 101,058

17,430 230,026 289,657 41,427

20,316 183,663 150,534 74,632

23,866 415,638 356,471 133,799

23,910 517,853 483,967 167,685

25,383 599,495 586,715 180,464

27,706 665,673 636,381 209,756

37,341 774,866 740,951 243,671

38,323 846,655 832,325 258,002

36,615 895,562 887,411 266,152

32,061 777,247 795,475 247,926

37,482 858,289 906,767 212,463

23,510 489,529 543,655 165,145

27,115 389,138 437,313 116,969

14,029 404,071 340,913 180,128

22,897 398,394 397,703 233,754

30,656 324,806 324,775 231,392

29,038 451,257 449,566 217,287

24,566 631,233 592,046 253,756


40

I II III IV I II III IV I II III IV I*

* January 20101) Excluded central government. non-resident. foreign counter part value. and managable credit.

Table 3

Outstanding of Credits in Rupiah and Foreign Currency of Commercial Banks by Group of Banks and Economic Sector1)


1 State Bank - Agriculture

- Mining

- Industry

- Trade

- Services

- Others

2 Private National Foreign Bank - Agriculture

- Mining

- Industry

- Trade

- Services

- Others

3 Regional Government Bank - Agriculture

- Mining

- Industry

- Trade

- Services

- Others

4 Foreign and Joint Bank - Agriculture

- Mining

- Industry

- Trade

- Services

- Othersn

5 Rurral Bank - Agriculture

- Mining

- Industry

- Trade

- Services

- Others

6 Sub total (1 until 4) - Agriculture

- Mining

- Industry

- Trade

- Services

- Others

282,633 301,186 314,427 348,973 350,232 394,065 432,850 461,877 466,605 495,440 504,649 533,945 520,865 24,222 26,805 28,433 30,281 30,711 32,381 35,153 37,409 38,367 42,041 41,313 45,091 32,789

7,414 9,006 6,556 10,647 13,371 14,922 14,778 13,807 13,363 11,923 14,205 16,795 14,196

71,600 69,959 69,450 72,810 72,706 81,038 88,181 96,838 98,660 99,825 92,634 92,485 90,957

63,561 68,172 75,722 85,601 79,209 92,719 98,865 102,017 103,408 113,130 118,580 129,497 65,460

39,477 44,868 47,465 55,587 55,271 64,182 77,295 87,505 83,540 88,540 91,532 93,320 93,431

76,359 82,376 86,801 94,047 98,964 108,823 118,578 124,301 129,267 139,981 146,385 156,757 224,031

335,998 367,168 394,451 432,595 451,967 500,718 534,599 552,617 530,642 529,687 549,349 593,400 578,640 11,312 12,053 12,467 15,533 15,571 18,298 18,169 19,150 18,722 19,353 19,112 21,359 20,049

5,409 7,321 7,076 10,678 9,621 10,137 10,850 11,137 8,979 9,697 10,861 15,013 14,409

59,826 63,319 68,670 73,840 77,952 84,610 90,896 97,042 93,414 84,488 86,575 92,738 88,948

86,783 95,549 100,883 108,726 111,756 123,057 125,908 130,687 120,114 121,956 124,949 134,434 129,676

80,252 90,497 98,503 110,144 115,400 131,115 143,486 148,332 144,072 145,936 151,281 162,535 143,922

92,416 98,429 106,852 113,674 121,667 133,501 145,290 146,269 145,341 148,257 156,571 167,321 181,636

58,851 65,123 70,937 71,921 75,065 85,339 93,991 96,440 100,817 110,968 119,552 120,701 118,671 2,090 2,130 2,248 2,274 2,379 2,710 3,067 3,182 3,143 3,289 3,749 3,706 3,397

58 58 55 43 53 182 187 270 312 388 615 675 643

487 520 543 631 710 770 787 814 829 943 1,082 1,146 1,891

8,386 8,762 9,295 9,617 10,191 11,504 12,042 12,055 12,638 14,006 14,898 15,278 13,685

6,776 7,747 9,850 8,879 8,615 10,831 13,456 13,356 13,153 15,716 18,790 17,565 16,083

41,054 45,906 48,946 50,477 53,117 59,342 64,452 66,763 70,742 76,626 80,418 82,331 82,973

117,232 121,509 127,445 141,622 151,908 161,998 178,061 189,245 184,654 168,614 168,509 170,748 167,735 5,395 5,460 5,933 7,817 7,449 6,425 6,505 6,419 7,020 6,669 5,535 5,236 4,725

2,287 2,540 2,629 3,972 4,591 3,910 4,478 5,327 6,081 4,712 6,235 9,076 8,810

50,219 51,029 51,259 56,527 60,265 65,896 68,739 74,458 71,358 61,420 58,833 59,314 54,578

7,691 9,035 10,379 11,726 11,383 13,022 14,256 13,246 15,113 13,598 13,364 12,873 14,857

30,709 31,540 34,679 37,831 43,878 46,763 56,523 60,766 57,418 53,919 55,326 52,828 51,962

20,931 21,905 22,566 23,749 24,342 25,982 27,560 29,029 27,664 28,296 29,216 31,421 32,802

117,232 121,509 20,334 20,469 21,592 23,856 25,706 25,413 25,333 26,382 27,434 28,014 28,353 5,395 5,460 1,294 1,339 1,498 1,672 1,769 1,733 1,774 1,915 1,934 2,002 2,036

2,287 2,540 0 0 0 0 0 0 0 0 0 0 0

50,219 51,029 324 333 367 391 436 426 433 456 486 505 507

7,691 9,035 7,831 7,664 7,973 8,866 9,516 9,307 8,998 9,368 9,746 9,801 9,866

30,709 31,540 2,084 2,093 2,185 2,433 2,684 2,672 2,705 2,861 2,935 3,054 3,084

20,931 21,905 8,801 9,040 9,569 10,494 11,301 11,275 11,423 11,782 12,333 12,652 12,860

794,714 854,986 913,158 1,004,178 1,038,912 1,148,891 1,249,970 1,313,873 1,308,051 1,331,091 1,369,493 1,446,808 1,414,264 43,019 46,448 49,654 57,203 57,562 61,413 64,623 67,828 69,026 73,267 71,643 77,394 62,996

15,168 18,925 16,310 25,336 27,634 29,151 30,293 30,541 28,735 26,720 31,916 41,559 38,059

182,132 184,827 190,242 204,141 212,000 232,705 249,039 269,578 264,694 247,132 239,610 246,188 236,881

166,421 181,518 192,985 214,804 211,719 235,898 249,762 259,953 260,271 272,058 281,537 301,883 233,544

157,214 174,652 188,838 210,561 221,123 249,700 286,740 306,141 300,888 306,972 319,864 329,302 308,482

230,760 248,616 275,129 292,133 308,874 340,024 369,513 379,832 384,437 404,942 424,923 450,482 534,301

2007 2008 2009 2010

Statistics

41

1) M1 plus Quasi Money2) Currency Outside Banks plus Demand Deposits3) Including Government Particular Account4) Termasuk derivatif keuangan

Tabel 4

Uang Beredar dan Faktor-Faktor yang Mempengaruhi

(Miliar Rupiah)

M2 Affecting Factors

End ofPeriod

Total 1) Total 2)

M1

CurrencyOutside

BanksDemand

DepositsQuasi

MoneyNet Foreign

Assets

NetClaims On

CentralGovt.3)

Claims OnOfficial

Entities andState

Enterprises

Claims OnPrivate

Enterprisesand

Individuals

2004

2005

2006

2007

2008

2008

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2009

Qtr. I

Qtr. II

Qtr. III

Qtr. IV

2010

Qtr. I*

1,033,877 245,946 109,028 136,918 785,261 253,260 500,318 13,908 605,927 -90,113

1,202,762 271,140 123,991 147,149 929,343 301,573 495,686 17,220 733,183 -87,639

1,382,493 347,013 150,654 196,359 1,032,865 401,710 507,337 27,648 821,649 -107,498

1,649,662 450,055 182,967 267,089 1,196,119 509,843 507,120 39,891 1,005,739 -102,955

1,895,839 456,787 209,747 247,040 1,435,772 593,137 387,248 47,949 1,314,049 -98,144

1,594,390 409,768 164,609 245,159 1,181,322 533,323 385,570 33,669 1,053,869 -94,992

1,703,381 453,047 189,040 264,007 1,247,213 550,015 371,647 36,516 1,159,311 -113,902

1,778,139 479,738 222,805 256,934 1,295,292 509,659 360,756 45,375 1,253,456 -93,287

1,895,839 456,787 209,747 247,040 1,435,772 593,137 387,248 47,949 1,314,049 -98,144

1,916,752 448,034 186,119 261,914 1,466,364 691,465 363,536 46,541 1,303,885 -109,433

1,977,533 482,621 203,406 279,215 1,491,950 655,440 399,395 48,996 1,320,131 -103,076

2,018,031 490,022 210,343 279,679 1,525,204 688,891 390,295 55,139 1,348,814 -139,119

2,141,384 515,824 226,006 289,818 1,622,055 663,635 449,977 66,589 1,408,724 -125,445

2,108,857 494,698 211,852 282,846 1,607,204 688,591 414,780 65,304 1,361,997 -117,003

NetOther

Items 4)


42

Table 5

Base Money and Its Affecting Factors


272,239 289,727 310,265 379,582 325,044 349,649 392,136 344,688 304,718 322,994 354,297 402,118 380,145

0 0 0 0 0 0 0 0 0 0 0 0 0

155,498 173,888 189,221 220,785 198,940 224,342 270,243 264,391 226,672 244,634 273,744 279,029 255,418

129,618 146,715 160,327 183,419 164,995 189,453 223,166 209,378 186,538 203,838 210,822 226,382 207,226

25,880 27,173 28,894 37,366 33,945 34,889 47,077 55,013 40,134 40,796 62,923 52,646 48,192

116,558 115,524 120,740 158,452 125,705 124,811 121,302 79,648 77,404 77,744 79,920 89,903 87,743

183 315 304 345 399 496 591 650 642 616 633 601 649

305,744 330,295 337,523 356,883 351,874 351,561 355,967 338,692 354,727 356,930 376,681 403,858 434,958

-33,505 -40,569 -27,258 22,699 -212,380 -192,491 -137,121 -213,668 -323,022 -259,388 -211,887 -183,794 -235,956

200,460 187,081 184,961 249,069 128,907 117,614 123,797 172,012 105,571 136,202 144,747 200,956 146,762

18,186 18,136 18,136 8,847 8,838 8,800 8,800 8,711 8,715 8,715 8,715 8,665 8,660

10,598 10,366 10,206 9,994 9,751 9,353 9,227 9,009 8,783 8,622 8,458 8,231 8,169

5,366 5,389 5,357 3,074 3,089 3,295 3,155 3,815 2,546 2,472 2,415 2,415 11,236

-247,525 -264,280 -254,096 -281,164 -219,099 -191,525 -152,563 -233,866 -257,701 -267,412 -242,991 -289,892 -303,893

-239,977 -257,998 -265,034 -247,688 -212,463 -165,145 -116,967 -179,879 -232,700 -232,731 -220,676 -226,887 -270,784

-19,298 -21,615 -4,750 -48,933 -5,737 -4,989 -1,403 -4,223 -15,288 -28,277 -22,824 -36,416 -25,442

11,750 15,333 15,688 15,457 -899 -21,391 -34,193 -49,764 -9,714 -6,404 509 -26,589 -7,666

-139,050 -121,610 -131,204 -141,151 -143,866 -140,027 -129,538 -173,348 -190,936 -147,987 -133,230 -114,170 -106,892

2007 2008 2009 2010

I II III IV I II III IV I II III IV I*

I. Base Money

a. Statutory Reserve Shortfall

b. Currency

- Currency outside bank

- Cash in vaults

c. Commercial Banks Positive Balance

d. Private Sector Demand Deposits

I. Factor Affecting Base Money

a. Net International Reserve 1)

b. Net Domestic Assets

- Net Claims on Central Government

- Liquidity Support

- Liquidity Credits

- Others Claims

- Open Market

- SBI (net) 2)

- FASBI

- Others 3)

- Net Other Items

* Posisi Februari 20101) Before June 1997 : NFA. after June 1997 : NIR using constant rate Rp7.000/$ Since June 1998 up to March 1999 using constant rate Rp10.000/$ Since April 1999 using constant rate Rp7.500/$ Since 21 November 1999 using constant rate Rp7.000/$ Sejak 25 Mei 2000 for account NIR using IRFCL (Int’l Reserve and Foreign Currency Liquidity) concept2) Since March 2000 include SBI Syariah3) including Government Bonds and FTO (Fine Tune Operation)

Statistics

43

Table 6

Indonesia Current Account Payment 1)

(Millions of $)

2006 2007 2008* 2009**

Total I II III IV Total I II III IV Total I II III IV

I. Current Account

A. Goods. net (Trade Balance) Export f.o.b Import f.o.b

B. Services (net)

C. Income (net)

D. Current Transfers (net)

II. Capital and Financial Account

A. Capital Account B. Financial Account

1. Direct Investment Abroad (net) Domestic (FDI). (net) 2. Portfolio Investment Asset (net) Liability (net) 3. Other Investment Asset (net) Liabiliaty (net) 2)

III. Total (I + II)

IV. Errors and Omissions

V. Overall Balance (III + IV)

VI. Monetary Movements 3)

Changes in Reserves Assets 3)

a.l. Transaction

IMF: Purchases Repurchases

Memorandum: Reserve Assets Posistion 4)

Current Account (% GDP) Debt Service Ratio (%) 5)

a.1. Government Related & Monetary Authorities 6) * Temporary figures.** Very Temporary figures.1) New format since January 2004 publication.2) Not included IMF package3) Negative represents surplus and positive represents deficit4) Since1988. reserve assets position is based on Gross Foreign Asset Replacing Official Reserve. Since 2000 reserve assets position is based on International Reserve and Foreign Currency Liquidity (IRFCL).5) Ratio of external debt service payments to export of goods and services.6) Consists of Government. State Owned Enterprises Except Banks. and Bank Indonesia.

10,859 2,638 2,271 2,152 3,431 10,492 2,742 -1,013 -967 -637 126 2,509 2,481 2,150 3,442 29,660 7,710 8,108 7,488 9,448 32,754 7,536 5,443 5,771 4,166 22,916 6,886 8,367 8,491 11,454 103,528 26,626 29,202 30,009 32,177 118,014 34,412 37,345 38,081 29,768 139,606 24,179 28,130 31,273 35,932 -73,868 -18,916 -21,095 -22,521 -22,729 -85,260 -26,876 -31,902 -32,309 -25,603 -116,690 -17,293 -19,763 -22,781 -24,478 -9,874 -3,163 -2,991 -2,764 -2,922 -11,841 -3,071 -3,387 -3,313 -3,227 -12,998 -2,743 -3,310 -3,517 -4,585 -13,790 -3,163 -4,023 -3,811 -4,527 -15,525 -3,093 -4,425 -4,756 -2,881 -15,155 -2,742 -3,776 -4,072 -4,742 4,863 1,254 1,178 1,240 1,432 5,104 1,371 1,356 1,331 1,305 5,364 1,109 1,200 1,247 1,315 3,025 1,836 2,029 -934 661 3,592 -529 2,105 2,370 -5,822 -1,876 1,502 -1,757 2,523 1,405 350 43 127 255 122 547 17 62 187 29 294 19 29 34 14 2,675 1,793 1,902 -1,189 539 3,045 -546 2,043 2,184 -5,850 -2,170 1,483 -1,785 2,489 1,390 2,211 -246 1,426 764 309 2,253 630 197 1,871 720 3,419 453 400 472 988 -2,703 -1,282 392 -1,427 -2,358 -4,675 -1,730 -1,436 -1,517 -1,217 -5,900 -1,451 -1,047 -515 26 4,914 1,037 1,034 2,191 2,667 6,928 2,360 1,633 3,388 1,937 9,318 1,904 1,447 987 962 4,174 2,491 3,810 466 -1,200 5,567 1,984 4,188 -74 -4,377 1,721 1,859 1,959 2,988 3,298 -1,933 -497 -1,897 -1,257 -764 -4,415 -823 60 -65 -467 -1,294 133 362 -331 -403 6,107 2,988 5,707 1,723 -437 9,982 2,807 4,128 -9 -3,910 3,015 1,726 1,597 3,319 3,701 -3,791 -452 -3,334 -2,419 1,430 -4,775 -3,160 -2,342 387 -2,194 -7,309 -829 -4,144 -970 -2,896 -1,588 -105 -2,283 -2,360 262 -4,486 -2,672 -1,974 -1,610 -4,498 -10,755 -307 -2,271 -6,325 -3,729 -2,204 -348 -1,051 -59 1,168 -289 -489 -367 1,998 2,304 3,446 -522 -1,873 5,355 833 13,885 4,475 4,300 1,218 4,092 14,085 2,213 1,091 1,404 -6,459 -1,750 4,011 724 4,673 4,847 625 -95 -664 -38 -572 -1,369 -1,181 233 -1,493 2,246 -195 -56 328 -1,127 -893 14,510 4,379 3,637 1,179 3,520 12,715 1,032 1,324 -89 -4,212 -1,945 3,955 1,052 3,546 3,954 -14,510 -4,379 -3,637 -1,179 -3,520 -12,715 -1,032 -1,324 89 4,212 1,945 -3,955 -1,052 -3,546 -3,954 -6,902 -4,379 -3,637 -1,179 -3,520 -12,715 -1,032 -1,324 89 4,212 1,945 -3,955 -1,052 -3,546 -3,954 -7,608 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -7,608 0 0 0 0 0 0 0 0 0 0 0 0 0 0 42,586 47,221 50,924 52,875 56,920 56,920 58,987 59,453 57,108 51,639 51,639 54,840 57,576 62,287 66,105 2,9 2,6 2,1 1,9 3,0 2,4 2,3 -0,8 -0,7 -0,5 0,0 2,2 1,9 1,5 2,2 24,8 19,8 21,4 15,2 21,2 19,4 16,2 17,8 15,2 24,2 18,1 23,4 24,4 19,3 23,9 14,2 5,6 9,4 5,1 9,0 7,3 4,4 7,7 4,7 9,2 6,4 6,0 10,0 5,2 8,5


44

Table 7

Inflation Rate by Group of Goods and Services

(Percent)1

3.71 -1.21 4.00 4.43 5.91 1.28 4.75 0.60 1.44 -1.76 4.94 -0.67 1.67 12.16 -6.50 0.69 3.48 2.59 2.11 0.60 0.91 2.76 -0.75 1.06 3.17 6.90 -2.93 5.12 9.08 -2.04 4.14 0.29 13.94 -4.64 2.39 -0.26 6.47 -4.14 0.72 1.37 -2.71 4.65 2.11 5.84 2.01 12.12 2.94 2.25 -2.52 4.63 -3.25 0.09 0.35 0.39 3.06 0.73 7.87 1.84 8.04 4.32 2.24 -0.88 1.60 0.14 0.44 -1.02 4.05 11.46 0.26 6.88 -0.19 8.94 -2.51 -0.34 -0.54 1.57 -0.51 0.01 -0.30 -1.04 2.17 7.39 2.42 1.68 3.79 6.60 2.59 -5.97 6.34 -0.97 4.13 3.81 2.61 4.49 7.90 28.51 1.84 5.93 0.42 0.18 -2.59 1.18 0.47 -18.67 2.21 1.39 2.87 1.79 1.38 0.89 7.30 1.68 0.71 3.11 8.14 -1.81 0.34 -3.70 -8.06 -0.43 25.17 2.85 -0.07 -10.49 8.28 1.66 -8.24 23.17 0.07 -4.89 8.63 12.79 7.09 6.71 15.72 1.47 -1.65 -6.81 -0.81 0.12 -1.30 -1.57 0.85 1.32 1.50 0.75 -1.47 2.02 1.00 3.57 1.20 1.62 0.61 2.37 -1.40 0.67 1.89 1.19 1.33 1.85 4.02 1.33 2.62 2.43 2.40 1.18 2.12 1.90 2.62 1.67 1.00 1.35 2.36 5.50 1.63 2.83 2.35 1.59 1.03 1.46 1.42 2.69 1.75 0.20 0.46 -0.20 1.47 1.06 2.15 1.50 5.39 2.15 5.61 2.46 2.86 2.24 2.60 1.85 2.28 1.89 0.73 2.60 3.70 2.42 0.82 1.06 3.13 1.81 1.81 0.75 1.27 0.97 2.79 1.14 3.58 1.00 0.42 0.26 0.47 0.67 0.67 2.12 0.83 1.11 1.58 2.22 1.67 2.16 0.73 1.00 0.12 0.53 0.70 0.83 1.69 0.15 1.92 -0.45 4.69 -0.12 8.94 1.66 -1.48 0.29 0.55 0.83 0.51 1.20 0.52 0.57 1.05 1.45 0.97 1.66 1.10 0.95 0.68 0.75 0.67 0.31 1.70 1.79 1.61 1.30 2.71 0.86 1.71 1.08 1.00 0.53 -0.21 0.25 0.62 0.72 0.39 2.34 4.78 4.30 0.49 0.77 2.58 4.48 -1.88 1.06 2.31 -0.66 0.37 0.29 1.29 1.70 0.81 0.27 3.02 0.35 0.38 0.55 2.49 0.45 1.02 0.10 0.71 0.94 1.45 0.68 0.46 2.15 0.30 0.44 0.29 1.24 0.49 0.44 0.50 0.32 1.34 0.86 0.56 0.64 2.13 0.23 0.26 0.39 1.67 0.37 0.69 2.09 0.35 5.53 13.60 12.66 0.59 -2.46 7.26 13.49 -6.30 -0.37 6.13 -2.88 1.39 0.71 1.03 1.12 3.00 0.83 1.64 1.10 1.27 1.20 0.77 0.59 0.58 1.92 0.45 0.32 0.44 5.12 0.47 1.07 0.69 1.60 1.72 0.85 0.69 0.52 1.32 0.82 1.08 1.46 1.96 1.31 2.19 1.60 1.14 1.39 0.42 0.86 0.65 1.16 1.85 0.61 0.73 1.15 1.10 2.36 1.61 1.39 0.73 1.38 1.38 0.84 1.46 0.80 1.56 1.52 2.32 0.90 1.76 1.26 1.01 0.42 0.83 0.41 0.57 0.36 0.01 7.97 0.43 0.14 0.44 3.77 0.82 0.22 0.22 2.94 0.48 0.18 0.46 0.03 12.73 0.36 0.09 0.18 6.76 0.70 0.04 0.06 4.86 0.62 0.03 1.04 0.26 0.87 0.48 0.72 0.45 4.95 0.32 0.59 0.46 1.27 0.77 0.77 0.36 0.36 1.58 0.66 0.30 0.72 1.14 1.11 0.37 0.16 0.74 0.19 0.30 0.13 -0.23 0.01 0.64 0.20 0.92 0.51 1.02 0.48 0.55 0.74 0.30 0.37 0.79 0.36 0.35 2.23 0.47 0.20 0.91 0.49 0.51 0.33 0.52 0.75 0.87 0.22 0.46 0.15 0.42 0.37 8.72 0.92 -2.94 -4.66 0.32 1.16 -0.44 0.34 0.24 0.60 0.00 0.49 0.27 12.98 1.03 -4.46 -6.95 0.54 1.70 -0.73 0.50 0.05 0.01 -0.02 0.00 0.01 -0.12 0.02 0.20 -0.07 -0.31 -0.32 -0.23 -0.40 0.50 0.24 2.43 1.27 1.40 0.84 1.34 1.64 1.38 0.34 0.87 1.07 0.96 0.01 0.01 0.00 0.00 4.90 0.01 3.89 0.00 0.00 0.00 0.65 0.00 0.00 1.91 0.17 2.28 2.09 3.41 2.46 2.88 0.54 0.36 -0.15 2.07 0.49 0.99

Sub Group 2007 2008 2009 2010 I II III IV I II III IV I II III IV I

I. Food A. Cereal and Product B. Meat and Meat Product C. Fresh Fish D. Dried Fish E. Egg and Milk F. Vegetables G. Beans and Nuts H. Fruits I. Species J. Fat and Oil K. Others

II. Prepared Food. Beverage. Cigarettes and Cloves A. Prepared Food B. Non-alcoholic-Beverage C. Cigarettes. Cloves. and Alcoholic BeverageIII. Housing A. Home Owner Cost B. Fuel. Electricity. and Water C. Household Equipment D. Household Operation IV. Clothing A. Clothing for Men B. Clothing for Women C. Clothing for Children D. Personal Effect and Other Clothing

V. Health A. Medical Care and Medicine B. Medicine C. Personal Care D. Personal Care and Cosmetics

VI. Education. Culture. Sport. and Entertainment A. Education B. Courses and Training C. Education Equipment D. Recreation E. Sport

VII. Transportation and Communication A. Transportation B. Communication and Delivery C. Transport Facility D. Financial Service

GENERAL

Notes :

1) Index quarterly changes.

CPI Calculated based on 2002 prices (2002 = 100).

* Started in 1 Juli 2008. CPI Calculated based on 2007 prices (2007 = 100). quarter II-2008 data is mtm inflation data (month to month) June 2008

Source : BPS-Statistic Indonesia (processed)

Statistics

45

Table 8

Inflation Rate Contribution in 44 Cities (cont.)

(Percent)1

2,16 -2,16 5,34 -1,05 4,84 4,38 2,92 2,97 -0,56 -0,37 4,37 0,53 -0,09 4,61 -1,67 5,85 1,94 3,49 2,75 1,36 1,39 0,35 0,14 4,12 -1,08 0,44 1,92 -2,34 3,76 2,51 4,65 2,53 1,27 1,56 -0,03 -1,07 2,66 0,33 0,38 6,92 -0,29 1,15 2,69 4,63 2,31 3,06 2,22 -0,52 -0,01 3,45 -1,28 1,21 2,98 -0,55 3,78 1,97 3,07 2,88 1,37 1,33 -0,20 0,10 3,26 -0,41 1,04 1,63 -0,51 1,96 3,23 2,19 2,07 1,21 2,26 -0,84 -0,17 3,35 0,38 1,05 3,68 -1,96 2,06 3,05 4,35 4,09 2,04 2,07 0,04 -1,34 2,79 0,59 1,02 3,67 -1,49 1,92 3,31 4,15 2,46 3,17 0,55 0,48 -0,54 1,70 0,30 0,79 1,40 -0,34 2,15 1,56 2,91 2,29 1,72 0,58 0,64 -0,43 1,76 -0,09 1,72 3,17 -1,22 2,57 2,75 2,16 4,19 1,76 -0,19 0,26 -0,72 2,37 0,58 1,53 0,64 0,85 3,23 3,28 3,11 3,41 3,20 -0,29 -0,06 0,09 1,57 0,25 0,58 1,36 -0,88 3,10 1,37 4,09 4,14 3,61 0,34 0,09 -0,74 4,06 -0,48 1,35 0,71 0,12 3,40 2,22 3,29 2,93 4,95 0,74 0,92 -1,29 4,85 -0,25 0,15 2,62 -0,98 0,67 0,33 6,53 4,20 4,26 0,13 -0,78 -0,74 3,16 0,57 1,37 - - - - - 3,80 3,04 1,22 -0,74 -0,77 3,52 -1,14 0,26 - - - - - 2,45 3,33 1,19 0,32 -0,73 1,29 0,55 0,80 1,95 0,51 1,85 1,61 3,51 1,94 2,54 - - - - - - 3,73 -0,04 1,65 2,20 2,57 2,54 3,64 - - - - - - - - - - - 2,21 4,50 - - - - - - - - - - - 3,04 3,21 0,00 0,32 -0,06 2,03 0,19 0,74 - - - - - 2,11 0,88 1,57 0,63 0,36 1,89 0,20 0,87 - - - - - 1,15 2,38 0,46 0,79 -0,27 1,72 -0,08 1,11 - - - - - 2,80 3,42 1,32 1,67 0,35 1,25 0,18 0,61 - - - - - 1,24 3,82 0,03 0,01 -0,26 1,76 0,41 1,26 - - - - - 2,45 3,49 0,18 -0,87 -0,20 2,43 -0,03 0,75 1,13 -0,26 2,48 1,82 2,81 2,76 2,28 -0,07 0,11 -0,14 1,64 0,50 0,84 3,24 0,15 2,22 2,06 3,52 3,33 4,04 0,19 0,91 0,04 2,49 0,62 0,36 2,22 1,33 2,21 0,26 3,60 2,75 3,53 1,16 0,78 0,11 1,17 0,73 1,11 1,19 -0,34 0,99 1,42 2,74 2,13 1,74 0,13 1,06 0,19 1,21 0,14 0,68 2,37 0,52 1,98 1,72 4,18 2,40 2,83 0,18 0,72 0,06 1,96 0,41 1,02 1,66 1,24 2,84 2,88 2,72 1,82 2,36 0,45 1,05 1,05 3,15 0,47 0,62 1,86 0,18 3,17 2,59 2,85 2,51 3,16 - - - - - - 1,26 0,78 2,13 2,91 2,73 3,46 2,77 - - - - - - - - - - - 1,62 2,83 1,05 0,25 0,14 1,90 0,42 0,52 2,50 -0,11 1,55 2,76 2,94 2,11 3,10 -0,35 0,90 0,02 2,04 0,61 0,63 1,30 0,13 2,12 2,28 4,06 2,77 2,93 0,38 1,28 0,16 1,38 0,54 1,00 - - - - - 1,81 3,85 0,00 0,60 0,07 1,84 1,00 0,72 - - - - - 4,05 2,27 -0,32 1,02 0,00 1,52 0,82 0,83 1,09 0,90 2,02 2,12 3,59 2,00 2,56 0,14 1,06 -0,41 1,97 0,74 0,63 2,19 0,29 1,36 1,95 3,35 1,78 3,14 - - - - - - 3,59 1,00 1,14 2,78 3,23 3,21 3,23 - - - - - - - - - - - 4,94 3,16 0,77 2,41 -1,12 2,06 0,71 1,53 - - - - - 2,24 6,66 -2,44 0,39 1,10 3,47 0,19 2,11 5,29 -0,39 0,90 2,47 3,33 2,31 0,46 - - - - - - 2,56 1,14 2,12 2,49 4,21 2,27 3,21 - - - - - - - - - - - 2,94 2,73 0,02 0,38 -0,90 2,44 -0,74 3,55 0,81 0,39 1,84 4,38 1,60 2,87 1,72 - - - - - - 0,62 -0,14 2,38 4,95 4,48 2,22 3,62 - - - - - - 3,29 -0,66 2,60 2,39 4,12 2,48 2,23 - - - - - - 0,81 0,39 4,54 1,40 3,75 2,88 1,84 - - - - - - 1,72 0,52 4,84 1,85 3,97 3,32 2,96 - - - - - -

C i t i e s 2007 2008 2009 2010

I II III IV I II* III IV I II III IV I

1. Lhokseumawe2. Banda Aceh3. Padang Sidempuan4. Sibolga5. Pematang Siantar6. M e d a n7. Padang8. Pekanbaru9. Batam10. Jambi11. Palembang12. Bengkulu13. Bandar Lampung14. Pangkal Pinang15. Dumai16. Tanjung Pinang17. Jakarta18. Tasikmalaya19. Serang20. Tangerang21. Cilegon22. Bogor23. Sukabumi24. Bekasi25. Depok26. Bandung27. Cirebon28. Purwokerto29. Surakarta30. Semarang31. Tegal32. Yogyakarta33. Jember34. Sumenep35. Kediri36. Malang37. Probolinggo38. Madiun39. Surabaya40. Denpasar41. Mataram42. Bima43. Maumere44. Kupang45. Pontianak46. Singkawang47. Sampit48. Palangka Raya49. Banjarmasin50. Balikpapan51. Samarinda


46

Notes :

1) Index quarterly changes.

CPI Calculated based on 2002 prices (2002 = 100).

* Started in 1 Juli 2008. CPI Calculated based on 2007 prices (2007 = 100) with total 66 cities. quarter II-2008 data is mtm inflation data (month to month) June 2008

Source : BPS-Statistic Indonesia (processed))

Table 8

Inflation Rate Contribution in 44 Cities (cont.)

(Percent)1

- - - - - 2.48 5.54 0.82 0.53 1.34 3.52 1.66 2.89 3.34 -0.43 3.45 3.46 1.04 3.63 3.02 0.17 1.18 -2.08 0.74 2.50 0.72 0.60 1.87 1.60 3.84 1.49 2.44 5.01 -0.63 1.78 -0.36 3.35 0.87 -0.64 - - - - - 6.26 3.62 0.27 2.14 0.84 2.85 0.87 1.42 2.28 0.51 3.38 -0.54 4.45 3.39 3.50 - - - - - - - - - - 2.76 4.21 0.43 0.40 -0.53 1.85 -0.32 0.48 - - - - - 3.15 3.50 1.16 1.14 -0.12 2.00 1.11 0.75 1.94 2.20 0.15 2.94 2.91 6.49 3.30 0.74 2.99 -0.34 2.20 -0.28 -0.20 -1.24 0.46 3.22 4.51 -0.04 2.59 4.01 0.16 2.33 0.59 0.85 0.53 1.59 - - - - - 3.04 5.86 -0.29 -0.35 0.06 1.45 0.62 0.84 1.77 0.51 2.38 1.07 2.92 1.76 5.06 -4.80 2.26 -2.43 1.82 4.81 2.84 2.39 2.06 0.44 5.21 4.71 1.17 4.30 -0.92 1.25 -0.27 1.32 1.54 1.79 - - - - - 5.78 8.31 0.62 3.52 0.36 2.39 1.07 -0.44 - - - - - 5.72 7.29 -1.86 0.77 0.52 0.42 0.87 1.34 4.93 0.15 0.52 4.45 6.49 5.86 2.88 0.31 -0.06 -0.36 1.55 0.78 1.31 1.91 0.17 2.28 2.09 3.41 2.46 2.88 0.54 0.36 -0.15 2.07 0.49 0.99

Ci t i e s 2007 2008 2009 2010

I II III IV I II* III IV I II III IV I

52. Tarakan53. Manado54. P a l u55. Watampone56. Makassar57. Parepare58. Palopo59. Kendari60. Gorontalo61. Mamuju62. Ambon63. Ternate64. Manokwari65. Sorong66. Jayapura

NATIONAL

Statistics

47

Notes :1) Index quarterly changes. Wholesale Price Index (WPI) calculated based on 2000prices (2000 = 100).

Source : BPS-Statistic (processed)

Table 9

Changes of Wholesale Price Index

(Percent) 1

1.26 9.77 1.18 3.10 3.91 2.90 6.75 2.35

3.20 1.55 2.34 6.67 7.32 2.26 21.16 4.37

-1.29 0.35 0.60 3.41 4.68 0.89 13.39 1.80

1.84 1.02 0.52 0.34 -1.48 2.42 -9.47 0.18

3.80 3.00 8.04 9.11 10.73 4.61 24.20 8.02

0.00 0.70 1.34 0.69 1.43 0.00 5.13 1.38

2.76 0.70 1.32 6.85 9.15 3.28 20.49 4.08

4.03 13.19 22.22 0.64 -3.87 2.38 -13.77 9.15

3.87 0.61 1.60 -0.64 -1.34 -4.65 3.29 -1.20

4.97 1.83 2.11 5.13 8.84 6.50 13.64 4.85

5.33 2.40 2.58 0.61 0.00 2.29 -3.60 2.31

6.74 3.51 1.51 1.82 -5.00 1.49 -16.18 0.56

6.32 3.39 3.47 3.57 2.63 3.68 1.49 3.93

2.97 1.64 3.35 5.75 7.05 2.84 14.63 4.32

7.69 1.61 3.70 3.26 1.80 -0.69 6.38 3.63

7.59 3.70 5.80 11.05 10.00 2.08 24.40 8.50

7.05 4.08 7.17 6.64 5.88 5.44 6.43 6.45

7.75 10.78 12.60 15.56 14.14 5.16 28.10 12.55

4.68 3.54 1.40 -9.23 -5.31 2.45 -15.09 -1.92

0.00 4.27 -4.14 -11.86 -13.55 9.58 -47.22 -6.67

2.93 7.52 -0.26 5.28 2.44 13.96 -31.67 1.80

3.72 -0.51 1.42 0.93 -0.87 -5.92 23.91 1.23

5.48 0.37 1.57 2.83 0.33 0.70 14.00 2.17

3.52 1.65 0.93 -2.28 -0.64 0.00 0.00 0.53

End of Agriculture Mining Industry Import Export General

Period Total Non Oil/Gas Oil/Gas

2004

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2005

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2006

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2007

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2008

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

2009

Qtr.I

Qtr.II

Qtr.III

Qtr.IV

jl.mh. thamrin no.2 jakarta 10110 - indonesia :// · 2013. 9. 30. · economic activity in...

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