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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 IV-2009
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MONETARY POLICY REPORTBANk INdONEsIA
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MONETARY POLICY REPORTBANk INdONEsIA
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
After consultations with Bank Indonesia. the Government has determined and announced the CPI inflation target at 5%+1%. 4.5%+1% and 4%+1% for 2008. 2009 and 2010. The inflation target is consistent with the process of disinflation aimed at medium to long-term inflation competitive with other nations at about 3%.
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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Foreword
The global economic recovery has advanced further in Q4/2009, taking stronger hold across a broader
range of countries. The various policies pursued by central banks and fiscal authorities during 2009 have prevented
the world economy from further decline. The most visible recovery has taken place in Asia’s emerging markets, led
by China and India. Against this background, leading world economic powers such as the United States, Eurozone
and Japan resumed positive growth in Q3/2009. Despite this, the recovery in the world economy is overshadowed
by risks related to high rates of unemployment rates in advanced nations.
The improvements taking place in the world economy are also reflected in positive developments on global
financial markets. Early in the year, financial markets came under intense pressure, but towards the end of the
year, conditions began to ease. Bolstering this trend is optimism for continued progress in global economic recovery.
During Q4/2009, risk levels in advanced nations and emerging markets embarked on a downward trend.
At home, Indonesia’s economic growth shows positive signs in keeping with the recovery in the global
economy. GDP growth in Q4/2009 is projected to reach 4.4% (yoy). Preliminary figures point to more vigorous
consumption over the preceding quarter, explained by seasonal factors approaching year end and rising export
revenues. Investment performance shows signs of modest improvement driven mainly by more robust domestic and
external demand and the stable business climate in the wake of the presidential election. Externally, the ongoing
improvement in the global economy and strengthening condition of trading partner economies has bolstered
Q4/2009 export growth. In related developments, the pressure bearing down on economic performance is now
easing in response to mounting domestic and external demand. On the supply-side, the global economic downturn
has generally had greater impact on tradable sectors, such as agriculture, mining and manufacturing. However, the
impact of the downturn on agriculture and mining is comparatively minimal. The Bank Indonesia regional economic
assessment also confirms the upbeat trend in the domestic economy. Indonesia’s diversified regions, each with specific
characteristics to local economic activity, provide key support for domestic economic growth.
Concerning prices, inflationary pressure remains on a downward trend with Q4/2009 inflation projected
at 2.41% (yoy). The low inflationary pressure is explained primarily by renewed price correction for staple goods.
The Governor of Bank Indonesia
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MONETARY POLICY REPORTBANk INdONEsIA
On the non-fundamentals side, security of domestic supply, efficient distribution and continued low international
commodity prices have contributed to lower volatile foods inflation. In the area of fundamentals, lower trading
partner inflation, the appreciating trend in the exchange rate and softening public expectations of inflation have
eased inflationary pressures.
Conducive developments at the global level augur for more positive showing in Indonesia’s Q4/2009
balance of payments. Key to this improvement is the performance in the current account as the global economic
recovery gathers momentum. Rising prices for Indonesia’s export commodities have also contributed to a more robust
current account. Optimism for global economic recovery alongside improving perceptions of risk in emerging market
countries is expected to sustain the pace of foreign capital inflows. In response to the performance of the balance
of payments, international reserves at end-November 2009 stood at USD 65.84 billion, equivalent to 6.5 months of
imports and servicing of official foreign debt.
Indonesia’s balance of payments performance has been strengthened by the upbeat nature of developments
in the global and domestic economy. While the capital market sustained some correction in Q4/209, foreigners
have maintained keen interest in domestic portfolio instruments. The balance of trade is set for another hefty surplus
despite signs of growing demand for imports. Buoyed by these developments, the balance of payments is on track
for a Q4/2009 surplus.
Indonesia’s banking sector is in comfortably strong shape. Analysed on the micro level, conditions in the domestic
banking system remain stable as reflected in the robust capital adequacy ratio (CAR) and the low, subdued level of
non-performing loans (NPLs) gross and net. On the other hand, the interest rate response in the banking system has
improved as demonstrated by the fall in deposit rates that will eventually lead to further reductions in loan interest rates.
The downward response in loan interest rates is expected to pave the way for more optimum lending by the banking
system. In related developments, banking liquidity remains adequate for the financing needs of the economy.
Looking forward, the Indonesian economy has potential to surpass earlier growth projections in 2009 and
2010. The driving force for this performance will come from exports, which have maintained an upward growth trend
since March 2009, in addition to the brisk pace of household consumption growth. Key to the accelerated export growth
are Indonesia’s primary commodity-based exports, which have mounted a quick recovery in response to escalating
demand in trading partner nations. On the supply side, renewed growth momentum is forecasted across a range of
sectors, led by manufacturing. The outlook for more robust manufacturing performance is supported by rising imports
of raw materials and high electricity consumption by business and industry. Buoyed by this optimism, the Indonesian
economy is forecasted to post 4.3% growth in 2009 with performance rising to 5.0%-5.5% in 2010.
The balance of payments is projected to chart an even larger surplus for 2009. The balance of trade has
steadily improved with more vigorous recovery in the global economy taking hold across more regions in the second
half of 2009. Heavy demand from Indonesia’s trading partners in Asia has brought gradual improvement in export
performance. With exports on the rise, imports are also climbing in keeping with the expanding absorption capacity
of the economy. Optimism for the domestic economy is also reflected in positive level of capital inflows for portfolio
investments and corporate borrowing.
In the inflation outlook, the downward trend in 2009 is forecasted to continue but with potential for normal
inflation to resume in 2010. Inflation has fallen significantly in 2009 and is projected below the targeted range of
4.5%+1%. In 2010, CPI inflation is predicted to return to normal in the 5%+1% range in response to strengthening
domestic economic activity, rising imported inflation related to forecasts for improvement in the world economy and
mounting international commodity prices, most importantly oil.
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MONETARY POLICY REPORTBANk INdONEsIA
After factoring in these developments, the Bank Indonesia Board of Governors Meeting convened on
3 December 2009 decided to hold the BI Rate at 6.5%. This decision was taken after the Board of Governors
concluded that the BI Rate at 6.5% remains consistent with achievement of the 5%±1% inflation target for 2010.
This policy stance is also regarded as conducive to the economic recovery and banking intermediation processes.
Jakarta, December 2009
On behalf of
THE GOVERNOR OF BANK INDONESIA
Darmin Nasution
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MONETARY POLICY REPORTBANk INdONEsIA
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Monetary Policy Report - Quarter III-2009Contents
MONETARY POLICY REPORTBANk INdONEsIA
Contents
1. General Review ............................................................................ 1
2. Latest Macroeconomic Indicators ................................................ 5
Deveopments In The World Economy ............................................. 5
Economic Growth ........................................................................... 6
Balance of Payments ...................................................................... 14
3. Monetary Indicators and Policy, Quarter IV-2009 ...................... 16
Rupiah Exchange Rate ........................................................................................ 16
Inflation ................................................................................................................. 18
MonetaryPolicy ................................................................................................... 20
4. Outlook for the Indonesian Economy ......................................... 26
AssumptionsandScenarios ................................................................................ 26
EconomicGrowthOutlook ................................................................................... 28
Inflation Forecast ............................................................................. 34
Risk ................................................................................................. 36
5. Monetary Policy Response, Q4/2009 .......................................... 37
Statistics ............................................................................................ 38
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Monetary Policy Report - Quarter III-2009 Contents
MONETARY POLICY REPORTBANk INdONEsIA
General Review
1
1. General Review
In 2009. the Indonesian economy has demonstrated considerable resilience in the
face of the global economic crisis. Reflecting this is the brisk pace of economic growth
at above 4% in Q3/2009. For 2009 overall. Bank Indonesia predicts that economic growth
in Indonesia may reach 4.3%. Looking forward to 2010 and 2011. the economy is expected
to chart even higher growth on the back of stronger world recovery and more conducive
conditions on world financial and banking markets matched by prudently managed domestic
fundamentals. In 2010. Indonesia’s economic growth is forecasted in the range of 5.0%-
5.5% with the outlook for 2011 at 6.0%-6.5%.
Regarding the global economy. Bank Indonesia expects the recovery process to keep
moving forward. The recovery is now sensed to be taking stronger hold across a broader
range of countries and economic sectors. The various policies implemented by fiscal and
monetary authorities during 2009 have successfully prevented even steeper world economic
decline. The green shoots of recovery started to show in Q2/2009. The powerhouses of the
world economy that have maintained growth throughout the crisis are the dynamic economies
of Asia. such as China. Korea and India. The positive effect of the economic performance of
these nations has spilled over to other countries in the region. including Indonesia. through
expanding demand for exports. Furthermore. the stimulus packages launched by governments
in developed countries alongside improvement in financing from the banking system and
consumer confidence have underpinned rising consumption levels since the second half
of 2009. Even so. the world economic recovery process remains overshadowed by risks.
Among these are the stubbornly high unemployment and sizeable fiscal deficit outcome in
the United States that have triggered concerns among market actors over the sustainability
of US financial operations.
Improvement in the global economy is again reflected in the positive developments
on global financial markets. Intense pressures were bearing down on global financial
markets early in the year. but by the end of 2009 these pressures had begun to ease.
Supporting this was optimism fuelled by the ongoing recovery in the global economy
and strengthening performance in the financial institutions in advanced nations. These
developments fostered positive perceptions leading to renewed asset price gains on global
financial markets beginning in Q2/2009. This optimism for the global economy has provided
a lift for financial market performance around the world. Global stock market indices are
climbing. while risk perceptions for financial market assets in developed nations and emerging
markets has similarly improved as reflected in the decline in credit default swaps (CDS).
The multifaceted dynamics of the global economy in 2009 have brought their
influence to bear on developments in the Indonesian economy. The global economic
recovery. the rise of China and India and prudent macroeconomic policies at home have
worked to the advantage of the Indonesian economy. Within the region. Indonesia has
become the “flavour of the day” as a result of the economic resilience maintained throughout
2009. amid the global crisis. The growth in the Indonesian economy has been driven mainly
by strong domestic demand. The expansion in the domestic economy over this period
Monetary Policy Report - Quarter IV-2009
2
is driven more by consumption spending. a result of election-related expenditures. low
inflation. various fiscal stimulus initiatives to boost public purchasing power and reductions
in taxes. Alongside this. Indonesia’s export performance is up in response to the ongoing
and more broad-based recovery process in the world economy and rising global commodity
prices. Against the background of these developments. economic growth for 2009 overall
is forecasted to reach 4.3%.
Further confirmation of renewed growth momentum in Indonesia during 2009 comes
from the regional economic assessments conducted by Bank Indonesia. For the most
part. local economies report brisk consumption and exports driven by rising demand for
primary products imported by China. India and South Korea. Export growth in the Sumatra and
the Kali-Sulampua (Kalimantan-Sulawesi-Maluku-Papua) regions is fuelled mainly by rubber.
nickel. coal and CPO. These regional economic gains are closely related to the continued
strength of domestic consumption. led by the Java-Bali-Nusa Tenggara (Jabalnustra) and
Jakarta regions. as well as recovery in exports of estate and mining commodities from Kali-
Sulampua and Sumatra driven by improving world economic conditions. Complementing
this is the fiscal stimulus outcome now at 36.2% and realised regional government capital
expenditures in the Kali-Sulampua and Jakarta regions. which have mounted over the same
period in 2008. The stimulus has brought some modest improvement in investment growth
in the regions. albeit minimal. Nevertheless. strong domestic consumption and expanding
volume of primary commodity exports has invigorated activity in key sectors in local regions.
namely agriculture in Jabalnustra and Sumatra. mining in Kali-Sulampua and tertiary sectors
in Jabalnustra and Jakarta. Throughout 2009. the combination of the domestic-oriented
economies in Jabalnustra and Jakarta and the export-oriented economies in Sumatra and
Kali-Sulampua has bolstered national economic growth in the face of the onslaught of the
global crisis.
Concerning prices. the Indonesian economy in 2009 was marked by low inflationary
pressure. November inflation was recorded at -0.03% (mtm). down from 0.19% in
the previous month. The deflation in November is linked mainly to the renewed correction
in prices for staple goods. Measured annually. CPI inflation eased from the previous month
to 2.41% (yoy). On the non-fundamentals side. security of domestic supplies. efficient
distribution and the still fairly low international commodity prices have eased volatile foods
inflation. Administered prices inflation has fallen sharply following the government decision
to lower fuel prices at the beginning of the year. Regarding fundamentals. inflationary
pressure has eased in response to the external factors of lower trading partner inflation.
appreciation in the exchange rate and softening public expectations of inflation. In view
of these developments. inflation at end-2009 could potentially come below the previous
forecasted 2.9% (yoy).
The balance of payments has charted more robust performance in 2009 in line with
conducive developments at the global level. Key to these gains is the improvement
the current account as the global economic recovery moves ahead. Further support for the
current account has come from the upward trend in prices for Indonesia’s exports. led by
resource-based commodities. The current account surplus is also projected to climb further
General Review
3
in spite of rising non-oil and gas imports. At the same time. optimism for global economic
recovery in tandem with improving perceptions of emerging market risks is expected to sustain
the pace of capital inflows. With the improvement in the balance of payments. Indonesia’s
international reserves position at end-November 2009 stood at USD65.84 billion. equivalent
to 6.5 months of imports and servicing of official debt.
The more robust performance in the balance of payments has contributed to
stability in the rupiah during 2009. Throughout the year. the rupiah has maintained
an appreciating trend. Positive global investor perceptions of the Indonesian economy
have stimulated investor risk appetite for domestic financial market assets. which has kept
capital inflows pouring into the Indonesian financial market. The rupiah exchange rate has
responded with steady appreciation since Q2/2009. reaching Rp 9.445 to the US dollar at
end-November. This represents a gain of 15.3% (ptp) from the end-2008 level recorded at
Rp 10.900 to the US dollar.
These economic developments have bolstered the domestic financial market.
Monetary policy transmission has also improved. as shown in the money market
and bank interest rate response to the BI Rate. On the bond market. monetary policy
transmission is reflected in declining yield on government securities across all tenors. with
the steepest reduction recorded for short-term maturities. However. policy transmission faces
greater resistance in the longer tenors. This is an indication of less favourable long-term
investor perceptions of inflation expectations and the fiscal sustainability outlook. On the
stock market. the index and prices are on the rise. Foreign investors have regained interest
in emerging market financial assets in response to the global economic recovery. With the
added support of Bank Indonesia monetary policy and healthy domestic macroeconomic
indicators. this has stimulated more vigorous growth in the Jakarta Composite Index.
The money market has seen steady improvement in interest rate transmission to interbank
transactions. The overnight rate on the interbank market has stayed around the level of the
BI Rate following the switch in the monetary policy operational target to the O/N interbank
rate in July 2008. The downward movement in O/N rates has been followed by interbank
rates in above O/N tenors. The BI Rate is also being transmitted more effectively to bank
deposit rates. The 337 bps fall in 1-month deposit rates during 2009 surpasses the 275 bps
reduction in the BI Rate over the same period. This represents markedly stronger response
when compared to the previous round of BI Rate cuts in 2006. However. lending rates have
responded to movement in the BI Rate with only slow. limited improvement. During 2009.
the aggregate lending rate (average for working capital. investment and consumption credit)
eased by 76 bps. The constrained response in lending rates is explained by a number of factors.
including persistently strong perceptions among banks of sustainability risk in the real sector.
Due to the tepid response in the banking system. there has been only sluggish growth in
bank sources of financing. As of October 2009. expansion in credit (including channelling)
had reached only 4.2% (ytd). well below the level for the same period one year earlier.
Looking forward. the domestic economy has potential to surpass earlier growth forecasts
for 2009 and 2010. This trend is expected to carry forward into 2011. Supporting factors
Monetary Policy Report - Quarter IV-2009
4
include more conducive external conditions with faster than predicted recovery in the world
economy and securely managed domestic conditions buoyed by sustained vigorous household
consumption. The renewed export growth that began taking hold at end-Q1/2009 is set to
maintain pace in keeping with the recovery in the world economy. Besides the improvement in
the world economy. an important factor in the accelerated export growth is the comparatively
speedy recovery in Indonesia’s exports of resource-based commodities buoyed by rising
demand in trading partner nations. Within Indonesia. household consumption growth is
predicted to maintain comparatively strong momentum as a major contributor to the GDP.
although not as strong as during the 2009 election period. Key to this consumption growth
will be sustained consumer confidence. higher incomes on the back of strengthening exports
and low inflation. Against this background. Indonesia’s economic growth in 2010 is forecasted
at 5.0%-5.5% before climbing further in 2011 to 6.0%-6.5%.
The outlook for global economic recovery in 2010 will have positive benefits for
Indonesia’s balance of payments. Supporting this improvement will be gains in the current
account and the capital and financial account. The ongoing recovery in the world economy
coupled with steady improvement in world commodity prices will lift export performance to
new levels. Preliminary figures for non-oil and gas imports point to a turnaround in Q2/2009
in keeping with expanding activity in the domestic economy. In the capital and financial
account. performance will be bolstered by more favourable domestic and external conditions
compared earlier forecasts.
In regard to inflation. the trend in 2010 and 2011 is predicted to return to normal as the
wheels of the Indonesian economy gather renewed growth momentum. For these reasons.
inflation in 2010 and 2011 is predicted in the range of 5%±1%. Among the external
factors in the inflation forecast are escalating inflation in trading partner nations in keeping
with the predicted improvement in the global economy and rising international commodity
prices. At home. inflationary pressure is also likely to result from increases in administered
prices. Concerning volatile foods inflation. possible supply shocks from the expected El Nino
phenomenon are predicted to have only minimum effect in stoking inflationary pressure.
After careful consideration of the developments outlined above. the Bank Indonesia
Board of Governors Meeting convened on 3 December 2009 decided to hold the BI
Rate at the level of 6.50%. An added factor is that the current BI Rate level is consistent
with achievement of the 2010 inflation target of 5%+6%. This policy stance is also regarded
conducive to the economic recovery and banking intermediation processes.
Latest Macroeconomic Indicators
5
2. Latest Macroeconomic Indicators
The ongoing recovery in the global economy has given added boost to domestic
economic performance. During Q4/2009. economic recovery spread to more corners of
the globe. buoyed by positive growth in advanced economies and the continued solid
economic performance in Asia. All this has positive influenced domestic economic
conditions. Consumption is estimated higher in Q4/2009 over the previous quarter in
keeping with the improving outlook for domestic and external demand and stable
conditions at home in the wake of the national elections. Realised investment is
also expected to show more vigorous growth in the quarter under review. while the
decline in imports will ease further in response to improved domestic demand on the
external sector. On the supply side. the slowdown in the world economy has impacted
performance in tradable sectors in contrast to the continued gains in non-tradable
sectors. The world economic slowdown has had little impact on agriculture and
trade. but has borne down significantly on manufacturing due to reduced demand
for Indonesian exports in trading partner nations. Alongside this. the transportation
and communications sector has maintained robust growth throughout 2009. mainly
on the strength of the communications subsector.
DEVELOPMENTS IN THE WORLD ECONOMY
The process of world economic recovery is predicted to see further gains in Q4/2009.
Economic recovery has been driven mainly by developments in leading world economies
(such as the US. Europe and Japan). which have emerged from recession as demonstrated by
positive growth figures for Q3/2009. Further impetus has come from the newly industrialised
economies of Asia. such as Singapore and Hong Kong. that resumed positive growth in
Q3/2009 following steep contraction in the first half of the year and are expected to post
even stronger growth in Q4/2009. The economies of China and India. the main pillars of
recovery in Asia. also maintained solid growth in the second half of 2009 as indicated by
sustained upward trends in production indices and consumption. However. stubbornly
high rates of unemployment continued to hamper recovery in consumption in advanced
economies. The outlook for faster than expected recovery in the global economy is seen as
conducive to accelerating improvement in the domestic economy.
In Q3/2009. the US economy reported positive growth at 3.5% (qtq). Recovery in
the US during Q3/2009 was bolstered by the Government fiscal stimulus programme that
held of the prospect of plummeting domestic consumption and infrastructure projects that
stimulated renewed activity in production sectors. Even so. the US economy is still dogged
by high unemployment figures. recorded last October at 10.2%. Pressure continues to bear
down on personal incomes in the US due to the high unemployment and comparatively tight
lending in the banking system. On the labour market. worker lay-offs continue. but have
begun easing as reflected in the drop in initial jobless claims to 519 thousand in Q4/2009
from the previous 560 thousand. Household consumption mounted in contrast falling
Monetary Policy Report - Quarter IV-2009
6
personal incomes due to the effect of the cash for clunkers programme that has boosted
retail sales and spurred renewed consumer confidence in the outlook for the economy. In
Q4/2009. the US economy is predicted to chart 2.8% growth (qtq). In annualised figures.
this representing the lowest level of contraction at -0.3% (yoy).
Global financial markets continue to show an upward trend during Q4/2009. The easing
of the global liquidity crunch is reflected in the narrowing of the LIBOR to Overnight Index
Swap (OIS) spread that has fuelled a dollar carry trade profiting from low US dollar interest
rates. These funds are pouring into assets promising higher returns as more signs emerge of
improvement in the economic situation. Alongside this. expectations of more rapid policy
reversal in emerging market countries compared to advanced nations will widen the interest rate
spread and lead to stronger inflows of foreign capital in search of higher risk assets. including
stock markets and assets on emerging markets. Despite this. the financial market experienced
some significant upheaval in November due to risk aversion among market actors triggered
by the responses of some financial authorities and central banks attempting to restrict foreign
inflows and slow excessively rapid domestic currency appreciation. At end-November. financial
markets came under renewed pressure from reports of losses at Dubai World from tumbling
prices for underlying property assets and the onset of a debt crisis. As a result. investor risk
appetite plunged sending stock markets tumbling around the globe and triggering a steep rise
in emerging market risk indicators. Nevertheless. the contagion from the Dubai World crisis
proved short-lived. Positive sentiment from the continuation of the fiscal stimulus in China.
solid Q3/2009 economic growth in India and the quick response by the UAE government and
central bank in providing assurances of support to local and domestic banks and opening
liquidity facilities within the financial system helped to bring calm to troubled markets.
Asian economies are forecasted to maintain solid growth in Q4/2009 and provide
the main driving force for the world economy. Most Asian economies have rebounded
in the wake of steep losses in the first half of 2009 to embark on positive growth in the
second half of the year. Some export-dependent economies are now shifting to domestic
demand. as indicated by the present surge in domestic industry activity indicators in China
on the back of the government fiscal stimulus. The economy in China will continue to be a
source of export demand for products from Asian countries. with the effect felt in economies
in the region.
Inflationary pressure remains low despite a modest rise. According to composite data
on realised inflation. world inflation has begun to climb although remaining low. Inflation
last September mounted to 1.1% (yoy) from the July 2009 level recorded at 0.5%. Some
countries have emerged from the deflationary phase and with economic activity on the
mend. inflationary pressure is now on the rise.
ECONOMIC GROWTH
Aggregate Demand
Economic growth in Q4/2008 is predicted at 4.4% (yoy). up from the previous quarter.
This improved growth is confirmed by movement in leading indicators for the GDP. pointing
Latest Macroeconomic Indicators
7
to growth in the economy (Graph 2.1). Key to the more robust economic
growth in Q4/2009 was stronger performance in exports that has
stimulated household consumption and spurred investment growth. In
response to these developments. economic growth for 2009 as a whole
is set to reach about 4.3% (yoy. Table 2.1). down from one year earlier
mainly because of the impact of the global economic downturn.
Analysed by distribution. the most important share of 2009 GDP
consists of private consumption and exports. Private consumption
measured as share of GDP in 2009 is largely stable against 2008. while
the GDP share of exports has diminished. This is explained by the slump
in export growth while trading partner economies were struggling to
embark on recovery during the first half of 2009.
Household consumption is forecasted to chart increased growth
in Q4/2009 at 4.8% (yoy). The boost from seasonal factors with the
approaching end of the year and higher export revenues is expected to provide added lift to
household consumption growth in Q4/2009. Further indications of improvement in household
consumption are visible in the more rapid sales growth for durable goods in October 2009
and high retail sales figures for non-durable goods (food and clothing). Credit card and debit
card transactions similarly recorded more vigorous growth as of mid-Q3/2009. In a similar
vein. leading indicators for household consumption point to an expansionary trend in the
cycle. at least until the next quarter (Graph 2.2). Figures also point to a heftier contribution
from non-food consumption over the preceding year. explained by high sales growth in
durables. such as motor vehicles (Graph 2.3) and electronics. These sales are up partly in
response to higher incomes that have strengthened purchasing power among middle and
upper class consumers and the seasonal factor of religious festivities.
The buoyant household consumption in 2009 has been strongly influenced by
spending on the national elections and government policy expenditures. During the
first half of 2009. falling exports resulted in depressed purchasing power in export-oriented
sectors and rising numbers of worker dismissals. Even so. public purchasing power in January-
Graph 2.1
Leading GDP Indicators
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IV I II III IV I II III IV*Indicators
Table 2.1
Economic Growth - Demand Side
2007
* Bank Indonesia Projection Figures
Source : Statistics Indonesia
Total Consumption 5.0 4.9 5.5 5.5 6.3 6.4 5.9 7.3 6.3 5.4 4.3
Private Consumption 5.5 5.0 5.7 5.5 5.3 4.8 5.3 6.0 4.8 4.7 4.8
Government Consumption 2.0 3.9 3.6 5.3 14.1 16.4 10.4 19.2 17.0 10.2 1.7
Gross Domestic Fixed Capital Formation 12.4 9.4 13.7 12.0 12.2 9.1 11.7 3.5 2.6 4.0 4.6
Export of Goods and Services 7.9 8.5 13.6 12.4 10.6 1.8 9.5 -19.1 -15.7 -8.2 -5.4
Import of Goods and Services 13.9 9.0 18.0 16.1 11.0 -3.5 10.0 -24.1 -23.9 -18.3 -6.2
GDP 5.8 6.3 6.2 6.4 6.4 5.2 6.1 4.4 4.0 4.2 4.4
20072008
20082009
Monetary Policy Report - Quarter IV-2009
8
June 2009 was sustained by several factors. most importantly the surge
in spending related to the national elections. Other factors boosting
household consumption included the operation of the government social
safety net through direct cash transfers. payment of a 13th month salary
and pay rise for civil servants and income tax reductions. Similarly. in
the second half of 2009. higher incomes derived from exports. lower
rate of job losses and the still robust consumption of the middle and
upper class population contributed to stronger household consumption.
Purchasing power gains in the second half of 2009 were evident in
higher real disposable incomes. which have maintained an upward
trend due to lower inflation. Other indicators. such as farmer terms of
trade and worker wages. also showed improvement in Q3/2009. Against
this background. household consumption growth for 2009 overall is
forecasted at 5.1%. a slower rate compared to one year before.
Investment growth (Gross Fixed Capital Formation) is expected
to gather momentum in Q4/2008. climbing from the previous
quarter to 4.6% (yoy). Reflecting this growth upturn are developments
in leading investment indicators pointing to an upswing in investment
growth during Q4/2009. The indications of stronger Q4/2009 investment
growth are linked primarily to strengthening domestic and external
demand and a stable business climate in the aftermath of the presidential
election. Supporting the renewed investment growth is improvement
in realised construction investment as indicated by increases in cement
consumption and growth in imports of capital goods. Added to this.
quarterly government capital expenditures are projected to boost
investment growth in Q4/2009. Investment growth for 2009 overall is
predicted to reach 3.7% (yoy). down from the previous year. This decline
is borne out in the business response to falling export demand during
the first half of 2009 and weakening business tendencies. Like before.
investment growth in 2009 was dominated by non-construction activity.
which was nevertheless down in comparison to 2008 (Graph 2.5).
Leading indicators for end-Q3/2009 confirm the slackening trend
in investment growth for 2009. This decline is explained mainly by
the slump in non-construction investment growth. reflected in the limp
growth in imports of capital goods compared to 2008 (Graph 2.6).
Nevertheless. cement consumption growth. which hit a low in the first
half of 2009. began to recover in Q3/2009 in line with the renewed
investment growth in construction and infrastructure and more positive
business confidence in the outlook for economic conditions. In addition.
cement demand in the regions is expected to rise as the reconstruction
work in earthquake-hit areas enters the implementation stage. In regard to
financing. investment financing support remains adequate as indicated by
Graph 2.2
Leading Indicators for Household Consumption
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Graph 2.3
Growth in Car and Motorcycle Sales and Household
Consumption GDP
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Leading Investment Indicators
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Latest Macroeconomic Indicators
9
the quite high rate of growth in real foreign investment loans. However.
according to surveys by the Central Statistics Agency (BPS). business
tendencies have shown a downward trend in 2009 compared to the
preceding year. due to declining orders for input goods and foreign orders
accompanied by a drop in real selling prices (Graph 2.7). This decline is
borne out in the Bank Indonesia survey findings that point to falling value
of planned investment in 2009 compared to one year earlier. despite the
outlook for expanding business activity during the second half.
Exports are predicted to chart increased growth during Q4/2009.
bolstered by continued improvement in global economic
conditions. Key to the more robust export growth in Q4/2009 is the
escalation in international commodity prices alongside reinvigorated
export demand. with traditional markets in the lead. Added to this. the
improvement in production indices. the consumer confidence index
and business sentiment in the G3 nations and China augurs for added
export growth potential. Indications of improvement are reflected
the expanding volume of global trade in the Baltic Dry index. marked
by upward movement in early Q4/2009 (Graph 2.8). In response to
these developments. Q4/2009 export growth is estimated ahead of
the previous quarter at -5.4% (yoy). According to the latest BPS data.
October 2009 exports reached US$11.88 billion. down 10.12% (yoy)
from October 2008. Growth in non-oil and gas exports was again driven
by primary commodity exports led by coal and other mining products
and industrial products. such as palm oil.
With domestic and external demand on the rise. preliminary
figures point to healthier import growth during Q3/2009.
Indications of this are visible in the leading import indicators that offer
hope for more vigorous import growth. even though imports will remain
in the contractionary stage of the cycle for one quarter ahead (Graph 2.9).
Import growth is predicted to improve as household consumption gains
added momentum and demand picks up for raw materials and capital
goods for production. mainly in the manufacturing sector. Similarly.
confirmation of continued improvement in import growth is provided by
accelerated growth in import duties. In response to these developments.
the slowdown in imports is estimated to have eased in Q4/2009 to -6.2%
(y-o-y). The most important contribution to this improvement comes from
stronger growth in imports of raw materials and intermediate inputs.
Analysed by 2-digit HS commodity classification. import growth during
January-October 2009 was again dominated by raw materials and capital
goods intended for boosting production capacity. such as machines.
mechanical tools. electrical motors and other electrical equipment.
Graph 2.5
Construction and Non-Construction Investment Contributions
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Growth of Capital Goods Imports
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Business Sentiment - BPS
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Monetary Policy Report - Quarter IV-2009
10
Government Financial Operations
Revenues and expenditures in 2009 Government financial
operations are predicted to fall below the targeted levels in the
Revised 2009 Budget. Total state revenues in January-October 2009
reached 73.2% of the Revised Budget. below the equivalent 2008
outcome at 87.4%. In a similar vein. the outcome for state expenditures
came to only 68% of the Revised Budget. below the equivalent 2008
outcome of 74.2%. The global economic slowdown and oil price
development in 2009 have been the main factors in the depressed
revenue and expenditure performance. Given these conditions. the
deficit from Government financial operations is predicted to come below
target (2.4% of GDP).
State expenditures have declined further in Q4/2009 from the
impact of the global economic slowdown and current oil price
developments. In the taxation sector. the slackened pace of the
domestic and global economy has borne down significantly on VAT
and international tax revenues. Another tax sector reporting significant
reductions is Oil and Natural Gas Income Tax. due to the effect of lower
oil prices in 2009 compared to 2008. In the midst of these adverse
economic conditions. revenues from non-oil and gas income tax and
excise continued to expand as a result of taxation policy changes. Added
to this VAT revenues are expected to begin charting positive growth
despite limited coverage in keeping with the onset of improvement
in economic performance and growing trading activity in Q4/2009.
However. with revenues down in most taxation sectors. actual taxation
receipts in January-October 2009 came to only 75.1% of the Revised
Budget. or less than the 88.5% posted last year for the same period. In
the non-tax sector. the drop in oil prices from 2008 has led to significant
decline in non-tax revenues. led by oil and natural gas natural resource-based revenues.
Under these conditions. non-tax revenues stood at only 67.5% of the Revised Budget target
in October. below the outcome recorded in 2008 at 85.6%.
Absorption of state expenditures is down from last year. but with improvement in
quality. In October 2009. realised central government expenditures were up on the preceding
year by expenditure category. except for subsidies due to the effect of lower oil prices. In
related developments. expenditure outcomes by line ministries/statutory agencies. which
provide a direct stimulus for economic activity. showed visible improvement over 2008. During
January-October. improvements took place in the realised expenditures for personnel. capital
and goods with direct impact on the real sector. Despite this. the drastically reduced burden of
energy subsidies has resulted in lower actual central government spending compared to one
year before. Total state revenues in January-October 2009 reached no more than 63.2% of
the Revised Budget. below the equivalent 2008 outcome at 71.7%. However. the outcome
Graph 2.8
Baltic Dry Index
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Graph 2.9
Leading Import Indicators
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Latest Macroeconomic Indicators
11
of the fiscal stimulus package offering tax savings. subsidised import duties and other non-
tax subsidies for business remains low. In October 2009. the expended portion of the fiscal
stimulus stood at only 44.9% of the total Rp 73.3 trillion budget allocation.
On the financing side. the more robust bond market in 2009 has paved the way
for achieving the deficit financing target. Improvement in government securities yield
has progressively lowered the average yield accepted by the government in each of the
auctions during 2009. This has not only lowered the cost of financing. but also enabled the
government to meet the targeted issuance of Government Securities in mid-November. The
improvement in the bond market also means that most of the available standby loan funds
remain untouched. During 2009. the only standby loan funds drawn by government are
from the 35 billion yen Samurai Bonds issued in August.
Aggregate Supply
Several economic sectors are expected to show improvement in Q4/2009 (Table
2.2). Growth in key sectors. such as trade and agriculture. is set to mount higher during the
quarter. In other sectors. and particularly manufacturing. growth is comparatively stable.
Gains are visible in the construction and electricity. gas and water utilities sectors. However.
the transport and communications sector slowed to some extent in Q4/2009. although
growth remains high. In analysis by structure. the dominant sectors of the economy. like
before. are manufacturing. the trade. hotels and restaurant sector and agriculture. However.
the most important contributors to growth were the transport and communications sector.
agriculture and the financial services leasing and corporate services sector.
Manufacturing growth in Q4/2009 has held at a relatively stable level. Analysed by
structure. the largest share of manufacturing is concentrated in the transportation equipment.
machinery and tools subsector. food. beverages and tobacco and the chemicals and rubber
% Y-o-Y. Base Year 2000
IV I II III IV I II III IV*Sectors
Table 2.2
Economic Growth - Supply Side
2007
* Bank Indonesia Projection Figures
Source : Statistics Indonesia
Agriculture 3.1 3.5 6.3 4.8 3.4 4.7 4.8 5.3 2.5 2.7 4.3
Mining and Quarrying -2.1 2.0 -1.7 -0.5 2.1 2.1 0.5 2.4 3.3 6.5 3.8
Manufacturing 3.8 4.7 4.3 4.2 4.3 1.8 3.7 1.5 1.5 1.3 1.2
Electricity. Gas and Water Supply 11.8 10.4 12.3 11.8 10.4 9.3 10.9 11.4 15.4 14.6 15.1
Construction 9.9 8.6 8.0 8.1 7.6 5.7 7.3 6.3 6.4 8.8 8.9
Trade. Hotels and Restaurants 9.1 8.5 6.9 8.1 8.4 5.6 7.2 0.5 -0.3 -0.6 1.2
Transportation and Communication 17.4 14.4 18.3 17.3 15.5 15.8 16.7 17.1 17.5 18.2 15.9
Financial. Rental and Business Services 8.6 8.0 8.3 8.7 8.6 7.4 8.2 6.3 5.3 4.9 4.8
Services 7.2 6.6 5.9 6.7 7.2 6.0 6.4 6.8 7.4 5.8 5.0
GDP 6.3 6.3 6.2 6.4 6.4 5.2 6.1 4.4 4.0 4.2 4.4
20072008
20082009
Monetary Policy Report - Quarter IV-2009
12
products subsector. However. the major contributors to manufacturing growth are food.
beverages and tobacco. chemicals and rubber products and the paper and printed products
subsectors.
The relative stability in manufacturing growth is reflected in developments in leading
indicators. The car sales indicator has held stable since early 2009. but remains below the
average sales level for the preceding year. A similar trend is also evident in imports of industrial
raw materials and the results of the Bank Indonesia Production Survey for end-Q3/2009. On
the financing side. bank financing for the industry sector showed a slackening trend from
early in the year to the end of Q3/2009. The 100-day programme for industry is expected
to bring only limited benefits given that the only direct impact will be in revitalisation of the
People’s Business Credit (KUR) facility and revitalisation of sugar and fertiliser plants.
Following a period of slowdown. the key sectors. such as trade and agriculture.
is set to mount higher in Q4/2009. Preliminary figures for the quarter suggest that the
trade sector has embarked on positive growth. The improvement in the trade sector is
attributable to a number of factors. including the upswing in demand and largely stable levels
of public purchasing power. Confirmation of initial improvement in trade sector growth is
also provided by leading indicators for the trade. hotels and restaurants sector. which has
entered an expansionary phase set to carry forward into the coming quarter. Added to this
was the upswing in the BI retail sales index in early Q4/2009. At a more detailed level. sales
were up in almost all commodity categories. encompassing both durables and non-durable
goods. Non-oil and gas imports. used as the indicator for the wholesale trade subsector.
and average hotel occupancy in Bali. indicating performance in the hotels subsector. were
both up at end-Q3/2009. In regard to financing. credit channelled to the trade sector has
shown a declining trend since early 2009. with lending at end Q3/2009 below the average
growth for 2008.
Agriculture is on track for 4.3% growth (yoy) in Q4/2009. up from the preceding
quarter. This is explained primarily by reduced growth in the estates subsector related to
slack demand from trading partner nations in Q3/2009. Analysed by structure. the agriculture
sector is dominated by the food crops subsector. In the food crops subsector based on the
BPS Forecast Figures II (ARAM-II). rice production and harvested land is set to decline from
the second subround (May-August) to the third subround (September-December). due to
the passing of the harvest season. However. if the subround is transformed into quarterly
data. harvested area has maintained expansion while rice production is largely stable. In
contrast. the estate crops subsector is expanding in response to renewed growth in demand.
Regarding financing. banks expanded their lending to the agriculture sector throughout the
first half of 2009. However. slowing lending performance was visible in the second half as
of end-Q3/2009.
The mining and quarrying sector is predicted to chart more modest growth in
Q4/2008 compared to one quarter earlier at 3.8% (yoy). The slowdown in the world
economy has had minimum impact on mining. as reflected in steady improvement in mining
sector growth in 2009 compared to the preceding year. As of Q3/2009. exports of mining
Latest Macroeconomic Indicators
13
commodities such as coal. copper. nickel and ores. matte and concentrates maintained an
upward trend in response to strengthening demand and higher commodity prices. Despite
this. lending to the mining sector has declined in 2009. with growth slipping below the
average for 2008.
The transportation and communications sector is expected to chart reduced growth.
Performance in the communications subsector is reflected in the growing numbers of
cellular subscribers as of Q3/2009. Some leading cellular operators have seen remarkable
growth in numbers of customers. Similarly. strengthening performance in the transportation
subsector is indicated by growing air and rail passenger numbers and increased cargo traffic
at Indonesia’s five major seaports (Belawan. Tanjung Priok. Tanjung Perak. Balikapan and
Makassar) at end-Q3/2009. In regard to financing. credit channelled to transportation and
communications has tapered off since early 2009. with lending growth in early Q3/2009
below the average for 2008.
The construction sector is projected to chart fairly stable growth
in Q4/2008 relative to the preceding quarter at 8.9% (yoy). Some
leading indicators such as cement production and cement imports
have begun to climb. A survey of commercial properties in Q3/2009
also points to more bullish developments. This is visible in the upbeat
growth in commercial properties. encompassing offices. retail space and
apartments. and follows the completion of several construction projects
in and near Jakarta. Concerning levels of financing. banks reported
reduced lending growth for the construction sector at end-Q3/2008.
below the average rate of credit expansion in 2008.
Regional Economic Performance
At the regional level. economic growth is projected to improve
further in Q4/2009. The overall economy has been bolstered by more
rapidly improving growth in the Jabalnustra (Jakarta-Bali-Nusa Tenggara)
region compared to other regions and continued high growth levels
in Kali-Sulampua (Kalimantan-Sulawesi-Maluku-Papua). Given that
Jabalnustra accounts for the largest share of the national economy at
45.2%. the economic gains in this region indicate that economic growth
is returning to normal.
For the most part. local economies report brisk consumption and exports
consistent with the rising demand for primary products imported by
China. India and South Korea. Export growth in the Sumatra and the
Kali-Sulampua (Kalimantan-Sulawesi-Maluku-Papua) regions is fuelled
mainly by rubber. nickel. coal and CPO. The economic improvement in
this regions is closely linked to the conducive conditions of domestic
consumption in Jabalnustra and Jakarta and the ongoing recovery in
Graph 2.10
Consumer Confidence Index
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Cement Consumption Growth
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Monetary Policy Report - Quarter IV-2009
14
export activity. Household and government consumption in Jabalnustra
accounts for 52% of consumption nationwide. The buoyant consumption
in Jabalnustra is explained by the factors of strong purchasing power
and consumer optimism in the region (Graph 2.10). Indications point to
rising investment. as demonstrated by increases in capital expenditures
by regional governments (Jakarta. Kali-Sulampua and Sumatra) and
cement consumption (Graph 2.11). Alongside this. exports maintained
stable growth.
Potential for low national CPI inflation in 2009. now forecasted below
the 3.0% mark. is confirmed by the slowing trend in regional inflation
across almost all regions. The deflation recorded on a national scale in
November 2009 resulted primarily from price contraction in Sumatra.
Jakarta and parts of Jabalnustra driven by price corrections following a
round of escalating prices for staple goods. Annual inflation above the
national inflation figure was recorded across all zones in Kali-Sulampua.
the Southern Sumatra Zone and the Eastern Java Zone. Compounding this was an increase
in the number of cities in Jabalnustra and Kali-Sulampua reporting above national inflation.
This indicates that even though inflation is moving lower with healthier influence from
fundamentals. some regions are still hampered by constraints brought on by shocks that
have exacerbated inflation volatility on an individual city basis.
At the regional level. the economic growth outlook is predicted to improve in line with national
economic growth recorded in Q3/2009 at 4.2%. The higher growth figure is supported by
strengthening consumption and exports. Public purchasing power is estimated to be mounting
higher while farmer terms of trade are projected to improve in line with the steady climb in
international commodity prices and the proposed 15% hike in the government floor price for
unhusked dry rice. In analysis by sector. the planned investment expected for manufacturing
and mining will be complemented by increased output of leading agricultural commodities.
such as palm oil and rubber.
BALANCE OF PAYMENTS
Increasingly upbeat global and domestic economic developments have had a positive effect
on Indonesia’s balance of payments. The influence of the external sector on the goods market
is reflected in stronger exports. while demand in the domestic economy is spurring growth
in imports. The balance of trade continues to post a strong surplus despite rising demand
for imports. This surplus is buoyed by the estimated rise in export performance fuelled by the
faster and broader-based recovery in the global economy and the continued positive trend
predicted in international commodity prices. Concerning capital inflows. optimism for the
domestic economy and the still accommodative global monetary policy will help maintain
consistency in portfolio capital inflows in Indonesia. On the capital market. foreign investors
maintained steady interest in domestic portfolio instruments even though some adjustments
have taken place during Q4/2009. Taken together. the Q4/2009 balance of payments
is projected to chart a surplus.
Graph 2.12
Inflation at the Regional Level
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Latest Macroeconomic Indicators
15
The Current Account
The current account in Q4/2009 is expected to register a more modest surplus
compared to Q3/2009. The lower surplus from the previous quarter is predicted in relation
to the rising cost of transportation services caused by escalating oil prices. On the other hand.
the balance of trade continues to chart a strong surplus on the back of rising exports. Even
so. the stronger absorption capacity of the domestic economy has also stimulated activity
among domestic importers. The trade surplus is sufficient to offset the deficit in the services
transactions. income and current transfers account.
Exports have been bolstered by developments in commodity prices. In addition to
strengthening external demand. the upward trend in export commodity prices has also
provided a boost to exports in Q4/2009. Despite a lower annual increases over the preceding
year. export commodity prices steadily mounted throughout 2009 until reaching a peak in
Q4/2009. On the other hand. improvement in domestic economic activity. rising commodity
prices and accommodative level of the exchange rate resulted in higher value of imports in
Q4/2009. although growth remains in negative territory.
The Capital and Financial Account
The capital and financial account is on track for another surplus in Q4/2007. albeit
down slightly from the previous quarter. The comfortably secure condition of domestic
fundamentals combined with attractive yields on rupiah investment instruments has kept
capital inflows pouring into the domestic economy. Despite a downturn resulting in a
weakening of the rupiah. portfolio investments in October-November 2009 reflect continued
positive foreigner interest in domestic commercial assets (BI Certificates. government securities
and stocks). Concerning foreign direct investment inflows. expectations of rising oil prices
in Q4/2009 have prompted more aggressive exploration by oil and natural gas companies
and therefore larger than expected cash calls from overseas affiliates. Q4/2009 is expected
to chart higher inflows of equity and reinvested earnings for direct investment in the oil-gas
and non-oil and gas sectors.
International Reserves
Following the latest developments in the current account and the capital and financial account.
the international reserves position at end-November 2009 came to USD65.84 billion.
equivalent to 6.5 months of imports and servicing of official external debt.
Monetary Policy Report - Quarter IV-2009
16
3. Monetary Indicators and Policy. Quarter IV-2009
In Q4/2009. global economic developments have seen steady improvement. The
faster than expected global economic recovery has reinvigorated investor optimism
for emerging markets. In addition. the solid condition of domestic economic
fundamentals has underpinned exchange rate movement throughout the quarter. In
Q4/2009. the rupiah has maintained an appreciating trend. Measured as an average
for the quarter (until November 2009). the rupiah has gained 5.39%. climbing to Rp
9.463 from Rp 9.973 in the past quarter. The sharp appreciation saw volatility mount
slightly from 0.69% in Q3/2009 to 0.74%. In regard to prices. inflationary pressure
has eased further during Q4/2009. CPI inflation in Q4/2009 is projected at about
only 3% (yoy). below the inflation targeting band established by the Government.
The low rate of inflation is primarily linked to modest inflation in volatile foods and
administered prices and improvement in improving expectations. Added to this.
external pressures have ameliorated from the effect of appreciation in the rupiah
and low imported inflation.
The loose bias monetary policy throughout 2009 has been adequately transmitted
through the interest rate channel and specifically through short-term interest rates
and deposit rates. However. the rapid decline in the policy rate and time deposit
rates has met with delayed. only partial response in lending rates. In the liquidity
channel. the fall in interest rates has been matched by health expansion in economic
liquidity and particularly M1. In regard to lending. the decline in the policy rate has
engendered inadequate response with persistent sluggish credit expansion as of
Q3/2009. The slow pace of economic activity and high rates for credit have sapped
demand for credit from the public. In the asset price channel. the loose bias stance
has met with positive response on the markets for stocks and Government bonds.
Despite this. financial markets have shown only limited response
to the policy rate due to the predominating influence from
external factors.
RUPIAH EXCHANGE RATE
The steady improvement in global economic conditions and
solid progress in domestic economic conditions augur for further
appreciation in the rupiah to the end of Q4/2009. Synergy of
economic recovery across different regions coupled with support from
domestic economic fundamentals has strengthened the investor risk
appetite for the Indonesian economy. In recognition of Indonesia’s
respectable domestic economic performance. the Standard & Poors
rating agency upgraded Indonesia’s credit outlook from stable to
Graph 3.1
Average Rupiah Exchange Rate
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Monetary Indicators and Policy, Quarter IV-2009
17
positive. The combination of improving externals. domestic economic
performance and strengthened global investor risk appetite has kept
capital inflows pouring into the domestic economy.
At end-November 2009. rupiah had appreciated by an average 5.39%
to Rp 9.463/USD from Rp 9.973/USD on the preceding quarter (Graph
3.1). The rupiah closed November at Rp 9.455/USD. having gained 2.01%
over Rp 9.645/USD at the close of Q3/2009. This marked appreciation
saw volatility increase from 0.69% to 0.74% (Graph 3.2).
The conducive condition of externals is providing impetus for
appreciation in the exchange rate to the end of Q4/2009. Economic
indicators continue to improve with more broad-based recovery in various
regions. including the United States. Europe and Asia. This reinforces
indications that the global economy has entered a stabilisation phase. The
recovery in the US economy has become visible in improvement across
several sectors. including industry. the labour market and housing. In
Europe. industry has forged ahead with positive growth as the leading
sector driving economic recovery in that region. In non-China Asia.
economies such as Japan and Singapore have begun reporting positive
results. Rising optimism for the global economy has stimulated growing
expectations for business activity. and especially for higher corporate
earnings. Rising expectations of the business community and heightened
investor risk appetite for emerging market assets has prompted global
investors to return to stock markets. Despite a temporary dip prompted
by the Dubai foreign debt crisis. global stock markets continue to chart
gains.
Besides external factors. conducive conditions in the domestic
economy also contributed to rupiah appreciation. The domestic
economy with growth running at 4.2% (yoy) and the Q3/2009 balance
of payments charting a current account surplus have bolstered investor
confidence in the resilience of the domestic economy to external
pressures. The international reserves position at end-November 2009
reached USD65.84 billion. equivalent to 6.5 months of imports and
servicing of official debt. At this level. international reserves will
strengthen positive sentiment in Indonesia’s ability to service external
debt.
Risk perceptions have been managed within safe levels. During
Q4/2009. the majority of risk indicators for Indonesia reported modest
escalation triggered by negative sentiment related to rumours of new
restrictions on foreign capital in the BI Certificate (SBI) instrument and
the outbreak of the external debt crisis in Dubai. Like with CDS in other
parts of Asia. Indonesian CDS widened slightly from 183 bps in Q3/2009
Graph 3.2
Rupiah Exchange Rate Volatility
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Risk Perception Indicators
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Swap Premium in Various Tenors
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Monetary Policy Report - Quarter IV-2009
18
to 229 bps (Nov-09). Yield spread on Indonesia Global Bonds against
US T-Notes also saw modest expansion from 251 bps in Q3/2009 to
295 bps (Nov-09). At the same time. the EMBIG spread narrowed from
345 bps in Q3/2009 to 336 bps (Nov-09) (Graph 3.3). Nevertheless. the
swap premium indicator for Q4/2009 has maintained a comparatively
stable track. indicating safe levels of risk perceptions and liquidity (Graph
3.4).
Rupiah investment returns are still more attractive compared to
other countries in Asia. Uncovered interest parity (UIP) narrowed from
6.45% at end-Q3/2009 to 6.47% (November 2009). Despite having
eased. the UIP is still at a favourable level on a regional scale. The risk
adjusted interest rate differential or CIP also remains favourable despite
slipping from 3.94% in Q3/2009 to 3.52% (Nov-09) due to slight
escalation in risk indicators triggered by the Dubai debt crisis (Graph 3.5).
Otherwise. the yield spread between Indonesian domestic government
securities and US treasuries remains the highest in Asia (Graph 3.6).
Improvement in global investor confidence and high yields on
rupiah investments have stimulated inflows of foreign funds into
the domestic economy. In November 2009. foreign inflows placed in
SBIs and Government Securities reached USD680.56 million and USD1.04
billion. bringing the position of foreign holdings in SBIs and government
securities to USD5.29 billion and USD10.95 billion. On the stock market.
foreigners recorded a net purchase of USD55.18 million (Graph 3.7).
These developments helped to maintain relative supply-demand
equilibrium on the forex market (Graph 3.8).
INFLATION
In November 2009. the CPI recorded deflation. once again moving
below the historical trend. November inflation sank to -0.03% (mtm).
mainly from renewed correction in volatile food prices. Annual CPI
inflation slowed to 2.41% (yoy) from 2.83% (y-o-y) in Q3/2009 (Graph
3.9). In response to these developments. calendar year CPI inflation
reached 2.45%.
As 2009 draws to a close. inflation in the coming month is also
predicted below the historical trend. This is explained largely by the
deflation in December 2008 that resulted from the cut in fuel prices.
Accordingly. CPI inflation for 2009 is projected below the inflation
target. set at 4.5%±1%.
Analysed by influencing factors. the drop in annual inflation in November
2009 is attributable mainly to fundamentals. as reflected in core inflation.
Graph 3.5
CIP for Countries in the Region
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Graph 3.6
Yield Spread in the Asia Region
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Capital Inflows
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Monetary Indicators and Policy, Quarter IV-2009
19
Core inflation in November 2009 reached 4.29% (yoy). having eased
from the previous quarter’s level of 4.86% (yoy). This indicates that
demand-side pressure remains weak despite indications of a renewed
increase amid relatively stable inflation expectations. Alongside this.
pressure from external factors is predicted to be minimal in view of
the past 8 months of exchange rate appreciation Regarding non-
fundamentals. volatile foods and administered prices inflation are stable
at about 4.71% (yoy) and -5.99% (yoy).
Analysed by category of goods. the drop in 2009 CPI inflation is explained
by falling prices in the transportation. foodstuffs and housing categories.
The lower inflation in the transportation category is linked mainly to the
10% cut in subsidised fuel prices and reductions in urban public transport
fares. Other categories of goods reporting sharply reduced inflation is
foodstuffs. a result of secured levels of supply. and the housing category.
mainly due to the brisk progress in the kerosene to LPG conversion
programme after difficulties experienced in 2008.
Annual core inflation continued to decline. During November
2009. core inflation reached only 4.29% (yoy). Given the low level
of core inflation in November and the core inflation projection for the
subsequent month. end-2009 core inflation is predicted below the 2008
level of 4.86%. The drop in core inflation is related to softened pressure
from external factors with inflation down in trading partner nations and
a stable. appreciating trend in the rupiah since Q2/2009 (Graph 3.11).
Similarly. pressure from the output gap was minimal due to slackened
growth in demand. In addition. inflation expectations maintained a
downward trend. given the absence of shocks and relative decline in
demand and external pressures (Graph 3.12).
Overall demand side pressure remains weak despite the recent onset of
an upward trend. Reflecting the renewed growth in demand is the rise
in the October real sales index to 27.2% (yoy) compared to the 2008
level of -5% (yoy). The steepest increases have taken place in sales of
food and tobacco. clothing and accessories. automotive spare parts
and construction. However. there are no indications of strong upward
pressure on prices as reflected in the continued low level of non-food
quotation inflation. On the other hand. supply-side indicators reflected
in the manufacturing production index have embarked on a rising trend
(Graph 3.13). This is consistent with the increase in manufacturing
capacity utilisation to 80.09% in August 2009 compared to the 2008
level of 78.2% (Graph 3.14). This expansion in production capacity is
related to the upswing in production activity in response to domestic and
foreign market demand and to replenish company inventories.
Graph 3.8
Forex Demand and Supply
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Graph 3.9
Inflation
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Inflation by Category
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Monetary Policy Report - Quarter IV-2009
20
With November deflation in volatile foods at -0.85% (mtm) or 4.71%
(yoy) and volatile foods inflation predicted to edge upwards in December
in line with the end-of-year seasonal trend. volatile foods inflation for
2009 overall is predicted to drop significantly from 16.48% in 2008 to
about 5% (yoy). The decline in volatile foods inflation is explained by a
range of government policy actions. smooth distribution and moderate
global food prices. Some major commodities (rice. chicken and eggs. beef
and cooking oil) have recorded quite low inflation during 2009.
Administered prices inflation at end-2009 is expected to be down
significantly compared to 2008. In annual terms. the drop in administered
prices inflation during 2009 is explained more by the first-round and
second-round effects of the January 2009 government decision to lower
prices for subsidised fuels (premium gasoline and automotive diesel).
The price cuts produced a first round effect of -0.5% on CPI inflation in
January and February 2009. followed by a second round effect of -0.44%
through cuts in urban transport fares during the months of January-
March 2009. As of end-2009. the largest deflationary contribution has
come from gasoline prices. due to price reductions for subsidised and
non-subsidised fuels.
In related developments. decisions concerning other. non-strategic
administered prices have had minimum impact on inflation. The
approximately 15% rise in toll charges on 11 toll road sections in
September 2009. the 1.7% hike in 12 kg bottled LPG prices in October
and increases in water billing rates in some regions had minimum impact
on inflation. Following the 7% hike in cigarette excise. prices went up
for various cigarette brands resulting in a contribution to inflation at
about 0.05% during the month. In addition. the kerosene to bottled
LPG conversion programme progressed smoothly. also contributing to
deflation in the household fuels category.
MONETARY POLICY
Interest Rates
The 275 bps fall in the BI Rate during 2009 was readily transmitted
to short-term interest rates due to sufficient availability of
liquidity on the money market. Reflecting this was overnight interbank
rate movement that tracked the BI Rate each month during 2009. The
average daily overnight interbank rate fell 308 bps from 9.38% at end-
2008 to 6.29% in November 2009. This is a stronger reflection of the
improving credibility of the RI Rate. and also conforms to best practice
in the band of movement in operational targets applied by various
ITF nations. The transmission through the interest rate channel has
Graph 3.11
Trading Partner Exchange Rates and Inflation
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Inflation Expectations - Consensus Forecast
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Manufacturing Production Index (SP)
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Monetary Indicators and Policy, Quarter IV-2009
21
general improved with the commitment of Bank Indonesia to maintain
adequate liquidity on the money market. This commitment has been
operationalised by enriching the selection of instruments for bank
liquidity management (reverse repo government securities. FTE in 14.
28 and 91 day tenors) and adding a 3-month tenor repo window to the
previously available 14-day and 1-month tenors.1 Furthermore. since
June 2009. the fine tune contraction monetary operations have been
scaled back. producing an increase in the FASBI position and in turn
influenced movement in the overnight interbank rate on a path below
the BI Rate. The objective is to enable more rapid transmission of the BI
Rate to longer tenor interest rates.
Monetary transmission in short-term interest rates has been
followed transmission to rates in longer tenors. More abundant
liquidity on the overnight interbank market also led to improvement in
longer-term interbank liquidity across all tenors during 2009. Overall.
average interbank rates in above O/N tenors fell by 378 bps with the steepest decline recorded
in above 30 day tenors at 442 bps. In a further development beginning in October 2009.
banks engaged in interbank transactions in longer tenors compared to earlier months. with
maturities at 60. 90 and 365 days. This condition also indicates improving perceptions of
long-term liquidity risk and lower counterparty risk in the banking system. particularly for
foreign banks and some regional development banks. Despite this. interbank rates in 27-30
day tenors have mounted since September 2009 due to thin volume of transactions in this
tenor. As a result of these developments. the interbank rate structure for various tenors has
followed an irregular path. reflected in the still asymmetric perceptions of liquidity across
tenors. In November 2009. average interbank rates in > 30 day tenors mounted in line with
indications of tightening credit lines held by some small-scale banks.
The BI Rate is being transmitted more readily to bank deposit rates. During 2009
(figures as of October 2009). the 1-month deposit rate has come down by 337 bps. Deposit
rates in various tenors also came down in varying magnitude. except for the 24 month
rate. which remains resistant to change. When the series of BI Rate cuts came to a halt
(September to November 2009). the downward movement in deposit rates continued.
albeit on a lesser scale.
On the other hand. the BI Rate is not being adequately transmitted to loan interest
rates and especially consumption credit rates. During 2009. aggregate loan interest rates
(average for working capital credit. investment credit and consumption credit) fell by only
76 bps. representing far less decline than the 275 bps for the BI Rate and 337 bps drop in
1-month deposit rates. In analysis by categories of lending. the steepest drop took place in
rates for investment credit (128 bps) and working capital credit (113 bps). However. interest
rates for consumption in fact mounted by 13 bps in keeping with the inelastic nature of
demand for this type of credit to movement in interest rates. In analysis by category of bank.
the steepest drop in interest rates took place at foreign and joint venture banks at 165 bps. 1 From 7 September 2009.
Graph 3.14
Manufacturing Capacity Utilisation (SP)
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Monetary Policy Report - Quarter IV-2009
22
In regard to level. the top average rates for working capital credit and investment credit
were offered by private domestic commercial banks. while the highest rates for consumption
credit were again offered by foreign and joint venture banks.
Funds. Credit and the Money Supply
Throughout 2009. bank depositor funds maintained stable growth over the
preceding year. Depositor funds were up by Rp 110.2 trillion in October 2009 compared
to the previous year-end position of Rp 1.863 trillion. As a result. annual funding growth
as of October 2009 slowed to 11.3% (yoy) from the end of the preceding year when bank
funding growth was still as high as 16.1% (yoy) (Graph 3.15). The rising depositor funds
position is explained primarily by rupiah time deposits. most of which are held by individuals.
At the same time. personal savings deposits have been on a rising trend since Q3/2009 due
to the fall in time deposit rates. Countering this was a drop in the foreign currency deposit
position brought about by appreciation in the rupiah. At end-2009. funding held by banks
and especially rupiah depositor funds are projected to chart renewed growth in response to
more expansive liquidity flows from the central and regional governments and expected rise
in bank lending. This is confirmed by indications of rising levels of funds paid in by banks to
maintain the required level of statutory reserves.
Credit expansion has fallen short of expectations. During 2009 (January-September). credit
growth (including channelling) came to no more than Rp 56.8 trillion (4.2% ytd). with
outstanding credit at Rp 1.410.4 trillion. This was well below the credit growth (including
channelling) recorded for the same period in 2008 at Rp 241.7 trillion (23.1% ytd). In
response. annual credit expansion in October 2009 slowed to 5.0% (yoy) from 29.5% (yoy)
at end-2008 (Graph 3.15). The tapering off in credit growth is related to the slow pace of
added lending in rupiahs and foreign currencies. The weak credit expansion is consistent
with soft demand for personal credit. reflected in the stable relationship of credit to GDP. An
added factor holding back credit expansion is the current high level of loan interest rates.
Interest Rate (%) Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct
Quarter IV-2008 Quarter I-2009 Quarter II-2009 Quarter III-2009 Qtr IV
Table 3.1
Interest Rate Movements
BI Rate 9.50 9.50 9.25 8.75 8.25 7.75 7.50 7.25 7.00 6.75 6.50 6.50 6.50
Dep. Guarantee 10.00 10.00 10.00 9.50 9.00 8.25 7.75 7.75 7.50 7.25 7.00 7.00 7.00
1-month Dep. (Weighted Average) 10.14 10.40 10.75 10.52 9.88 9.42 9.04 8.77 8.52 8.31 7.94 7.43 7.38
Base Lending Rate 13.65 14.07 14.16 14.18 13.98 13.94 13.78 13.64 13.40 13.20 13.00 12.96 13.01
Working Capital Credit 14.67 15.13 15.22 15.23 15.08 14.99 14.82 14.68 14.52 14.45 14.30 14.17 14.09
Investment Credit 13.88 14.28 14.40 14.37 14.23 14.05 14.05 13.94 13.78 13.58 13.48 13.20 13.20
Consumption Credit 16.05 16.24 16.40 16.46 16.53 16.46 16.48 16.57 16.63 16.66 16.62 16.67 16.53
Monetary Indicators and Policy, Quarter IV-2009
23
Analysed by category of lending. the key factor in slow rate of credit
growth is the steep correction in working capital credit. In other
categories. significant growth took place in lending. led by consumption
credit. Working capital credit underwent contraction mainly in the
manufacturing sector. one of the largest borrowers of working capital
credit. as well as in business services. At end-2009. credit expansion is
predicted to mount significantly in line with the seasonal trend.
As of October 2009. economic liquidity was marked by sluggish
growth. particularly in M1. Average annual expansion in M1 economic
liquidity has fallen to 6.7% in 2009 from 17.1% in 2008. At the same
time. annual growth in M2 and Rupiah M2 economic liquidity averaged
16.7% and 16.3%. up from 16.1% and 15.1% one year previously
(Graph 3.16). M1 growth. while down from the preceding year. was
shored up by expansion in demand deposits. an early indicator of
economic activity among the population. On the other hand. accelerated
growth in M2 and Rupiah M2 is linked to the growth in quasi-money
held by the public fuelled by the relatively high level of deposit rates as
of Q3/2009. The conditions described above are reflected in the absence
of strong indications of renewed economic activity in society. as evident
from below historical levels of M1 growth.
Financial Markets
The relaxed monetary policy of 2009 has been transmitted to the
stock market. as reflected in the steep rise in share prices. which have
gained 78.2% during 2009. The strong influence of external factors on
the JSX Composite indicates that the ongoing recovery in the global
economy and world financial markets has contributed positively to
movements in domestic share prices. Besides the external factors. the
robust condition of domestic macroeconomic fundamentals is an added
factor fuelling the rise in the JSX Composite during 2009.
The renewed gains in the global economy and world financial
markets have led to a resurgence of capital inflows on the stock
market. Mounting global market confidence alongside more plentiful
global liquidity has prompted renewed expansion in investments on
global financial markets. Foreign capital is pouring back into emerging
market nations and driving up stock indices. In Indonesia. the inflows
on the stock market have bolstered positive sentiment and stock index
gains. With foreign capital pouring into the market. domestic investors
are also showing greater enthusiasm for stock trading.
On the domestic front. conducive developments in macroeconomic
and micro corporate indicators have also played a role in the
Graph 3.15
Funding and Credit Growth and the BI Rate
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Nominal Growth in M1 and M2
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JSX Composite Index and Trading Value
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Monetary Policy Report - Quarter IV-2009
24
stock index gains. Developments in indicators such as exchange rate
appreciation. adequate economic growth. subdued inflation and political
stability imbued the market with positive sentiment fuelling JSX index
gains. At the micro level. the ability of stock issuers to book net earnings
played a role in boosting market confidence. Indonesia’s stock market
performance outshines that of any other market in the region.
The surge of capital inflows into the stock market has helped to
shore up trading volume. Average volume of share trading in 2009
stands at Rp 4.06 trillion per day. a fairly stable level when compared
to Rp 4.41 trillion daily volume in the preceding year. With capital
flowing into the market. foreigners have booked a net purchase of Rp
10.07 trillion in 2009. down from the previous year’s level of Rp 18.65
trillion. The low net foreign purchase this year is related to a round of
profit taking in early Q4/2009. Early in the year. a sharp rise in buying
resulted in a technical condition of the JSX being overbought. leading
subsequently to correction and profit taking.
On the government securities market. monetary policy
transmission is reflected in the evenly distributed narrowing of
yield across all tenors. This is confirmed by testing results showing
that BI Rate movements exert greater influence on government securities
yield compared to movement in the JSX index. The 275 bps reduction
in the BI Rate during 2009 has been followed by an average 230 bps
fall in yield. Short tenor government securities were more responsive
to the cuts in the BI Rate. as reflected in the significant rate of decline.
Yield on Indonesian government securities in short. medium and long
tenors has fallen 359 bps. 221 bps and 119 bps. When compared to
the height of the crisis (October 2008). yield on short. medium and
long-term government securities has come down even more by 1198
bps. 965 bps and 914 bps.
Besides the factor of the declining BI Rate. yield on the
government securities market has also been influenced by global
financial market developments. The dominance of external factors is
reflected in the relative alignment between movement in government
securities yield and developments on the global financial market. Yield
on Indonesian government securities has narrowed in line with the
narrowing of the Indonesia CDS. Externally. the recovery in government
securities has been bolstered by keen foreign investor interest. With the
slashing of the Fed Funds rate to 0%-0.25% and global liquidity on
the rise. investors have begun shifting to high yielding assets. including
Indonesian government securities. The rush of foreign investment in
government securities has also been prompted by an upgrading in
Graph 3.18
JSX Composite Index and Net Foreign Purchase
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Graph 3.19
Government Securities Trading Volume and Yield (all tenors)
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Average Daily Frequency of Government Securities Trading
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Monetary Indicators and Policy, Quarter IV-2009
2525
Indonesia’s debt risk. Domestically. conducive macroeconomic indicators and fiscal risks
within comfortable limits have kept pressures from bearing down on market performance
for Indonesian government securities.
The rebound in foreign investor confidence will have significant impact on market liquidity
for these instruments. Foreigners have expanded their holdings of Indonesian government
securities by Rp 15.7 trillion. up from the previous period when equivalent holdings stood
at Rp 9.6 trillion. Despite this. daily average trading volume is down. Total 2009 trading
volume in government securities stands at Rp 3.44 trillion per day. down from the 2008
position of Rp 4.49 trillion per day (Graph 3.19). At the same time. average daily frequency
of government securities trading is up from 266.3 transactions per day in 2008 to 281.6
per day in 2009 (Graph 3.20).
On the mutual funds market. indications point to smooth monetary policy
transmission bolstered by macro stability. The further relaxation of monetary policy in
2009 and downward movement in bank deposit rates followed by improving performance
in underlying assets in Q3/2009 has led to an increase in NAV reported
by mutual funds. The improving performance of mutual funds is also
supported by a conducive level of macroeconomic stability. Fund
managers have responded to this by releasing new fund products
stimulating activity in mutual funds trading. These new products include
sharia-compliant funds and Collective Investment Contract funds. Other
policies likely to boost mutual funds NAV include the reduction in final
withholding tax to 0% to be applied to interest and discounts earned
on bonds in 2009-2010. Net Assets Value (NAV) for mutual funds
mounted to Rp 101.68 trillion in early August 2009 compared to only Rp
75.82 trillion at the start of the year (Graph 3.21). The most important
contributions to the increased NAV came from equity. fixed income and
mixed funds. In early August. NAV in these three categories reached Rp
35.69 trillion. Rp 14.16 trillion and Rp 12.5 trillion.
Graph 3.21
Mutual Funds NAV
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26
Monetary Policy Report - Quarter IV-2009
4. Outlook for the Indonesian Economy
In initial indications. the Indonesian economy has resumed a phase of accelerating
economic growth. Figures suggest that growth passed through a trough in Q2/2009
at 4.0% before picking up in the subsequent quarters. Key factors supporting this
improvement are: (i) economic growth and world trade volume. which bottomed
out in Q1/2009. and predictions of an accelerated upward trend; (ii) the continued
strength of household consumption in the aftermath of the election periods
owes much to low inflation and sustained levels of household confidence in the
performance of the domestic economy.
With the upbeat outlook for an accelerating economic growth trend to the end of
2011. growth in 2009 is projected at about 4.3% before climbing to about 5.0%-5.5%
in 2010 and 6.0%-6.5% in 2011. The primary engine of growth will be exports. which
have maintained an upward monthly growth trend since March 2009. The accelerated
export growth is supported by Indonesia’s primary commodity-based exports. which
have seen comparatively quick recovery in keeping with rising demand in trading
partner nations. On the domestic front. household consumption in second half 2009
and 2010-2011. while not reaching the levels of the 2009 election period. is forecasted
to remain strong and provide a leading contribution to GDP. The relatively high
rate of household consumption is not only backed by sustained levels of household
consumption and the income effect of rising exports. but also the controlled level
of inflation. Given the improvement in the domestic economy. economic liquidity is
also predicted to show more rapid expansion.
On the supply-side. a renewed upswing is predicted for the manufacturing sector.
Since Q4/2008. this sector has passed through difficult times due to the global
economic crisis that had begun to take its toll early in second half 2008. A key
indicator supporting the improving trend in manufacturing is the rise in imports of
raw materials and the relatively high levels of electricity use by business and industry.
The accelerated sectoral growth overall is not only explained by renewed domestic
and external demand. but also by the backward and forward linkages between the
tradable sectors and other sectors in the economy.
ASSUMPTIONS AND SCENARIOS
International Economic Conditions
The world economy. which underwent contraction during the first half of 2009. is forecasted
to chart more rapid recovery with positive growth in the second half of 2009. Global economic
growth is estimated to have passed through a trough in Q1/2009. before resuming an
upward track. Improving global economic conditions are supported by the strengthening
global economic recovery that is taking hold in more nations. Against the background of
these developments. economic growth for 2009 overall is forecasted to reach -1.1%.
27
Outlook for the Indonesian Economy
In 2010. world economic growth is predicted in positive territory at 3.3%. Confidence in
the economic outlook will be strengthened with the support of fiscal stimulus policies.
low interest rates. government actions to bolster domestic demand and success in curbing
systemic risk. The economies in developed nations. such as the United States. Europe and
Japan. will chart steady improvement. The three economies embarked on positive economic
growth during the second half of 2009. and this trend is predicted to carry forward in 2010.
During the first quarter of 2010. world economic growth measured annually (year-on-year)
is expected to enter positive territory.
Developing nations will chart more solid growth. For the most part. Asia’s emerging markets
will resume a growth trajectory in their economies in response to recovery in external
conditions and mounting domestic demand. The impact of the government stimulus will
boost domestic demand. with multiplier effects on economic growth as a whole. This is
reflected in the strengthening of the production and consumer confidence indices. The main
engines of economic growth in Asia. namely China and India. are forecasted to chart about
9.0% and 6.4% growth (yoy) in 2010.
Fiscal Policy Scenario
In a parliamentary committee meeting in August 2009. the Revised 2009 Budget deficit was
set at Rp 129.8 trillion (2.4% of GDP). below the 2.5% Government-proposed deficit in
the stimulus document. This amendment factors in downgraded assumptions of economic
growth. the exchange rate and inflation. higher crude oil prices and more modest absorptions
of personnel expenditures. procurement expenditures. capital expenditures and other
expenditures. below the levels set out in the stimulus document. The fiscal sustainability
outlook remains sound with the official debt ratio set to ease from 33% of GDP in 2008 to
about 32% in 2009 while macroeconomic conditions remain conducive (economic growth
ahead of real interest rates).
In 2010. fiscal policy will target support for national economic recovery and maintaining levels
of public welfare. A plenary session convened by Parliament in September 2009 adopted the
2010 Budget Law with a deficit at Rp 98 trillion or 1.6% of GDP. Highlights of fiscal policy
in 2010 include the following: (a) the Government will retain some fiscal incentives put into
place in 2009 to revitalise industry and promote business recovery. Fewer tax incentives will
be provided in 2010 in comparison to 2009. (b) improvement in pay and allowances for civil
servants with a 5% increase in base pay and pensions and payment of a 13th month salary;
(c) continue social welfare programmes (including the National Community Empowerment
Block Grant Programme (PNPM). School Operational Assistance. Social Health Insurance. Rice
for the Poor. the Families with Hope Programme); (d) continue development of infrastructure;
(e) move forward with administrative reforms; (f) increase the budget for the Armed Forces;
and (g) maintain the education allocation ratio at 20% of the state budget.
28
Monetary Policy Report - Quarter IV-2009
ECONOMIC GROWTH OUTLOOK
Current indications suggest the Indonesian economy has entered an expansionary
phase after reaching a low in Q2/2009. This recovery is buoyed by strengthening exports
and stable levels of household consumption. A key factor influencing export growth is the
accelerated recovery in the world economy and volume of world trade. Trade volume is
estimated to have reached a low in Q1/2009. and has subsequently had a beneficial effect
on Indonesia’s export recovery beginning in March 2009. On the domestic front. household
consumption is relatively stable. albeit not as high as during the period of the national elections
in Q1/2009. The stable level of household consumption owes much to the income effect from
export growth. low inflation and sustained levels of household confidence in the performance
of the domestic economy. On the supply side. growth is predicted to recover in all sectors and
particularly in manufacturing. Overall. economic growth is predicted to reach 4.26% in 2009
before climbing in 2010 to about 5.0%-5.5% and in 2011 to an estimated 5.5%-6.0%.
Outlook for Aggregate Demand
Household consumption is projected to chart 5.1% growth during 2009. a respectable
figure amid the turmoil of the global crisis. In the first half of the year. household
consumption maintained a stable trend. The extended process for elections of legislatures
and the president and vice president resulted in strong multiplier effects on household
consumption. Furthermore. household consumption is estimated to be maintaining stable
growth for the second half of 2009 as a leading contributor to economic growth.
Household consumption in 2010 is forecasted chart stable growth in the range
of 5.1%-5.3%. Key to the stable household consumption is solid consumer confidence.
the income effect from renewed export growth since Q2/2009 and low inflation. Stable
performance in household consumption is reflected in various indicators. Car sales and
imports of consumer goods are showing improved growth. Similarly. household power
consumption is climbing at an accelerated rate. Alongside this. retail sales have recovered
ground after sustaining decline at the end of 2008.
I II III IV I II III IV* I t e m
Table 4.1
Economic Growth Projection - Demand Side
2008
* Bank Indonesia Projection Figures
Total Consumption 5.5 5.5 6.3 6.4 5.9 7.3 6.3 5.4 4.3 5.8 5.1 - 5.3 6.3 - 6.5
Household Consumption 5.7 5.5 5.3 4.8 5.3 6.0 4.8 4.8 4.8 5.1 5.1 - 5.3 5.4 - 5.6
Total Investment 13.7 12.0 12.2 9.1 11.7 3.5 2.6 4.0 4.6 3.7 8.5 - 8.7 10.0 - 10.2
Domestic Demand 7.5 7.1 7.9 7.1 7.4 6.3 5.3 5.0 4.4 5.2 6.0 - 6.2 7.3 - 7.5
Export of Goods and Services 13.6 12.4 10.6 1.8 9.5 (-18.7) (-15.5) (-8.2) (-5.4) (-12.0) 8.1 - 9.0 9.6 - 10.5
Import of Goods and Services 18.0 16.1 11.0 (-3.5) 10.0 (-26.0) (-23.9) (-18.3) (-6.2) (-18.9) 10.8 - 11.1 14.4 - 14.7
GDP 6.2 6.4 6.4 5.2 6.1 4.4 4.0 4.2 4.4 4.3 5.0 - 5.5 6.0 - 6.5
20082009
2010* 2011*2009*
YOY, Base year 2000
29
Outlook for the Indonesian Economy
The relatively buoyant level of consumption is supported by low interest rates. Historically.
low interest rates have a strong correlation with rising consumption. In the public mind.
lower interest rates diminish the opportunity cost of holding money in banks. It then becomes
preferable to boost consumption to prevent losing out to price increases. Reflecting this is
an upward shift in privately-held liquidity consistent with tendencies to engage in higher
consumption.
Due to the effect of slackened economic growth. investment is predicted to grow at
a more moderate 3.7% in 2009. The global economic downturn since the second half of
2008 has impacted export performance. which in turn has depressed the economic outlook.
The effect has been to erode public purchasing power. prompting investors to postpone
new investments with non-construction ventures especially affected. Reflecting investment
delays is the contraction in imports of raw materials and capital goods.
Optimism for improvement in the economy is expected to boost investment growth
to 8.5%-8.7% in 2010. Accelerated growth in household consumption and recovery in
exports will be followed by increases in production activity. although not significant enough
to support accelerated business expansion. This improving trend is forecasted to carry forward
into 2010 on the strength of the global economic recovery that began in Q2/2009. Evidence
of this is visible in several indicators. such as imports of raw materials and industrial electricity
consumption. The absence of significant acceleration in business expansion is reflected in
imports of capital goods.
Non-construction investment is predicted to climb significantly in 2010. driven in party
by the falling cost of credit. The downward trend in the BI Rate during the first half of
2009 augurs for reductions in loan interest rates during the second half. More affordable
lending rates have historically been followed by more rapid growth in non-construction
investment on the back of the expected surge in investment credit. This is confirmed by
signs of renewed increases in manufacturing capacity utilisation during Q3/2009. Besides
this. the positive outlook for the Indonesian economy will encourage foreign investors to
take up foreign direct investment in Indonesia. The positive outlook is evident from the
improvement in Indonesia’s credit rating. The higher rating is expected to have a beneficial
effect on capital inflows and cost of financing.
Construction investment is forecasted to expand more rapidly in 2010 compared to 2009.
responding to the government stimulus for infrastructure projects and the flurry of property
developments. Progress in infrastructure project construction is reflected in the rising trend in
construction investment growth since Q1/2009. In the second half. construction investment
is forecasted to expand at a faster rate compared to January-June 2009. Indications of this
are reflected in cement consumption growth and rising share prices for companies operating
in infrastructure.
The global economic contraction has resulted in significant decline in exports of
goods and services in 2009. projected to reach -12%. The downturn in the global
economy has led to a reduction in volume of world trade. a development that set in during
the second half of 2008. Furthermore. the declining of world trade will weaken demand for
goods exported from Indonesia.
30
Monetary Policy Report - Quarter IV-2009
The global economic recovery will pave the way for renewed acceleration in
Indonesia’s exports in 2010. with growth in the range of 8.1%-9.0%. Exports appear
to be on the mend after reaching a low in Q1/2009. with confirmation provided by the
direction of world economic growth and movement in the Baltic Dry Index. The accelerated
recovery in the world economy will bolster future export performance. as reflected in the
increased pace of growth in export activity each month. Besides demand. an important
factor in the accelerated export growth is the resource-based nature of Indonesia’s export
commodities. which have bounced back fairly quickly in response to renewed demand in
trading partner nations.
Due to the effect of slackening domestic demand and falling
exports. imports are projected to contract by -18.9% in 2009.
Lower exports. weak consumption and delayed investment will sharply
reduce demand for imported goods. Imports have fallen in all categories.
including consumption goods. raw materials and capital goods. as
evident in the first half of 2009. when imports contracted -25%.
Nevertheless. improvements during the second half of 2009 are expected
to stimulate renewed demand for imported goods.
Improved domestic demand and exports in 2010 will generate
added demand for imported goods. with import growth
potentially reaching 10.8%-11.1%. Indications of import growth are
now visible in an upward trend in monthly imports that commenced
in Q2/2009. More robust exports. rising public purchasing power and
strengthening investment are expected to boost momentum in imports
of goods and services. Import growth is forecasted to overtake exports
in mid-2010 as a result of accelerating investment towards normal le
vels.
Demand-side growth in the economy will be driven in 2011
primarily by exports and investment. The strengthening recovery
in global and domestic economic conditions will pave the way for both
activities to chart more rapid growth.
Volume of world trade is forecasted to see even more vigorous growth
in 2011. ahead of 2010. This will spur optimism for more vigorous
export performance. Exports are playing an increasingly important role
in economic growth. In 2011. export growth is forecasted to reach
9.6%-10.5%.
On the other hand. the upbeat outlook for the economy. more conducive
conditions for business and better infrastructure will attract investment activity. In keeping
with this optimism. investment is forecasted to chart 10.0%-10.2% growth in 2011.
Household consumption is forecasted to maintain high growth in 2011. in line with
improvement in economic conditions. In 2011. household consumption growth will be
Graph 4.1
Real Imports and Current Prices
Graph 4.2
Real Exports and Imports
31
Outlook for the Indonesian Economy
bolstered by rising incomes generated from expanding opportunities for economic activity.
The forecast for household consumption growth in 2011 is about 5.4%-5.6%.
The gathering pace of business activity will provide added reason for investment. When
investment growth accelerates toward the normal trend. import growth will surge ahead of
export growth. Accordingly. imports are projected to surge ahead of exports in 2011 with
growth in the range of 14.4%-14.7%.
Outlook for Aggregate Supply
Although beset by high unemployment. the process of global economic recovery is
moving forward. while fostering greater optimism for domestic economic activity. These
developments will take the Indonesian economy forward in an accelerated growth phase.
Agriculture sector growth in 2009 is projected to reach 3.6% (yoy). Agricultural
output during Q3/2009 was among the reasons for the correction to the agriculture sector
forecast for 2009 as a whole. Only mild impact is expected from El Nino in 2009. with little
significant effect on agricultural production. However. the El Nino phenomenon is predicted
to gather force in early 2010. The added intensity of El Nino may delay the onset of the
2010 planting season.
The predicted delay in the 2010 planting season due to the escalating intensity of
El Nino is expected to slow agriculture sector growth in 2010. The agriculture sector
is predicted to perform less vigorously than in 2009 with growth in the 3.1%-3.4% (yoy)
range. The slowdown is forecasted to take place in the food crops subsector and particularly
in rice output. Even with this slowdown. food resilience will remain strong. The excess food
production in 2009 will be used to cover food stuff needs in 2010.
To support the agricultural sector and protect food resilience and self-sufficiency of food crops.
the government intends to issue a government regulation on agrarian reform. This regulation
is planned for launching in 2010. Under the agrarian reform. the government envisages
expanding land under farmer cultivation to a minimum of 2 ha per family. Of the available
land for redistribution. 7.13 million hectares is set aside for expansion of food estates.
I II III IV I II III IV* I t e m
Table 4.2
Economic Growth Projection - Supply Side
2008
* Bank Indonesia Projection Figures
Agriculture 6.3 4.8 3.4 4.7 4.8 5.3 2.5 2.7 4.2 3.6 3.1 - 3.4 3.8 - 4.0
Mining & Quarrying (-1.7) (-0.5) 2.1 2.1 0.5 2.4 3.3 6.5 3.8 4.0 2.2 - 2.5 2.4 - 2.5
Manufacturing 4.3 4.2 4.3 1.8 3.7 1.5 1.5 1.3 1.2 1.4 2.8 - 3.4 4.0 - 4.4
Construction 8.0 8.1 7.6 5.7 7.3 6.3 6.4 8.8 8.9 7.6 8.0 - 8.3 8.8 - 8.9
Trade. Hotels & Restaurants 6.9 8.1 8.4 5.6 7.2 0.5 (-0.3) (-0.6) 1.2 0.2 4.0 - 4.5 5.9 - 6.2
Transportation & Communication 18.3 17.3 15.5 15.8 16.7 17.1 17.5 18.2 15.9 17.1 14.3 - 15.1 14.7 - 15.3
GDP 6.2 6.4 6.4 5.2 6.1 4.4 4.0 4.2 4.4 4.3 5.0 - 5.5 6.0 - 6.5
20082009
2010* 2011*2009*
32
Monetary Policy Report - Quarter IV-2009
Mining sector growth in 2009 is projected to reach 4.0% (yoy) before slowing in
2010 to approximately 2.2%-2.5% (yoy). The positive growth in the mining sector will be
supported primarily by exploration for new mineral reserves. with focus on nickel. gold. bauxite
and coal. In a move to increase national oil and natural gas output. the Government signed
14 new contracts of work with contractors in November 2009 to strengthen exploration and
production in oil and natural gas and coal bed methane (CGM) working areas.
Looking forward. coal will play an increasing role. primarily in relation to power generation.
Foreign investors from India and China have begun to eye the mining sector in Indonesia.
For the two countries. the main reason driving the aggressive pursuit of mining activity in
Indonesia is the need to achieve energy security. The government also plans to develop coal
bed methane (CBM) within the broader framework of environmentally friendly. renewable
energy. This project has attracted widespread investor interest. reflected in the many
companies/consortia bidding directly for CBM projects. The government is tendering three
CBM Working Areas: CBM Barito. CBM Rengat and CBM Sanga-Sanga.
The manufacturing sector has not performed as expected for 2009. This is evident
from the sluggish trend in manufacturing growth as of Q3/2009. The flagging growth
in Indonesia’s industry is closely linked to investment levels. most importantly the lack
of improvement in non-construction investment. If analysed more deeply. the key issues
revolve around continued weak demand. This has also led to ineffective absorption of the
government fiscal incentives for assistance to the industry sector. Many businesspersons do
not avail this facility. due to persistent lack of demand.
In 2010. the manufacturing sector performance is set to improve. buoyed by the
strengthening domestic and global economy. Manufacturing growth in 2010 predicted
to reach 2.8%-3.4%. To build manufacturing performance in coming years. the government
plans to offer incentives to industries supplying raw material for domestic manufacturing.
This incentive package is expected to provide added attraction for foreigners to invest in
Indonesia and especially in the development of national downstream industries. The new
government also plans to revitalise a number of industry sectors. including but not limited
to cement. fertilisers. sugar and CPO. This revitalisation plan is intended to anticipate rising
demand for these industrial products.
Looking ahead. the industry sector will confront new challenges when the Asean-China Free
Trade Agreement (AC-FTA) comes into force in early 2010. Products from Asean nations and
China are set to become strong competitors on the domestic market. Most affected will be
the iron and steel industry. petrochemicals. yarn and fabric. horticultural products. food and
beverages. footwear. electronics. cable. synthetic fibre and toys. To mitigate negative impact
from the AC-FTA. the national industry standards (SNI) will be applied to a wider range of
commodities. Besides the supply of electricity itself. increases in gas prices and electricity
industrial billing rates pose increasingly complex challenges for industry.
Construction sector growth in 2009 is projected at 7.6%. The onset of renewed growth
in purchasing power in tandem with rising optimism for future improvement in economic
33
Outlook for the Indonesian Economy
conditions and declining loan interest rates is expected to boost activity in the property
business. Cement producers have taken action to anticipate this condition by expanding
capacity. The property sector is the major consumer of cement. accounting for up to 70%
of cement supplied to the market. with infrastructure absorbing approximately a further
10%. Property expansion will take place mainly in residential developments for middle class
buyers and in office properties (mainly in the Jakarta CBD).
The construction sector is expected to pick up in 2010 with growth rising to 8.0%-
8.3%. Strong government support in infrastructure has boosted construction sector growth to
new levels. Concerning infrastructure development. the government has committed itself to
support infrastructure construction in order to accelerate the pace of economic development.
Infrastructure projects are included in the priority programmes of the Second Medium-Term
Development Plan (RPJM) for the 2010-2014 period. To this end. the government plans to
issue an economic stimulus package for national infrastructure development. The accelerated
power infrastructure programme for the stage II 10.000 MW power plant construction will
be launched in 2010.
The trade. hotels and restaurants sector has been the hardest hit in 2009. Growth in
this sector is estimated at only 0.2%. well below the 2008 growth recorded at 7.2%. The
steepest performance decline has taken place in the wholesale and retail subsector. The
downturn in the wholesale and retail subsector is closely related to deteriorating imports
and manufacturing.
The gathering momentum of global and domestic economic recovery in 2010 will
see more robust performance in the trade. hotels and restaurants sector. This sector
is predicted to grow 4.0%-4.5% during 2010. Improved performance in trade. hotels and
restaurants will be driven mainly by strengthened public purchasing power reflected in rising
household consumption. surging activity in industry and higher imports.
In recent years. transport and communications has been a relatively high growth
sector. even when weathering the global economic crisis. Growth in transport and
communications during 2009 is forecasted at 17.5%. The communications subsector
contributes significantly to the overall performance of the transport and communications
sector. Investment in development of communications technology is set to forge ahead.
primarily for enhancing communications services.
In the 100 day programme. the new government will launch the Universal Service Obligation
(USO) programme. This programme includes the 25.000 Telephone Connected Villages
programme and the Smart Village programme. part of which involves the procurement of
100 computers in 100 villages. This will bring computers into closer reach of more and more
Indonesians. Internet access will be offered over the telephone network. The President has
set a deadline of December 2009 for all villages in Indonesia to have telecommunications
network access.
Another major government project for development of telecommunications infrastructure
is the Palapa Ring project. Palapa Ring is a megaproject for construction of an international
34
Monetary Policy Report - Quarter IV-2009
fibre optic backbone consisting of 7 rings covering 33 provinces and 460 districts. Work
on Palapa Ring commenced on 30 November 2009 and will focus on the strengthening of
communications infrastructure in Eastern Indonesia.
Looking forward. the high growth area of telecommunications development will be internet
expansion. A vast internet market remains untapped. Numbers of internet users are estimated
at only around 2.5 million. comparatively small compared to Indonesia’s total population.
The development of Broadband Wireless Access (BWA) supports this trend. Since July 2009.
a total of 8b WiMAX licences have been issued for a number of zones with services expected
to launch in early 2010.
Given the steady improvement in the economic outlook. the transportation subsector
is also predicted to see mounting activity. The increase in activity is related to the
mounting traffic of imports and exports. To anticipate the escalating pace of trading activity
(exports and imports) in response to improved economic conditions. the government plans to
launch 24-hour port services at 13 class 1 ports in Indonesia. Initially. this programme will be
launched at the 4 main ports of Tanjung Priok (Jakarta). Tanjung Perak (Surabaya). Belawan
(Medan) and Makassar. The 24-hour service will speed up incoming and outgoing cargo
movements and reduce waiting times for vessels berthed or loading and unloading cargo in
ports. This upgrading of port services will provide a valuable boost to exports and imports.
Concerning aviation. the ministry plans a restructuring of pioneer aviation routes and a
change in the contract system from 1 year to 3 years. The ministry will also increase the
subsidy for pioneer aviation services to Rp 249.95 in 2010. an increase of 29.7% over the
2009 level. This subsidy will support air services on 118 routes in 15 provinces. In response to
these developments. the transportation and communications sector is forecasted to maintain
relatively brisk growth in 2010 at 14.3%-15.1%.
Sectoral performance is generally expected to improve in 2011 in keeping with
recovery in external and internal external conditions. Economies in trading partner
nations will boost performance in export-oriented sectors. Strong government support for the
downstream industry development will increase the value added generated by industry. Rising
domestic consumption will stimulate growth in the trade sector. Similarly. the transportation
and communications sector will maintain high growth in tandem with the mounting pace of
economic activity in society. Passenger and cargo vehicle movements will be better supported
by improved transportation infrastructure. including 24 hour service at 13 of the class 1 ports
across the archipelago. The government commitment to food self-sufficiency will provide
valuable support for agriculture sector performance.
INFLATION FORECAST
The downward trend in inflation during 2009 is predicted to continue. Inflation has
fallen significantly in 2009 and is projected below the targeting range of 4.5%±1%. Key to
the reduced inflationary pressure in 2009 is low inflation in administered prices following
the government decision to lower fuel prices at the beginning of the year. The decline in
inflationary pressure is also explained by the downward trend in core inflation related to
35
Outlook for the Indonesian Economy
low inflation in trading partner nations and improving inflation expectations. In the volatile
foods category. inflationary pressure is predicted to be minimal as a result of adequate
supply. efficient distribution and comparatively low food commodity prices. CPI inflation
measured year to date (ytd) in November 2009 reached no more than 2.45%. well below
the equivalent ytd figures in 2008 and 2007 recorded at 11.10% and 5.43%. Given the very
low ytd inflation outcome. the expected sources of inflationary pressure in the immediate
future are surging demand related to the Christmas festivities and more vigorous activity in
the domestic economy.
In 2010. CPI inflation is predicted to return to normal levels in the range of 5±1%. On
the external side. inflation will be spurred by escalating inflation in trading partner nations
in keeping with the predicted improvement in the global economy. rising international
commodity prices and especially world oil prices. At home. inflation is not only expected
from hikes in administered prices. but also from strengthened demand in line with forecasts
for improvement in the domestic economy. Concerning volatile foods inflation. the El Nino
phenomenon will result in only minimum inflationary pressure from price increases caused
by domestic production shortages and escalating international food commodity prices.
At home. stronger inflation in 2010 is expected in view of the improving condition of the
economy. which may outperform earlier predictions for that year. One indication of this is a
modest rise in total capacity utilisation. At the same time. inflation expectations remain on a
downward trend in 2010. despite modest improvement at the end of the quarter. This trend
is understood to be linked to low actual inflation during 2009. stability in the exchange rate
and the absence of hikes in strategic administered prices.
On the non-fundamentals side. heightened inflationary pressure is predicted from increases
in some non-strategic administered prices. Renewed increases in administered prices inflation
are expected in relation to the plans of the newly elected government to raise prices for
non-strategic goods and services (excluding subsidised fuels. electricity and LPG gas). At the
same time. volatile foods inflation will climb in relation to 2009. while remaining below the
historical average. The threat of El Nino. which is feared could drive up
international food commodity prices. is expected to have only minimal
impact on domestic food stuff prices. This prediction is confirmed by
the still sizeable spread between some domestic food stuff prices and
international commodity prices. indicating that prices for some domestic
commodities do not show much elasticity towards international price
movements. The low rate of volatile foods inflation is also supported
by secure levels of food supply and distribution. most importantly for
food staples.
In 2011. inflation is expected to remain within the range of
5.0%+1%. Measured against 2010. core inflation is predicted to
mount slightly in keeping with the steady rise in aggregate demand
and improving growth forecasts for the domestic and global economy.
However. volatile foods inflation is predicted to ease. The fall in volatile
Graph 4.3
GDP Fan Chart
36
Monetary Policy Report - Quarter IV-2009
foods inflation will be largely attributable to the absence of adverse
climatic factors (El Nino) in 2011 that could impact food production and
prices. It is assumed that food production and distribution will operate
smoothly. In addition. a series of infrastructure-related government
programmes are expected to remove obstacles to distribution on the
ground. Administered prices inflation is also predicted to ease slightly
in the wake of expected hikes in administered prices following the
formation of the newly-elected government. Other than this. it is
assumed that during 2011. no increases will take place in administered
prices for strategic items. notably subsidised fuels. electricity billing rates.
transport fares and so on.
RISKS
Indonesia’s GDP growth in 2009 is forecasted at 4.3%. However. in
2010. GDP growth is predicted in the range of 5.0%-5.5%. ahead of
2009. Despite improvement. GDP growth nevertheless carries a number of downside risks.
most importantly if the accelerated growth in volume of world trade during 2010 disappoints
predictions. Key factors that may disrupt the accelerated trade growth are persistently high
unemployment and lack of significant improvement in financing in the developed economies.
However. should there be a modest weakening in the fundamentals in the rupiah exchange
rate. the competitiveness of Indonesia’s exports is expected to improve. pushing Indonesia’s
GDP growth to a slightly higher level. The GDP forecast and magnitude of risks for 2009
and 2010 are presented in the GDP fan chart (Graph 4.3).
The inflation outlook for 2010 is daunted by various risks. The main risks are related
to government plans to phase in higher electricity billing rates and LPG prices. The increase
in electricity billing rates is related to the still considerable gap between electricity selling
prices and cost of production and the substantial subsidy provided by the government. In
a similar vein. bottled LPG prices are set to rise to compensate for the marked difference
between LPG selling prices and the economical price of the fuel. Risks may also arise from the
impact of the El Nino phenomenon. if worse than predicted. Both factors could potentially
drive CPI inflation beyond the projected level. Besides the risks that may boost projected
inflation above the forecasted level. other factors may ease inflationary pressure as a result of
improved inflation expectations. The inflation forecast and magnitude of risks are presented
in the inflation fan chart (Graph 4.4).
Graph 4.4
Inflation Fan Chart
Monetary Policy Response, Q4/2009
37
5. Monetary Policy Response. Q4/2009
In the Board of Governors’ Meeting convened on 3 December 2009. Bank Indonesia decided
to hold the BI Rate at 6.50%. This decision was taken after an evaluation of economic
performance in 209 and discussion of the future economic outlook. In the view of Bank
Indonesia. the monetary relaxation during 2009 with BI Rate lowered 300 bps to 6.50% has
provided ample support for the economic recovery and bank intermediation processes. At
6.50%. the BI Rate level is also regarded consistent with achievement of the 2010 inflation
target. set at 5% ± 1%. Global economic conditions in Q4/2009 point to strengthening
improvement with positive impact for developments in the domestic economy.
November 2009 recorded deflation at 0.03% (mtm). with annual inflation reaching 2.41%
(yoy). In view of these developments. inflation at end-2009 could potentially come below
the Bank Indonesia inflation target set at 4.5%+1%. Inflation in 2010 and 2011 is predicted
to resume a normal path in line with the growing pace of economic activity.
Conditions in the banking system are marked by relative stability. Aggregate banking liquidity
remains sufficient for the activities of banks in financing the economy. However. credit has
seen only limited expansion in 2009 with the projection running at about 7%. At the micro
level. the banking industry is in stable condition. reflected in the high CAR and NPLs gross
safely below 5%.
Bank Indonesia will consistently steer monetary policy to safeguard low inflation on track
with the 5%+1% inflation target. while taking careful account of the drive for more rapid
economic recovery. Various measures will be pursued to strengthen the effectiveness of
monetary policy transmission. including efficiency improvements in the banking system. Bank
Indonesia will also maintain close coordination with the Government in monitoring global.
regional and domestic economic developments and in taking necessary measures.
Monetary Policy Report - Quarter IV-2009
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
4.24 7.34 6.23 6.31 6.36 7.68 9.31 14.10 14.64 4.13 7.39 6.31 6.61 6.89 7.27 8.94 13.80 14.33 3.76 7.43 6.43 6.71 7.12 7.07 8.12 13.41 14.05 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 7.94 8.73 9.11 11.24 9.14 14.30 13.48
WorkingCapital
Investment
2004Qtr. IIQtr. IIIQtr. IV
2005Qtr. IQtr. IIQtr. IIIQtr. IV
2006Qtr. IQtr. IIQtr. IIIQtr. IV
2007Qtr. IQtr. IIQtr. IIIQtr. IV
2008Qtr. IQtr. IIQtr. IIIQtr. IV
2009Qtr. IQtr. IIQtr. III
* July 2009
Statistics
39
Table 2
Money Market Transactions
(Billions of Rupiah)
Bank Indonesia Certificate (SBI) 2)
Period Interbank Transaction1) Issuance Repayment Outstandng
2004
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
1) Morning Transaction2) Transaction between Bank Indonesia and Commercial Banks only. Since March 1994 includes Repo SBPU.
87.082 283.275 304.891 118.776
165.064 252.542 339.339 31.979
204.336 293.933 252.929 103.825
216.381 369.495 415.784 57.536
237.571 362.770 315.996 101.058
250.610 230.026 289.657 41.427
264.348 183.663 150.534 74.632
310.175 415.638 356.471 133.799
280.836 517.853 483.967 167.685
286.958 599.495 586.715 180.464
329.312 665.673 636.381 209.756
495.786 774.866 740.951 243.671
362.339 846.655 832.325 258.002
413.527 895.562 887.411 266.152
313.544 777.247 795.475 247.926
368.429 858.289 906.767 212.463
246.462 489.529 543.655 165.145
326.315 389.138 437.313 116.969
326.310 404.071 340.913 180.128
265.674 450.275 397.703 232.699
261.958 324.805 324.776 232.731
239.689 420.327 427.198 220.676
Monetary Policy Report - Quarter IV-2009
40
III IV I II III IV I II III IV I II III
1) 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)
(Billions of Rupiah)
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
264.735 282.784 282.633 301.186 314.427 348.973 350.232 394.065 432.850 461.877 466.605 495.440 504.649 23.012 25.816 24.222 26.805 28.433 30.281 30.711 32.381 35.153 37.409 38.367 42.041 41.313 3.485 4.771 7.414 9.006 6.556 10.647 13.371 14.922 14.778 13.807 13.363 11.923 14.205 64.265 71.165 71.600 69.959 69.450 72.810 72.706 81.038 88.181 96.838 98.660 99.825 92.634 61.031 61.431 63.561 68.172 75.722 85.601 79.209 92.719 98.865 102.017 103.408 113.130 118.580 39.269 43.481 39.477 44.868 47.465 55.587 55.271 64.182 77.295 87.505 83.540 88.540 91.532 73.673 76.120 76.359 82.376 86.801 94.047 98.964 108.823 118.578 124.301 129.267 139.981 146.385 313.651 334.943 335.998 367.168 394.451 432.595 451.967 500.718 534.599 552.617 530.642 529.687 549.349 10.316 11.430 11.312 12.053 12.467 15.533 15.571 18.298 18.169 19.150 18.722 19.353 19.112 3.775 6.460 5.409 7.321 7.076 10.678 9.621 10.137 10.850 11.137 8.979 9.697 10.861 58.125 61.525 59.826 63.319 68.670 73.840 77.952 84.610 90.896 97.042 93.414 84.488 86.575 78.679 85.628 86.783 95.549 100.883 108.726 111.756 123.057 125.908 130.687 120.114 121.956 124.949 74.729 78.963 80.252 90.497 98.503 110.144 115.400 131.115 143.486 148.332 144.072 145.936 151.281 88.027 90.937 92.416 98.429 106.852 113.674 121.667 133.501 145.290 146.269 145.341 148.257 156.571 55.009 55.959 58.851 65.123 70.937 71.921 75.065 85.339 93.991 96.440 100.817 110.968 119.552 1.922 2.030 2.090 2.130 2.248 2.274 2.379 2.710 3.067 3.182 3.143 3.289 3.749 54 58 58 58 55 43 53 182 187 270 312 388 615 476 457 487 520 543 631 710 770 787 814 829 943 1.082 8.312 8.239 8.386 8.762 9.295 9.617 10.191 11.504 12.042 12.055 12.638 14.006 14.898 7.531 6.915 6.776 7.747 9.850 8.879 8.615 10.831 13.456 13.356 13.153 15.716 18.790 36.714 38.260 41.054 45.906 48.946 50.477 53.117 59.342 64.452 66.763 70.742 76.626 80.418 107.692 113.450 117.232 121.509 127.445 141.622 151.908 161.998 178.061 189.245 184.654 168.614 168.509 4.727 5.727 5.395 5.460 5.933 7.817 7.449 6.425 6.505 6.419 7.020 6.669 5.535 2.369 2.607 2.287 2.540 2.629 3.972 4.591 3.910 4.478 5.327 6.081 4.712 6.235 49.682 49.285 50.219 51.029 51.259 56.527 60.265 65.896 68.739 74.458 71.358 61.420 58.833 6.663 7.098 7.691 9.035 10.379 11.726 11.383 13.022 14.256 13.246 15.113 13.598 13.364 24.726 28.279 30.709 31.540 34.679 37.831 43.878 46.763 56.523 60.766 57.418 53.919 55.326 19.525 20.454 20.931 21.905 22.566 23.749 24.342 25.982 27.560 29.029 27.664 28.296 29.216 107.692 113.450 117.232 121.509 20.334 20.469 21.592 23.856 25.706 25.413 25.333 26.382 27.434 4.727 5.727 5.395 5.460 1.294 1.339 1.498 1.672 1.769 1.733 1.774 1.915 1.934 2.369 2.607 2.287 2.540 0 0 0 0 0 0 0 0 0 49.682 49.285 50.219 51.029 324 333 367 391 436 426 433 456 486 6.663 7.098 7.691 9.035 7.831 7.664 7.973 8.866 9.516 9.307 8.998 9.368 9.746 24.726 28.279 30.709 31.540 2.084 2.093 2.185 2.433 2.684 2.672 2.705 2.861 2.935 19.525 20.454 20.931 21.905 8.801 9.040 9.569 10.494 11.301 11.275 11.423 11.782 12.333 741.087 787.136 794.714 854.986 913.158 1.004.178 1.038.912 1.148.891 1.249.970 1.313.873 1.308.051 1.331.091 1.369.493 39.977 45.003 43.019 46.448 49.654 57.203 57.562 61.413 64.623 67.828 69.026 73.267 71.643 9.683 13.896 15.168 18.925 16.310 25.336 27.634 29.151 30.293 30.541 28.735 26.720 31.916 172.548 182.432 182.132 184.827 190.242 204.141 212.000 232.705 249.039 269.578 264.694 247.132 239.610 154.685 162.396 166.421 181.518 192.985 214.804 211.719 235.898 249.762 259.953 260.271 272.058 281.537 146.255 157.638 157.214 174.652 188.838 210.561 221.123 249.700 286.740 306.141 300.888 306.972 319.864 217.939 225.771 230.760 248.616 275.129 292.133 308.874 340.024 369.513 379.832 384.437 404.942 424.923
2006 2007 2008 2009
Statistics
41
1) M1 plus Quasi Money2) Currency Outside Banks plus Demand Deposits3) Including Government Particular Account
Table 4
Money Supply and Its Affecting Factors
(Billion of Rupiah)
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
935.247 219.086 86.881 132.205 716.161 275.819 443.440 22.803 454.663 -261.518
975.166 233.726 97.574 136.152 741.440 280.070 468.907 27.806 522.161 -323.778
986.806 240.911 99.505 141.406 745.895 258.684 476.451 25.261 551.562 -325.152
1.033.528 253.818 109.265 144.553 779.710 263.647 498.019 26.919 588.885 -343.940
1.020.693 250.492 98.584 151.908 770.201 268.482 456.274 28.257 612.463 -344.783
1.073.746 267.635 106.125 161.510 806.111 256.058 468.004 28.237 659.129 -337.682
1.150.451 273.954 114.998 158.956 876.497 280.369 488.483 29.805 708.018 -356.224
1.203.215 281.905 124.316 157.589 921.310 313.082 498.901 28.059 710.783 -347.610
1.195.067 277.293 112.625 164.668 917.774 347.970 470.048 25.557 705.321 -353.829
1.253.757 313.153 123.761 189.392 940.604 345.457 481.654 29.746 729.609 -332.709
1.291.396 333.905 129.969 203.936 957.491 401.065 481.641 31.858 758.261 -381.429
1.382.074 361.073 151.009 210.064 1.021.001 413.265 506.488 38.946 798.125 -374.750
1.375.947 341.833 129.618 212.215 1.034.114 457.382 447.655 35.032 810.996 -375.118
1.451.974 381.376 146.715 234.661 1.070.598 496.522 430.956 44.185 865.144 -384.833
1.512.756 411.281 160.327 250.954 1.101.475 519.360 439.649 45.496 916.657 -408.406
1.643.203 460.842 183.419 277.423 1.182.361 524.703 497.478 56.152 984.844 -419.974
1.586.795 419.746 164.995 254.751 1.167.049 549.049 375.976 49.644 1.025.856 -413.730
1.699.480 466.708 189.453 277.255 1.232.772 562.636 359.645 57.304 1.131.796 -411.901
1.768.250 491.729 223.166 268.563 1.276.521 525.702 348.387 64.488 1.222.193 -392.520
1.883.851 466.379 209.378 257.001 1.417.472 602.347 379.217 66.571 1.282.257 -446.541
1.909.681 458.581 186.538 272.043 1.451.100 703.621 348.466 67.164 1.350.570 -492.977
1.967.776 493.384 203.838 289.546 1.474.392 655.130 375.946 71.044 1.380.575 -453.876
1.995.275 507.096 214.037 293.059 1.488.178 694.431 377.160 55.879 1.410.934 -487.250
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
NetOtherItems
Monetary Policy Report - Quarter IV-2009
42
Table 5
Base Money and Its Affecting Factors
(Billions of Rupiah)
257.843 297.080 272.239 289.727 310.265 379.582 325.044 349.649 392.136 344.688 304.718 322.994 354.297
0 0 0 0 0 0 0 0 0 0 0 0 0
153.569 178.572 155.498 173.888 189.221 220.785 198.940 224.342 270.243 264.391 226.672 244.634 273.744
129.969 151.009 129.618 146.715 160.327 183.419 164.995 189.453 223.166 209.378 186.538 203.838 210.810
23.600 27.563 25.880 27.173 28.894 37.366 33.945 34.889 47.077 55.013 40.134 40.796 62.935
104.061 118.417 116.558 115.524 120.740 158.452 125.705 124.811 121.302 79.648 77.404 77.744 79.920
213 91 183 315 304 345 399 496 591 650 642 616 633
255.182 274.694 305.744 330.295 337.523 356.883 351.874 351.561 355.967 338.692 354.727 356.930 376.681
2.661 22.386 -33.505 -40.569 -27.258 22.699 -26.830 -1.912 36.169 5.996 -50.009 -33.935 -22.383
219.538 265.919 200.460 187.081 184.961 249.069 128.907 117.614 123.797 172.012 105.571 136.202 144.747
18.226 18.196 18.186 18.136 18.136 8.847 8.838 8.800 8.800 8.711 8.715 8.715 8.715
11.035 10.832 10.598 10.366 10.206 9.994 9.751 9.353 9.227 9.009 8.783 8.622 8.458
5.494 5.352 5.366 5.389 5.357 3.074 3.089 3.295 3.155 3.815 2.545 2.473 2.415
-189.131 -242.001 -247.525 -264.280 -254.096 -281.164 -219.099 -191.525 -152.563 -233.866 -257.701 -267.412 -242.991
-180.382 -208.763 -239.977 -257.998 -265.034 -247.688 -212.463 -165.145 -116.967 -179.879 -232.700 -232.731 -220.676
-16.829 -41.568 -19.298 -21.615 -4.750 -48.933 -5.737 -4.989 -1.403 -4.223 -15.288 -28.277 -22.824
8.080 8.330 11.750 15.333 15.688 15.457 14.356 14.172 15.929 19.569 15.599 22.580 22.675
-62.501 -35.912 -20.590 2.739 8.178 32.879 41.684 50.551 43.752 46.316 82.078 77.465 56.274
2006 2007 2008 2009
III IV I II III IV I II III IV I II III*
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
1) 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**
IV Total I II III IV Total I II III IV Total I II III
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.
22.157 10.859 2.640 2.271 2.151 3.430 10.493 2.742 -1.013 -966 -637 125 2.722 2.907 1.739 7.386 29.660 7.712 8.107 7.487 9.448 32.754 7.536 5.443 5.771 4.166 22.916 6.908 8.410 7.796 27.178 103.528 26.626 29.202 30.009 32.177 118.014 34.412 37.345 38.081 29.768 139.606 24.204 28.175 31.735 -19.792 -73.868 -18.914 -21.095 -22.521 -22.729 -85.260 -26.876 -31.902 -32.309 -25.603 -116.690 -17.297 -19.765 -23.939 -2.829 -9.874 -3.163 -2.991 -2.764 -2.922 -11.841 -3.072 -3.387 -3.313 -3.227 -12.999 -2.620 -2.983 -3.162 -3.539 -13.790 -3.163 -4.023 -3.811 -4.527 -15.525 -3.093 -4.425 -4.756 -2.881 -15.155 -2.688 -3.720 -4.071 1.139 4.863 1.254 1.178 1.240 1.432 5.104 1.371 1.356 1.331 1.305 5.364 1.122 1.200 1.176 1.303 3.025 1.836 2.029 -935 660 3.591 -529 2.105 2.370 -5.822 -1.876 1.886 -2.230 2.966 132 350 43 127 255 122 546 17 62 187 29 294 19 29 34 1.170 2.675 1.793 1.902 -1.190 539 3.045 -546 2.043 2.184 -5.850 -2.170 1.867 -2.259 2.962 1.232 2.211 -246 1.426 764 309 2.253 630 197 1.871 720 3.419 843 228 -70 -204 -2.703 -1.282 392 -1.427 -2.358 -4.675 -1.730 -1.436 -1.517 -1.217 -5.900 -1.251 -1.047 -505 1.435 4.914 1.037 1.034 2.191 2.667 6.928 2.360 1.633 3.388 1.937 9.318 2.094 1.275 435 1.312 4.174 2.491 3.810 465 -1.200 5.566 1.984 4.188 -74 -4.377 1.721 1.859 1.959 3.403 -762 -1.933 -497 -1.897 -1.257 -764 -4.415 -823 60 -65 -467 -1.294 133 362 84 2.074 6.107 2.988 5.707 1.722 -437 9.981 2.807 4.128 -9 -3.910 3.015 1.726 1.597 3.319 -1.382 -3.791 -452 -3.334 -2.419 1.430 -4.775 -3.160 -2.342 387 -2.194 -7.309 -835 -4.455 -371 -1.707 -1.588 -105 -2.283 -2.360 262 -4.486 -2.672 -1.974 -1.610 -4.498 -10.755 -307 -2.571 -4.733 325 -2.204 -348 -1.051 -59 1.168 -289 -489 -367 1.998 2.304 3.446 -528 -1.874 4.362 3.459 13.885 4.476 4.300 1.217 4.091 14.805 2.213 1.092 1.404 -6.459 -1.750 4.608 677 4.735 -751 625 -97 -663 -37 -571 -1.368 -1180 233 -1493 2246 -194 -653 375 -1189 2.708 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 -2.708 -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 -3.546 292 -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 -3.001 -7.608 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -3.001 -7.608 0 0 0 0 0 0 0 0 0 0 0 0 0 42.586 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 2.9 2.6 2.1 1.9 3.0 2.4 2.3 -0.8 -0.7 -0.5 0.0 2.4 2.2 1.2 33.2 24.8 19.8 21.4 15.2 21.2 19.4 16.2 17.8 15.2 24.2 18.1 23.3 24.3 21.9 18.6 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 5.4
Monetary Policy Report - Quarter IV-2009
44
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)
Table 7
Inflation Rate by Group of Goods and Services
(Percent)1
1.27 6.05 3.71 -1.21 4.00 4.43 5.91 1.28 4.75 0.60 1.44 -1.76 4.94 2.60 8.63 12.16 -6.50 0.69 3.48 2.59 2.11 0.60 0.91 2.76 -0.75 1.06 5.62 -0.25 -2.93 5.12 9.08 -2.04 4.14 0.29 13.94 -4.64 2.39 -0.26 6.47 3.66 1.46 1.37 -2.71 4.65 2.11 5.84 2.01 12.12 2.94 2.25 -2.52 4.63 2.72 1.64 0.35 0.39 3.06 0.73 7.87 1.84 8.04 4.32 2.24 -0.88 1.60 1.96 2.55 -1.02 4.05 11.46 0.26 6.88 -0.19 8.94 -2.51 -0.34 -0.54 1.57 1.00 11.87 -0.30 -1.04 2.17 7.39 2.42 1.68 3.79 6.60 2.59 -5.97 6.34 1.73 1.72 3.81 2.61 4.49 7.90 28.51 1.84 5.93 0.42 0.18 -2.59 1.18 0.50 4.46 2.21 1.39 2.87 1.79 1.38 0.89 7.30 1.68 0.71 3.11 8.14 -13.98 24.41 -3.70 -8.06 -0.43 25.17 2.85 -0.07 -10.49 8.28 1.66 -8.24 23.17 1.41 3.65 8.63 12.79 7.09 6.71 15.72 1.47 -1.65 -6.81 -0.81 0.12 -1.30 4.36 3.13 1.32 1.50 0.75 -1.47 2.02 1.00 3.57 1.20 1.62 0.61 2.37
0.80 2.24 1.89 1.19 1.33 1.85 4.02 1.33 2.62 2.43 2.40 1.18 2.12 0.96 2.25 1.67 1.00 1.35 2.36 5.50 1.63 2.83 2.35 1.59 1.03 1.46 0.31 1.95 1.75 0.20 0.46 -0.20 1.47 1.06 2.15 1.50 5.39 2.15 5.61 0.86 2.59 2.24 2.60 1.85 2.28 1.89 0.73 2.60 3.70 2.42 0.82 1.06 0.78 1.30 1.81 0.75 1.27 0.97 2.79 1.14 3.58 1.00 0.42 0.26 0.47 0.98 1.73 2.12 0.83 1.11 1.58 2.22 1.67 2.16 0.73 1.00 0.12 0.53 0.34 0.56 1.69 0.15 1.92 -0.45 4.69 -0.12 8.94 1.66 -1.48 0.29 0.55 0.67 0.78 1.20 0.52 0.57 1.05 1.45 0.97 1.66 1.10 0.95 0.68 0.75 0.99 0.99 1.70 1.79 1.61 1.30 2.71 0.86 1.71 1.08 1.00 0.53 -0.21 0.57 1.84 0.72 0.39 2.34 4.78 4.30 0.49 0.77 2.58 4.48 -1.88 1.06 0.80 1.81 0.37 0.29 1.29 1.70 0.81 0.27 3.02 0.35 0.38 0.55 2.49 0.69 1.41 0.10 0.71 0.94 1.45 0.68 0.46 2.15 0.30 0.44 0.29 1.24 1.00 1.35 0.50 0.32 1.34 0.86 0.56 0.64 2.13 0.23 0.26 0.39 1.67 -0.22 2.47 2.09 0.35 5.53 13.60 12.66 0.59 -2.46 7.26 13.49 -6.30 -0.37 le 0.70 1.76 1.39 0.71 1.03 1.12 3.00 0.83 1.64 1.10 1.27 1.20 0.77 0.94 3.70 1.92 0.45 0.32 0.44 5.12 0.47 1.07 0.69 1.60 1.72 0.85 -0.19 0.18 1.32 0.82 1.08 1.46 1.96 1.31 2.19 1.60 1.14 1.39 0.42 0.84 0.80 1.16 1.85 0.61 0.73 1.15 1.10 2.36 1.61 1.39 0.73 1.38 0.77 0.72 1.46 0.80 1.56 1.52 2.32 0.90 1.76 1.26 1.01 0.42 0.83 7.44 0.20 0.36 0.01 7.97 0.43 0.14 0.44 3.77 0.82 0.22 0.22 2.94 11.41 0.12 0.46 0.03 12.73 0.36 0.09 0.18 6.76 0.70 0.04 0.06 4.86 2.31 0.23 1.04 0.26 0.87 0.48 0.72 0.45 4.95 0.32 0.59 0.46 1.27 3.61 0.27 0.36 0.36 1.58 0.66 0.30 0.72 1.14 1.11 0.37 0.16 0.74 0.06 0.28 0.13 -0.23 0.01 0.64 0.20 0.92 0.51 1.02 0.48 0.55 0.74 1.19 0.88 0.79 0.36 0.35 2.23 0.47 0.20 0.91 0.49 0.51 0.33 0.52 0.08 0.35 0.22 0.46 0.15 0.42 0.37 8.72 0.92 -2.94 -4.66 0.32 1.16 0.02 0.33 0.24 0.60 0.00 0.49 0.27 12.98 1.03 -4.46 -6.95 0.54 1.70 -0.01 -0.01 0.05 0.01 -0.02 0.00 0.01 -0.12 0.02 0.20 -0.07 -0.31 -0.32 1.26 1.56 0.50 0.24 2.43 1.27 1.40 0.84 1.34 1.64 1.38 0.34 0.87 0.05 0.01 0.01 0.01 0.00 0.00 4.90 0.01 3.89 0.00 0.00 0.00 0.65 1.16 2.44 1.91 0.17 2.28 2.09 3.41 2.46 2.88 0.54 0.36 -0.15 2.07
Sub Group 2006 2007 2008 2009 III IV I II III IV I II* III IV I II III
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
Statistics
45
Table 8
Inflation Rate Contribution in 44 Cities (cont.)
(Percent)1
1.09 4.45 2.16 -2.16 5.34 -1.05 4.84 4.38 2.92 2.97 -0.56 -0.37 4.37 2.64 2.81 4.61 -1.67 5.85 1.94 3.49 2.75 1.36 1.39 0.35 0.14 4.12 2.74 4.93 1.92 -2.34 3.76 2.51 4.65 2.53 1.27 1.56 -0.03 -1.07 2.66 1.90 1.07 6.92 -0.29 1.15 2.69 4.63 2.31 3.06 2.22 -0.52 -0.01 3.45 1.68 4.01 2.98 -0.55 3.78 1.97 3.07 2.88 1.37 1.33 -0.20 0.10 3.26 0.85 3.31 1.63 -0.51 1.96 3.23 2.19 2.07 1.21 2.26 -0.84 -0.17 3.35 0.93 5.07 3.68 -1.96 2.06 3.05 4.35 4.09 2.04 2.07 0.04 -1.34 2.79 1.21 3.36 3.67 -1.49 1.92 3.31 4.15 2.46 3.17 0.55 0.48 -0.54 1.70 2.30 1.97 1.40 -0.34 2.15 1.56 2.91 2.29 1.72 0.58 0.64 -0.43 1.76 1.61 6.14 3.17 -1.22 2.57 2.75 2.16 4.19 1.76 -0.19 0.26 -0.72 2.37 0.96 4.27 0.64 0.85 3.23 3.28 3.11 3.41 3.20 -0.29 -0.06 0.09 1.57 1.23 3.76 1.36 -0.88 3.10 1.37 4.09 4.14 3.61 0.34 0.09 -0.74 4.06 0.69 2.31 0.71 0.12 3.40 2.22 3.29 2.93 4.95 0.74 0.92 -1.29 4.85 2.16 0.93 2.62 -0.98 0.67 0.33 6.53 4.20 4.26 0.13 -0.78 -0.74 3.16 - - - - - - - 3.80 3.04 1.22 -0.74 -0.77 3.52 - - - - - - - 2.45 3.33 1.19 0.32 -0.73 1.29 1.21 2.07 1.95 0.51 1.85 1.61 3.51 1.94 2.54 - - - 2.23 3.53 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 - - - - - - - 2.11 0.88 1.57 0.63 0.36 1.89 - - - - - - - 1.15 2.38 0.46 0.79 -0.27 1.72 - - - - - - - 2.80 3.42 1.32 1.67 0.35 1.25 - - - - - - - 1.24 3.82 0.03 0.01 -0.26 1.76 - - - - - - - 2.45 3.49 0.18 -0.87 -0.20 2.43 1.26 1.87 1.13 -0.26 2.48 1.82 2.81 2.76 2.28 -0.07 0.11 -0.14 1.64 0.63 4.23 3.24 0.15 2.22 2.06 3.52 3.33 4.04 0.19 0.91 0.04 2.49 2.21 2.48 2.22 1.33 2.21 0.26 3.60 2.75 3.53 1.16 0.78 0.11 1.17 0.36 2.41 1.19 -0.34 0.99 1.42 2.74 2.13 1.74 0.13 1.06 0.19 1.21 1.48 1.57 2.37 0.52 1.98 1.72 4.18 2.40 2.83 0.18 0.72 0.06 1.96 1.48 3.19 1.66 1.24 2.84 2.88 2.72 1.82 2.36 0.45 1.05 1.05 3.15 2.52 2.42 1.86 0.18 3.17 2.59 2.85 2.51 3.16 - - - 0.70 2.68 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 0.80 3.11 2.50 -0.11 1.55 2.76 2.94 2.11 3.10 -0.35 0.90 0.02 2.04 0.60 1.76 1.30 0.13 2.12 2.28 4.06 2.77 2.93 0.38 1.28 0.16 1.38 - - - - - - - 1.81 3.85 0.00 0.60 0.07 1.84 - - - - - - - 4.05 2.27 -0.32 1.02 0.00 1.52 0.81 2.61 1.09 0.90 2.02 2.12 3.59 2.00 2.56 0.14 1.06 -0.41 1.97 -0.12 1.37 2.19 0.29 1.36 1.95 3.35 1.78 3.14 - - - -0.05 1.93 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 - - - - - - - 2.24 6.66 -2.44 0.39 1.10 3.47 0.86 3.32 5.29 -0.39 0.90 2.47 3.33 2.31 0.46 - - - 1.72 1.29 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 0.30 1.74 0.81 0.39 1.84 4.38 1.60 2.87 1.72 - - - -0.52 3.94 0.62 -0.14 2.38 4.95 4.48 2.22 3.62 - - - 0.10 3.14 3.29 -0.66 2.60 2.39 4.12 2.48 2.23 - - - -0.06 1.05 0.81 0.39 4.54 1.40 3.75 2.88 1.84 - - - 2.44 0.61 1.72 0.52 4.84 1.85 3.97 3.32 2.96 - - -
C i t i e s 2006 2007 2008 2009
III IV I II III IV I II* III IV I II III*
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
Monetary Policy Report - Quarter IV-2009
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 2.15 1.29 3.34 -0.43 3.45 3.46 1.04 3.63 3.02 0.17 1.18 -2.08 0.74 1.23 1.74 0.60 1.87 1.60 3.84 1.49 2.44 5.01 -0.63 1.78 -0.36 3.35 - - - - - - - 6.26 3.62 0.27 2.14 0.84 2.85 1.58 0.66 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 - - - - - - - 3.15 3.50 1.16 1.14 -0.12 2.00 2.29 2.97 1.94 2.20 0.15 2.94 2.91 6.49 3.30 0.74 2.99 -0.34 2.20 2.34 3.48 -1.24 0.46 3.22 4.51 -0.04 2.59 4.01 0.16 2.33 0.59 0.85 - - - - - - - 3.04 5.86 -0.29 -0.35 0.06 1.45 -0.47 1.25 1.77 0.51 2.38 1.07 2.92 1.76 5.06 -4.80 2.26 -2.43 1.82 0.82 1.72 2.39 2.06 0.44 5.21 4.71 1.17 4.30 -0.92 1.25 -0.27 1.32 - - - - - - - 5.78 8.31 0.62 3.52 0.36 2.39 - - - - - - - 5.72 7.29 -1.86 0.77 0.52 0.42 1.57 2.31 4.93 0.15 0.52 4.45 6.49 5.86 2.88 0.31 -0.06 -0.36 1.55 1.16 2.44 1.91 0.17 2.28 2.09 3.41 2.46 2.88 0.54 0.36 -0.15 2.07
C i t i e s 2006 2007 2008 2009
II III IV I II III IV I II* III IV I II*
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
4.32 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
-31.27 -15.57 -41.37 -24.52 -25.95 -17.49 -50.53 -32.35
3.31 -0.64 1.12 0.43 -0.65 -5.30 21.28 1.27
5.19 1.22 1.13 -0.37 -2.86 -4.20 2.63 0.79
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*