Faster Growth Despite Rising External Risks

15 01 2008

indonesia economic forecast 2008

GDP: Accelerating Since the Beginning of the Year

The Indonesian economy picked up its growth pace in 2007. From a growth pace of 6.0 percent in Q1 2007, the economy then expanded by 6.3 percent in Q2 2007 and 6.5 percent in Q3 2007. Nonetheless, in Q4 2007, we expect the Indonesian economy to show slightly slower growth of 6.2 percent as a result of slightly lower-than expected growth in government expenditures and private consumption in that particular quarter. Yet for the whole of 2007, the Indonesian economy is expected to grow by 6.3 percent, or much faster than the 5.5 percent growth pace in 2006.

Compared to other countries in the region, Indonesia is one of the fastest growing economies. Among the “emerging market” countries in Asia, the Indonesian economy ranked fourth in terms of growth over the last three quarters (up to the third quarter of 2007), with only the economies of China, India, and the Philippines growing more briskly than Indonesia’s economy.

Investment has helped drive the Indonesian economy over the last three quarters. Prior to 2006, investment (as measured by gross fixed capital formation) gave only a minimal contribution to economic growth. However, it then picked up significantly in 2007. Looking ahead, investment growth should remain strong. This is because spare capacity has been reduced significantly following the steady rise in domestic consumption since the beginning of this decade. Read the rest of this entry »

January 2008 Inflation Outlook: Unstable Rice Prices!

9 01 2008

indonesia flood

In December 2007, the consumer price index (CPI) shot up 1.10% MoM (month-on-month), after a 0.18% MoM rise in November. As such, the YoY (year-on-year) inflation rate fell slightly from 6.71% in November to 6.59% in December.

Prices rose in all components of the CPI. The largest increase was seen in the Foodstuffs component (up 2.47% MoM), followed by the clothing component (up 0.99% MoM), the housing component (up by 0.63% MoM), the processed foods component (up 0.91%), the medical care component (up 0.41% MoM), the transportation component (up 0.22% MoM), and the education component (up 0.12% MoM).

The December inflation figure was higher than we had expected. We knew that seasonality factors (Christmas and New Year) would push up the price of rice in December. Nonetheless, we did not expect foodstuff prices (especially rice prices) to increase as sharply as they did. In the previous year, the price of rice climbed higher due to the long dry season that delayed rice planting and led to rumors of rice scarcity. Also, the government agency responsible for maintaining the sustainability of the rice supply (Bulog) was apparently ill prepared to deal with the problem. Furthermore, rice imports could not be conducted in a timely manner due to the lengthy debate over whether such a policy would hurt the country’s rice farmers. Read the rest of this entry »

Weekly Currency 7 Januari 2008

8 01 2008

Nilai tukar Yen menguat terhadap USD dalam perdagangan minggu kemarin. Pada hari pertama perdagangan, Yen ditutup menguat pada level 111.7 dari level 112.3 pada penutupan hari Jumat minggu sebelumnya (28 Desember 2007). Pada hari perdagangan selanjutnya, Yen terus menguat hingga akhirnya ditutup pada level 108.6 di hari Jumat yang lalu (4 Januari 2008). Secara keseluruhan, Yen menguat sebesar 3.3% dibandingkan penutupan minggu sebelumnya.

Euro tidak banyak berubah terhadap Dolar Amerika dalam perdagangan minggu kemarin. Pada hari pertama perdagangan, Euro ditutup melemah pada level 1.459 dari level 1.472 pada hari Jumat minggu sebelumnya (28 Desember 2007). Namun pada perdagangan selanjutnya, Euro kembali menguat. Sehingga pada akhir perdagangan pekan kemarin, Euro ditutup pada level 1.474 pada hari Jumat kemarin. Secara keseluruhan, Euro hanya menguat sebesar 0.1% dari penutupan minggu sebelumnya.

Dalam perdagangan minggu kemarin, nilai tukar Rupiah melemah terhadap USD. Pada hari pertama perdagangan, Rupiah ditutup pada level 9,400 dari level 9,395 pada hari Jumat minggu sebelumnya (28 Desember 2007). Pada hari-hari perdagangan berikutnya, Rupiah relatif stabil. Namun pada akhir perdangangan minggu lalu, Rupiah melemah tajam dan ditutup pada level 9,460 pada Jumat kemarin. Secara keseluruhan, Rupiah melemah sebesar 0.6% dari penutupan minggu sebelumnya. Weekly Currency 7 Januari 2008

Weekly Currency 10 December 2007

11 12 2007

Nilai tukar Yen melemah terhadap USD dalam perdagangan minggu kemarin. Pada hari kedua perdagangan, Yen sempat ditutup menguat pada level 109.9 dari level 112.2 pada penutupan hari Jumat minggu sebelumnya (30 November 2007). Namun pada perdagangan berikutnya, Yen kembali melemah. Yen akhirnya ditutup pada level 111.7 di hari Jumat yang lalu (7 Desember 2007). Secara keseluruhan, Yen melemah sebesar 0.4% dibandingkan penutupan minggu sebelumnya.

Apabila pada dua pekan sebelumnya Yen melemah cukup signifikan akibat menguatnya aktivitas carry trade, pergerakan Yen pada pekan kemarin bersifat mixed dan relatif terbatas. Hal ini sedikit banyak menunjukkan bahwa investor global memilih untuk berhati – hati mengantisipasi putusan The Fed pertengahan pekan ini.

Untuk perdagangan minggu ini, nilai tukar Yen terhadap Dolar Amerika masih akan dipengaruhi oleh perkembangan data ekonomi terakhir baik di Jepang maupun Amerika. Data terakhir menunjukkan terjadi peningkatan permintaan mesin produksi untuk korporasi di Jepang, yang mengindikasikan antisipasi korporasi Jepang atas peningkatan permintaan baik di wilayah domestik-regional (Jepang dan Asia) maupun di tingkat global. Hasil survei bisnis yang dilakukan oleh Bank Sentral Jepang (BoJ) memperkuat hal ini. Hasil survei tersebut menunjukkan bahwa mayoritas CEO perusahaan besar di Jepang berencana untuk meningkatkan belanja modal perusahaan pada penghujung tahun 2007 ini. Selain itu diperkirakan investor global akan mengantisipasi penurunan Fed Funds Rate dengan kembali melakukan aktivitas carry trade pada pekan ini. Karena itu, Yen diperkirakan akan melemah dalam perdagangan minggu ini dan bergerak di kisaran 110.5 – 113.0. Read the rest of this entry »

Weekly Report 10 December 2007

11 12 2007

Weekly Outlook : The central bank’s decision to cut interest rates provides the impetus for further gains in share prices this week as the year-end approaches. As we had earlier noted, share prices have risen in every December in the last six years – and this year looks like being no exception. And expectations of a cut in interest rates in the US should also add to the positive market sentiment. Thus, against this backdrop, sentiment on the domestic bourse should remain upbeat this week with the JCI heading toward the 2,800 level.

Stocks listed on the Indonesia Stock Exchange, formed by a merger of the Jakarta and Surabaya bourses, rose to new highs last week. The main index even broke through the 2,800 level at one point, although shares later gave up some of their gains on profit taking. Over the week, the index closed 90.62 points higher at 2,778.95. The gains in stock prices were supported by a number of factors. First of all was the unexpected move by the central bank to cut its benchmark interest rate from 8.25% to 8%. This move reassures investors that inflationary pressures are not as strong as earlier feared despite the high oil prices, i.e. the longer-term inflation rate is still benign. On the domestic front, the issue concerning government plans to rein in fuel subsidies remained in the limelight. Yet hopes that the oil price was on the way down – it’ s fallen by more than 13 percent from its recent high – suggest that the government may not have to implement such plans. And even if they do, the idea of requiring private motorists to use nonsubsidized fuel is now becoming increasingly more accepted since the less well off – such as those who use motorcycles or public transport – would not be affected. Doubts, however, remain over implementation. Read the rest of this entry »

Consumer Confidence Finally Recovers

7 12 2007

The Consumer Confidence Index (CCI), which had been in a downtrend since July 07, perked up in November to stand at a level of 86.5, up 5.2% over the previous month. Propelling the increase in the CCI was the 9.2% jump in the level of the Present Situations Index (PSI) to 68.3 after it had slumped to a four-month low of 62.5 in October. At the same time, the Expectations Index (EI) rose 3.3% to 100.2 from 97.0 in October, giving rise to hopes of a pick-up in consumer spending.

Declines in basic foodstuff prices and upbeat assessments on the overall state of the economy have helped to quell consumer concerns over the prospects for the economy in the months ahead. At the same time, consumers should spend more – especially on traveling – during the holidays at the end of the year. This should give a timely boost to the economy. Read the rest of this entry »

Weekly Report 3 December 2007

4 12 2007

Weekly Outlook : The subdued inflation for November (+0.18 percent month-on-month) has created positive market sentiment. Hopes are that further rate cuts are possible provided that inflation can be reined in over the next few months. As such, stocks may edge higher this week with the JCI heading toward the 2,730 level. Yet longer-term there are some dark clouds on the horizon, with the prospect of the government adopting a policy to restrict supplies of subsidized fuel posing a major downside risk to stock prices.

Indonesian stocks climbed higher last week despite soaring crude oil prices. There were a number of supporting factors. First was the improved sentiment on Wall Street as well as on regional markets as investors surmised that the Fed would be forced to play its hand and cut rates in the future in order to avert economic weakness. And from the domestic side, concerns over the controversial ruling against Temasek eased as investors increasingly believe that the initial adverse market reaction was overdone. Stock wise, coal miners and CPO stocks continued to perform well. Hence, against this backdrop, the JCI put on an impressive head of steam last week, gaining103.98 points or 4.0 percent to 2,688.33.

In the last six years, Jakarta stocks have risen in every December: by 5.0% in 2006, by 6.8% in 2005, 2.4% in 2004, 12.0% in 2003, 8.8% in 2002 and 3.1% in 2001. But the market has been in a bullish trend in these years of course. Indeed, the JCI showed an average monthly return of 4.6% in 2006, 1.4% in 2005, 3.7% in 2004, 5.2% in 2003, 0.67% in 2002, and a negative 0.5% in 2001.

Government might limit Premium fuel sales According to news reports, the government is strongly considering the idea of whether to force all private motorists to switch to non-subsidized fuel (such as Pertamina’s Pertamax brand) from subsidized Premium petrol starting in January next year. To achieve this goal, the government would strictly limit supplies of Premium petrol. Thus, with limited availability of Premium fuel, motorists would have little choice but to switch to unsubsidized fuel brands. However, it is not clear how a workable mechanism could be devised to ensure that non-private motorists – such as operators of public transportation vehicles – would still be able to obtain premium fuel.

Indonesia’s automakers said last week that they would limit increases in car prices to only around 2-3 percent next year despite rising inflationary pressures. This, they say, is far below the level needed to take into account the impact of surging crude oil prices and other rising costs. According to the automakers it is not possible for them to raise prices too much given the elasticity of demand to hikes in selling prices. As such, automakers’ margins may be squeezed unless they can find other ways to slash costs (i.e. cutting marketing and advertising budgets etc). At the same time, the weak rupiah is also hurting automakers, pushing up the cost of raw materials. Indonesia Weekly Market Report 3 December 2007