INDONESIA MONTHLY ECONOMIC WRAP-UP August 2019 Summary of key economic developments Indonesia’s GDP broadly unchanged in Q2 Indonesia’s economy grew 5.0 percent yoy in Q2 2019, and the current (percent yoy) Private consumption Government consumption account deficit widened to 3.0 percent of GDP. The real sector recorded Investment Net exports weakened outcomes and headline inflation was broadly unchanged at 3.0 8 Stat. discrepancy Change in inventories GDP percent in July. The trade balance turned to deficit in July. Between January and June, revenues saw stronger growth due to income taxes and 6 expenditure growth also accelerated due to personnel spending. Bank Indonesia (BI) lowered its 7-Day Reverse Repo Rate by 25 bps and foreign 4 exchange reserves increased at the end of July. Indonesian financial assets recorded weak outcomes with the Rupiah depreciating, the Jakarta 2 Composite Index decreasing and bond yields increasing across all tenors in the 30 days to August 12. 0 Further details -2 • Indonesia’s economy expanded 5.0 percent yoy in Q2 2019, broadly Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 unchanged from Q1 at 5.1 percent. Among the components, the Q2 Source: BPS; World Bank staff calculations outcome was in line with a stable fixed investment, rebound in net exports, as well as stronger private and government consumption. On the production Current account deficit widened to 3.0 percent in Q2 side, stronger growth in the agriculture, transport and communication and (percent yoy) Current account Direct investment other services sectors outweighed slower growth in the other sectors. 20 Portfolio investment Other investment Overall balance Basic balance • Indonesia’s real sector recorded lower outcomes. The Manufacturing PMI fell below the 50 threshold in July, due to the decline in the production 10 volume and a slight rise in the total new orders. Consumer Confidence Index also dropped from 126.4 in June to 124.8 in July as consumers were less optimistic about current economic conditions. Retail Sales Index grew 2.3 0 percent yoy in July, after contracted 1.8 percent in June, due to the beginning of new school year. -10 • Headline inflation was relatively stable at 3.3 percent yoy in July 2019. The July outcome was driven by the increase in the food price inflation, while -20 the non-food price inflation slightly rose to 2.7 percent, particularly for Jun-16 Jun-17 Jun-18 Jun-19 clothing, education, recreation and sports. Core inflation eased to 3.2 percent Source: BPS; World Bank staff calculations in July from 3.3 percent in June. • Indonesia’s current account deficit widened to 3.0 percent of GDP in Indonesia recorded a stronger capital inflow in Q2 Q2 from 2.6 percent in Q1 2019. The widening of the CAD was driven by (USD billion) lower goods trade surplus and larger deficit on both services trade balance 2008 2009 2010 2011 and income balance. The capital and financial account posted a smaller 2012 2013 2014 2015 surplus compared to Q1 2019, due to lower surplus in portfolio investment balance and higher deficit in other investment balance. Overall, the balance 2016 2017 2018 2019 of payments (BOP) turned to a deficit of 0.7 percent of GDP in Q2 from a 4000 surplus of 0.9 percent of GDP in Q1. 3000 • Fiscal revenues between January to June 2019 grew 7.8 percent yoy 2000 and expenditure growth accelerated to 9.6 percent. The revenue growth 1000 was driven by income taxes and excises while the increase in expenditures 0 was mainly due to higher personnel spending. From January to June 2019, -1000 the revenue outturn was 42 percent of the budget (lower compared to 44 -2000 percent over the same period in 2018), while the expenditure disbursement -3000 rate was 42 percent of the budget, also lower than the same period last year -4000 -5000 • Official reserve assets increased by USD 2.1 billion from June to USD Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 125.9 billion at the end of July. On the other hand, Indonesian financial Source: IIF; BI; World Bank staff calculations assets recorded weak outcomes. The reserve asset position was equivalent to financing 7.3 months of imports or 7.0 months of imports and Indonesian financial assets recorded weak outcomes government external debt payments. The Rupiah depreciated by 1.0 percent (index, July 10, 2017=100, LHS; IDR thousands per against the US dollar in the 30 days to August 12, reaching IDR 14,220 per USD and percent, RHS) USD. The Jakarta Composite Index decreased by 1.9 percent and bond yields, on average, increased across all tenors. 120 IDR 000 per USD (RHS) 16 • Bank Indonesia (BI) lowered its 7-Day Reverse Repo Rate by 25 bps to 110 14 100 5.75 percent in July. BI also lowered the Deposit Facility (DF) rate and Jakarta Composite Index 12 90 Lending Facility (LF) rate by 25bps to 5.00 percent and 6.50 percent, respectively. 80 10 70 • External capital inflow grew by 10.1 percent yoy to USD 391.8 billion at 60 8 the end of Q2, higher compared to 8.1 percent yoy at the previous 50 6 5-yr IDR government bond yield quarter. Government and central bank external debt was USD 195.5 billion, 40 (RHS) 4 while private sector (including state-owned enterprises) external debt was USD 196.3 billion. Source: BI; JSX; World Bank staff calculations DISCLAIMER This report is for internal use only. For further questions, please reach out to ailman@worldbank.org Formatted: Indent: Left: -0.38"