INDONESIA April 2019 Summary of key economic developments Manufacturing PMI rose in March Indonesia’s real sector recorded mixed outcomes, with the Manufacturing (index, LHS) Purchasing Managers’ Index (PMI) increasing significantly, Business Survey strengthening and motorcycle sales growing, while the consumer confidence 53 index eased and car sales continued to plunge. Headline inflation continued to ease as food, administered prices and core inflation, were all lower in 52 March. Foreign exchange reserves continued to increase at the end of March, as a result of oil, gas and other foreign exchange receipts. Indonesian 51 financial assets also recorded mixed outcomes, with the Jakarta Composite Index declining in the 30 days to April 16 while the Rupiah appreciated, and 50 bond yields decreasing across all tenors over the same period. 49 Further details 48 • The Nikkei/Markit Indonesia Manufacturing Purchasing Managers’ Mar-18 Sep-18 Mar-19 Index rose substantially from 50.1 in February to 51.2 in March. New Source: CEIC; World Bank staff calculations order inflows rose despite a further decline in export sales. In response to greater demand, production volumes increased for the first time in three Headline inflation continued to ease in March months while input costs fell for the first time in eight years. (percent yoy) • Bank Indonesia’s retail sales index grew by 8.0 percent yoy in March, 12% slower than 9.1 percent growth recorded in February. The growth in March was mainly due to higher sales of clothing as well motor vehicle parts 10% Administered and accessories. 8% • Bank Indonesia’s Business Survey reported stronger weighted net balance of 8.65 percent in Q1 2019 than 6.19 percent reported in Q4 6% Food 2018. The agricultural, plantation, livestock, forestry and fisheries sector was Headline the main driver of growth, predominantly led by food crop activity. 4% • Motorcycle sales grew by 18.1 percent yoy in February, slower than the 2% Core 20.6 percent recorded in January. Meanwhile, car sales continued to decline by 13.5 percent in February, after declining by 14.6 percent in 0% January. -2% • Bank Indonesia’s consumer confidence index eased from 125.1 in Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 February to 124.5 in March. Consumers’ confidence about current Source: BPS; World Bank staff calculations employment and buying conditions fell while confidence about current income rose. Consumers also indicated concerns over higher inflationary Trade balance recorded a surplus in March pressures in the next 3 months (April to June), in the anticipation of Idul Fitri (USD billion) festivities. Total exports (fob, LHS) Total imports (cif, LHS) • In March, headline inflation continued to ease to 2.5 percent yoy from 20 Trade balance (RHS) 2 2.6 percent in February. Food price inflation continued to moderate from 0.7 percent to 0.6 percent, driven by price deflation in rice, flour, cooking oil, 16 1 spices, nuts and beans. Administered price inflation was down from 3.4 percent to 3.3 percent as the government lowered fuels and electricity prices. 12 0 Core inflation ticked down from 3.1 percent to 3.0 percent. 8 -1 • Trade balance recorded a monthly surplus of USD 540 million in March, and an accumulative deficit of USD 193 million since January. The 4 -2 surplus was due to a wider surplus of non-oil and gas account, and a narrower deficit of the oil and gas account. Both exports and imports 0 -3 continued to decline by 10.0 percent and 6.8 percent yoy, respectively, in Mar-18 Sep-18 Mar-19 March. Source: BPS; World Bank staff calculations • Official reserve assets increased by USD 1.3 billion to USD 124.5 billion at the end of March. The increase was mainly due to oil and gas foreign Indonesian financial assets recorded mixed outcomes exchange receipts, as well as other foreign exchange receipts. The reserve (index, April 17, 2017=100, LHS; IDR thousands per asset position was equivalent to financing of 7.0 months of imports or 6.8 USD and percent, RHS) months of imports and government external debt payments. 130 IDR 000 per USD (RHS) 16 • Indonesian financial assets recorded mixed outcomes. The Rupiah 120 appreciated by 1.2 percent against the US dollar in the 30 days to April 16, 14 110 reaching IDR 14,066 per USD, while the Jakarta Composite Index declined by 0.4 percent over the same period. However, bond yields, on average, 100 12 Jakarta Composite Index decreased across all tenors. 90 5-yr IDR government 10 • Bank Indonesia (BI) held its 7-Day Reverse Repo Rate at 6.00 percent 80 bond yield (RHS) in March. BI also maintained the Deposit Facility (DF) and Lending Facility 70 8 (LF) rates at 5.25 percent and 6.75 percent, respectively. 60 6 • The government will require all state agencies and ministries to use 50 credit cards in their official spending, particularly for daily operations, 40 4 in an effort to increase transparency in budget spending. Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Source: BI; JSX; World Bank staff calculations