indonesia credit outlook & liquidity condition (1).pdf

7/24/2019 Indonesia Credit Outlook & Liquidity Condition (1).pdf

1/58

Indonesia Economic Outlook 2016

Catching Opportunities am

Global Volatility

Josua Pardede

Economist


2/58

Outline

Global Economy

Indonesia Economy

Credit Outlook

Liquidity Condition

Economic & FX Outlook


3/58

Global Economy

G L B A L

Economy


4/58

Global EconomyGlobal Growth Forecast - Modest

Source: IMF and PermataBank Economic Research

3.4

2.42.9

0.8

-0.1

7.4

3.12.6 2.5

1.5

0.6

6.8

3.6

2.8

2.2

1.6

1.0

6

World

US

UK

EuroZone

Japan

China

Global Growth (%yoy)

2014 2015 2016


5/58

Global growth slowdown persists as manufacturing

activities keep slowing

Source: Bloomberg and PermataBank Economic Research

46

47

4849

50

51

52

53

54

55

56

57

58

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

J u l - 1 5

IndexEuro Zone US China Japan Global


6/58

Global EconomyStrengthening US dollar threatens Emerging Markets


400

500

600700

800

900

1,000

1,100

1,200

1,300

1,400

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

O

1 4

MSCIE

mergingMarketsIndex

MSCI Emerging Markets Index US Dollar


7/58

Global EconomyStrong negative correlation since 2010


70

75

80

85

90

95

100

105

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

O c t 1 4

USDollarIndex

US Dollar Index WTI Oil


8/58

Global EconomyEl Nino have impacted falling food price

Source: IMF and PermataBank Economic Research

-30

-20

-10

0

10

20

30

Jan-0

7

Sep-0

7

May-0

8

Jan-0

9

Sep-0

9

May-1

0

Jan-1

1

Sep-1

1

May-1

2

Jan-1

3

Sep-1

3

May-1

4

Jan-1

5

El Nino Index (LHS) Food

Beverages Raw materials


9/58

Oil price is expected to slightly inch up, while CPO and

coal are expected to decline

Source: EIU and PermataBank Economic Research

53.4 48.4

10.2

622.8

60 55.1

9.6

539.5

72.7 67.6

10.8

Oil: Brent (US$/b) Oil: WTI (US$/b) Coal (US$/tonne,

Australia)

Palm oil (US$/

Commodity Prices Forecast

2015 2016 2017

US E


10/58

US Economy

Econom

mixed

Unempgoes d

growin

but the

remain

US nee

increarates t

econom


11/58

Global Economic Review & OutlookUS economy continues to recover at moderate pace


The US economy grew at a 2.5%yoy in average during three quarters in this year. The report comes

debate whether growth is strong enough to withstand the first increase in the benchmark interest rate sinc

We expect the real GDP to grow by2.3%-2.5%yoyin 2015.

-6

-4

-2

0

2

4

6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2005 2006 2007 2008 2009 2010 2011 2012 2013

%yoy

GDP Inflation


12/58

Global Economic Review & OutlookLow energy prices are curtailing inflation


PCE (Personal Consumption Expenditure) core increased at annualized rate of1.31% in September

1.28% in August. PCE core is viewed by the Federal Reserve as a better gauge of longer-term infla

because they exclude the volatile food and energy categories. The central bank usually tries to aim f

inflation or less.

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

%yoy

PCE Core (%yoy) PCE (%yoy)


13/58

Global Economic Review & OutlookFurther improvement in labor market


The U.S. economy added 271,000 jobs inOct15, the highest in this year, up from 137,000 in S

The unemployment rate unchanged at 5.0% inOct15, its lowest level since April 2008. This d

the unemployment rate in line with the 5-5.2% range of the Fedstarget.

4

5

6

7

8

9

10

Jan-05

Apr-05

J

ul-05

O

ct-05

Jan-06

Apr-06

J

ul-06

O

ct-06

Jan-07

Apr-07

J

ul-07

O

ct-07

Jan-08

Apr-08

J

ul-08

O

ct-08

Jan-09

Apr-09

J

ul-09

O

ct-09

Jan-10

Apr-10

J

ul-10

O

ct-10

Jan-11

Apr-11

J

ul-11

O

ct-11

Jan-12

Apr-12

J

ul-12

O

ct-12

Jan-13

Apr-13

J

ul-13

O

ct-13

Jan-14

Apr-14

J

ul-14

O

ct-14

Jan-15

% Change in Non-Farm Payrols (RHS) Unemployment Rate

Gl b l E i R i & O l k


14/58

Global Economic Review & OutlookDeclining labor force participation


62

63

64

65

66

67

Jan-0

5

Apr-05

Jul-05

Oct-05

Jan-0

6

Apr-06

Jul-06

Oct-06

Jan-0

7

Apr-07

Jul-07

Oct-07

Jan-0

8

Apr-08

Jul-08

Oct-08

Jan-0

9

Apr-09

Jul-09

Oct-09

Jan-1

0

Apr-10

Jul-10

Oct-10

Jan-1

1

Apr-11

Jul-11

Oct-11

Jan-1

2

Apr-12

Jul-12

Oct-12

Jan-1

3

Apr-13

Jul-13

Oct-13

Jan-1

4

Apr-14

Jul-14

Oct-14

Jan-1

5

% Labor Force Participation Unemployment Rate (RHS

The probability of Fed rate hike in Dec15 or Jan16 increased after release of hawkish


15/58

The probability of Fed rate hike in Dec15 or Jan16 increased after release of hawkish

tone from FOMC meeting in Oct15 and release of NFP in Oct15.


0

10

20

30

40

50

60

70

80

Jan-1

5

Feb-1

5

Mar-15

Apr-15

May-1

5

Jun-1

5

Jul-15

Aug-1

5

Sep-1

5

Oct-15

Probability of the first US interest rate hike

Dec'15 Jan'16 Mar'16

China Economy


16/58

China Economy

China Cen

monetaryboost lend

China has

by almost

boost

performan

China is likstabilizatio

coming m

China Econom


17/58

China Economy

Decelerated since 2010 to near 7.0% in 2015


Diverging growth in investment

-4

-2

0

2

4

6

8

10

0

2

4

6

8

10

12

14

16

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

%yoy%yoy

GDP Inflation (RHS)

5

10

15

20

25

30

35

Jan-0

5

May-0

5

Sep-0

5

Jan-0

6

May-0

6

Sep-0

6

Jan-0

7

May-0

7

Sep-0

7

Jan-0

8

May-0

8

Sep-0

8

Jan-0

9

May-0

9

Sep-0

9

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

%yoy Fixed Asset Investment

China: lower growth uncertain prospect


18/58

China: lower growth, uncertain prospectSpreading the negative spillover to EM


Exports hurt by weak global demaManufacturing is still weighed down by weak

production growth

89

10

11

12

13

14

15

16

4546

47

48

49

50

51

52

53

5455

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

%yoyPMI Manufacturing Retail Sales (RHS)

-60-40

-20

0

20

40

60

80

100

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

M a y 1 1

%yoy

Trade Balance (RHS) Ex

China Economy


19/58

China Economy

Yuans devaluation: to revive economy??


Devaluing Yuan will lead to near-term capital flight

before market equilibrium with dollar can be achievedChinas REER is much stronger

currencies

6

6.5

7

7.5

8

8.5

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

Bln Foreign Reserves USD/CNY (RHS)

60

70

80

90

100

110

120

130

140

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

CNY IDR THB

China: lower growth uncertain prospect


20/58

China: lower growth, uncertain prospectChina cuts banks' reserve ratio to boost lending


PBOC cut benchmark interest rates with effective from

26Aug15

Loan growth trends up recently

bank financial institution loans

5

10

15

20

25

30

35

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-0

8

May-0

8

Sep-0

8

Jan-0

9

May-0

9

Sep-0

9

Jan-1

0

May-1

0

Sep-1

0

J a n 1 1

%yoy Loan Growth D

15

16

17

18

19

20

21

22

1

2

3

4

5

6

7

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

Apr-13

Jun-13

Aug-13

Oct-13

Dec-13

Feb-14

Apr-14

Jun-14

Aug-14

Oct-14

Dec-14

Feb-15

Apr-15

Jun-15

Aug-15

Oct-15

%% Lending Rate Deposit Rate Reserve Requirement (RHS)


21/58

Domestic Economy

D O M E S T I C

Economy

L t t D l t


22/58

Latest Developments

2.16%ytd6.25%yoy

INFLATION IN OCT

INFLATION YE2015

3.5%-4.0%

CAD 2Q15

2.05% GDPVS

2Q14

4.26% GDP

FX ReserveUSD 100.7 bn (Oct)

= 6.6 month imports& Govt. foreign

debt service

GDP 2015

is expected to grow to

4.70-4.75%compared to

5.02% in 2014.

E

Im

T

Indonesia GDP slightly improved in 3Q15,


23/58

g y p Q ,

though below than BI & govt. expectation

Source: Indonesia Statistics and PermataBank Economic Research

0

1

2

3

4

5

6

7

8

9

10

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%yoyGDP Growth

Extractives growth was a record low.


24/58

g

Trade sector, the biggest non-tradable slowed down

significantly


Q1 Q2 Q3 4Q Q1 Q2

Agriculture, Forestry & Fishery 5.3 5.0 3.6 2.8 4.0 6.8

Mining And Quarrying -2.0 1.1 0.8 2.2 -1.5 -6.

Manufacturing 4.5 4.8 5.0 4.2 4.0 4.Electricity And Gas Supply 3.3 6.5 6.0 6.5 1.7 0.

Water Supply, Sewerage, Waste Management And Remediation Activitie 3.6 3.2 2.8 2.7 2.9 6.

Construction 7.2 6.5 6.5 7.7 6.0 5.4

Wholesale & Retail Trade, Vehicle Repair 6.1 5.1 4.8 3.5 4.0 1.

Transportation & Storage 8.4 8.5 8.0 7.1 6.3 6.

Accomm odation & Food Service Activity 6.5 6.4 5.9 4.9 3.6 3.9

Information & Communication 9.8 10.5 9.8 10.0 10.1 9.

Financial & Insurance Services 3.2 4.9 1.5 10.2 7.6 2.Real Estate 4.7 4.9 5.1 5.3 5.3 5.

Business Services 10.3 10.0 9.3 9.7 7.4 7.6

Public Administration And Defence; Compulsory Social Security 2.9 -2.5 2.6 6.9 4.7 6.6

Education 5.2 5.4 7.3 7.1 5.8 12

Human Health And Social Work Activities 7.7 8.5 9.9 6.1 7.3 8.2

Other Services Activities 8.4 9.5 9.5 8.4 8.0 8.

Gross Domestic Product 5.1 5.0 4.9 5.0 4.7 4.

Sector 2014

Exports still contracting. Investment and government spending


25/58

p g g p gwere the dominant factors. Private consumption is at record low


4.7

4.0

4.5

5.0

5.5

6.0

6.5

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2012 2013 2014 2015

%yoyGDP

5.0

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3

2012 2013 2014 2015

%yoyPrivate Consumption

-5.0

0.0

5.0

10.0

15.0

20.0

Q1Q2Q3Q4Q1

2012

%yoyGo

4.6

2.0

4.0

6.0

8.0

10.0

12.0


2012 2013 2014 2015

%yoy Investment

-0.7

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.08.0

10.0

12.0


2012 2013 2014 2015

%yoyExports

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

Q1Q2Q3Q4Q

2012

%yoyI

Weaker consumption signals


26/58

p g


The consumer confidretail sales and cement

indicate weaker

throughout the year in

trend is likely to continu

0

1

2

3

4

5

6

7

Jan-0

5

May-0

5

Sep-0

5

Jan-0

6

May-0

6

Sep-0

6

Jan-0

7

May-0

7

Sep-0

7

Jan-0

8

May-0

8

Sep-0

8

Jan-0

9

May-0

9

Sep-0

9

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

May-1

1

S e p - 1

1

Million Ton Cement Consumption

95

100

105

110

115

120

125

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

Consumer Confidence Index

-10

-5

0

5

10

15

20

25

30

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

%yoy

Retail Sales

Automotive sector: 4-Wheeler Industry


27/58


FY2014 4W sales reached 1.21million units, down by 1.78%yoy from sales in 2013 at 1.23

Slowing car sales in 2015 was driven by moderation in private consumption amid slowing d

9M2015 4W sales reached 764,683 units, down by 18.01%yoy from sales in 9M2014 at 93

97

103

96

102100

104

112

78

116112 112

98

104

112 113

106

97

111

9197

103 105

91

79

94

89

9

0

20

40

60

80

100

120

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

M a r 1 5

('000units)

FY13: 1.23m units (+10.18%yoy)

FY14: 1.21m units (-1.78%yoy)9M2014: 932,668 u

9M2015: 764,683 u



28/58

Automotive sector: 2 Wheeler Industry

FY2014 2W sales reached 7.87million units, up by 1.59%yoy from sales in 2013 at 7.74

9M2015 2W sales reached 4.82million units, down by 20.35%yoy from sales in 9M20

units.

646 649

665 659645

660

702

489

676

714687

551

579

679

726 728 740

751

534

609

707

676

582556

503

556 54

0

100

200

300

400

500

600

700

800

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

M a r 1 5

('000units)

FY13: 7.74m units (+9.62%yoy)

FY14: 7.87m units (+1.59%yoy)

9M2014: 6.05m u

9M2015: 4.82m u

Indonesia Economic Review & Outlook


29/58

Inflation will start to stabilize in Nov15


Headline inflation remains above BIs5.0% comfort level (6.25%yoy in Oct or 2.1

likely normalized by the end of this year.

Core CPI (demand inflation) remains subdued, indicating slowing domestic demand

All in all, we think that inflation will start to stabilize inNov15 and will record within ra

by the end of this year..

2

4

6

8

10

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

Oct-14

Inflation BI rate Core Inflation

Indonesia Economic Review & OutlookE i d i h d b d li i di i i


30/58

Export remained weighed by declining commodities prices


Both imports and exports continued to contract in 2015, as we expect both domestic a

demand conditions remained in a weak stage to support economic growth entering 3Q

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

USD mn Trade Balance (LHS) Export Import

Indonesia Economic Review & OutlookHi h d d diti


31/58

High dependency on commodities


Commodity prices: Oil: -10.1%ytd

Coal: -17.6%ytd

CPO: -23.5%ytd

Rubber: -22.4%ytd

300

500

700

900

1100

1300

1500

30

50

70

90

110

130

150

170

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

Jul-15

Oct-15

USD/tonUSD/barelOil Price CPO (RHS)

20

40

60

80

100

120

140

160

180

200

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

USD/barelCoal (RHS) Oil Pr ic

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

30

50

70

90

110

130

150

170

Ja

n-07

Apr-07

Jul-07

Oct-07

Ja

n-08

Apr-08

Jul-08

Oct-08

Ja

n-09

Apr-09

Jul-09

Oct-09

Ja

n-10

Apr-10

Jul-10

Oct-10

Ja

n-11

Apr-11

Jul-11

Oct-11

Ja

n-12

Apr-12

Jul-12

Oct-12

Ja

n-13

Apr-13

Jul-13

Oct-13

Ja

n-14

Apr-14

Jul-14

Oct-14

Ja

n-15

Apr-15

Jul-15

Oct-15

USD/kgUSD/barelOil Price Rubber (RHS)

Indonesia Economic Review & Outlook


32/58

Source: Bank Indonesia

Current Account Deficit (CAD) eased to 2.05% GDP in 2Q15 from 4.26% GDP in 2Q14. Overall,

to improve to 2.35% of GDP in 2014 from 2.95% of GDP in 2014.

Indonesia Economic Review & OutlookL t bl IDR > i BI i t ti


33/58

Less-stable IDR-> aggressive BIs intervention


90

95

100

105

110

115

Jan-1

4

Feb-1

4

Mar-14

Apr-14

May-1

4

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct-14

Nov-1

4

Dec-1

4

Jan-1

5

Feb-1

5

Mar-15

Apr-15

May-1

5

Jun-1

5

Jul-15

Aug-1

5

Sep-1

5

USD blnForeign Reserves USD/IDR (RHS)

Indonesia Economic Review & OutlookUS d ll i t d id i d l tilit


34/58

US dollar appreciated amid increased volatility


0.1

-0.7

-1.7

-1.8

-2.9

-3.4

-3.6

-4.5

-5.4

-7.5

-9.6

-18.7

HKD

JPY

CNH

CNY

TWD

INR

KRW

PHP

SGD

THBIDR

MYR

Asian Currencies YTD Performance (%)

as per 30 Oct'15

Indonesia Economic Review & OutlookFX market tend to be more volatile on US rate hike expectation


35/58

FX market tend to be more volatile on US rate hike expectation


7

8

8

9

9

1

1

0

2

4

6

8

10

12

14

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Emerging Market Vol G7 Vol USD Index (RHS)

Current Rupiah is far from its fundamental


36/58


50

60

70

80

90

100

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

J a n 1 5

REER IndexREER USD/IDR

Indonesia Economic Review & OutlookJCI corrected 14 8%YTD; bonds declined 5 0%YTD (as per Oct15)


37/58

JCI corrected 14.8%YTD; bonds declined 5.0%YTD (as per Oct 15)


Foreign outflows of $375mn in stocks & inflows Rp4.6tn in bonds (Oct15) Indonesia stock market vs

3,900

4,100

4,300

4,500

4,700

4,900

5,100

5,300

5,500

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

JCI JCI I

100

150

200

250

300

350

400

450500

550

600

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

IDR tn Foreign Ownership % F

-2,098

-1,083

801

10

-710-498

-375

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

4,000

4,200

4,400

4,600

4,800

5,000

5,200

5,400

5,600

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

USD mlnJCINet Foreign Buy/Sell (RHS) JCI

-20.0 -19.9

39.5

6.8

-3.6

4.16.3

23.0

-3.9-8.0

-1.2

4.6

-30

-20

-10

0

10

20

30

40

50

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

IDR tn% Net Foreign Buy/Sell (RHS) 10yr IDR Bond

Valuation is attractive: Spread yield betweenINDON yield and UST yield is wide


38/58

INDON yield and UST yield is wide


140

160

180

200

220

240

260

280

300

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Sovereign Risk Premium (RHS)

INDON 10-YR

UST 10-YR

Yield spread between 10yr INDON and the 10yr UST was up by 18.2% in Sep15 w

by 28.9% as per 20 Oct15.

Rupiah volatility was one of the main factors discouraging foreign investors

Indonesia. This resulted in higher exchange rate risk. This is depicted by the yie

Rupiah and USD denominated Government bonds. The currency risk premium re

September though it already decline to 458.1bps as per 20 Oct15.

1.01.52.02.53.03.54.04.55.05.56.0

6.57.07.58.08.59.09.5

10.0

Jan-1

4

Feb-1

4

Mar-14

Apr-14

May-1

4

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct-14

Nov-1

4

Dec-1

4

Jan-1

5

Feb-1

5

Currency Risk PremiumSUN 10-YRINDON 10-YR

Monetary policy


39/58

o eta y po cy

M N E T A R Y

Policy

BI Meeting 15 Oct 2015


40/58


BI kept BI rate unchanged at 7.50% with the deposit and lending facilities steady

respectively.

BI: domestic economy and financial global condition improved.

BI hinted at loosening.

Our view: BI rate cut likely next year IF there is a sign of further rupiah stabilizatio

hike on Indonesia capital market not too significant.

3

4

5

6

7

8

9

Ja

n-13

Fe

b-13

Ma

r-13

Ap

r-13

Ma

y-13

Ju

n-13

Jul-13

Au

g-13

Se

p-13

Oct-13

No

v-13

De

c-13

Ja

n-14

Fe

b-14

Ma

r-14

Ap

r-14

Ma

y-14

Ju

n-14

Jul-14

Au

g-14

Se

p-14

Oct-14

No

v-14

De

c-14

Ja

n-15

Fe

b-15

Ma

r-15

Ap

r-15

Ma

y-15

Ju

n-15

Jul-15

A u

g - 1 5

% Inflation BI rate Core Inflation

Banking sector


41/58

Source: Bank Indonesia and PermataBank Economic Research

Banking sector: Loan Growth to slightlyimprove in 2016


42/58

improve in 2016


Total industry loans finally saw some improvement, growing 10.9%yoy or 7.5%ytd in Sep15. Total depos

7.7%ytd.

Liquidity improved slightly. The industry's LDR remained unchanged at 88.9% in Sep15.

Investment loans started to improve again, growing at 13.0%yoy in Sep from 12.9% in Aug, while working

10.3%yoy vs. 10.2% in Aug. Consumption loans remained subdued, growing at 10.2%yoy in Sep, up slightly

0

5

10

15

20

25

30

35

40

45

Jan-0

3

Sep-0

3

May-0

4

Jan-0

5

Sep-0

5

May-0

6

Jan-0

7

Sep-0

7

May-0

8

Jan-0

9

Sep-0

9

May-1

0

Jan-1

1

Sep-1

1

May-1

2

Jan-1

3

Sep-1

3

May-1

4

Jan-1

5

%yoyDeposit growth Loan growth LDR (RHS)

Banking sector: Loan Growth to slightlyimprove in 2016


43/58

improve in 2016


The positive causality between the economic and credit growth reflect the e

cyclicality relation between the two variables. The causality relationship te

dominant role of the economic growth as the lead variable, rather than the credit

5

10

15

20

25

30

35

40

Jan-0

3

Sep-0

3

May-0

4

Jan-0

5

Sep-0

5

May-0

6

Jan-0

7

Sep-0

7

May-0

8

Jan-0

9

Sep-0

9

May-1

0

Jan-1

1

Sep-1

1

May-1

2

Jan-1

3

Sep-1

3

May-1

4

Jan-1

5

Sep-1

5

Credit_growth GDP_growth

Credit/GDP ratio rose faster than M2/GDP


44/58


A higher ratio of M2 to GDP indicates a larger financial sector which means

intermediation capacity.

Credit to GDP ratio represents the actual amount of funds that are chann

economy.

15

20

25

30

35

40

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Sep-15

%% Credit/GDP M2/GDP (RHS)

Financial deepening benefits growth


45/58


Financial development in Indonesia benefits growth since financial development

a relatively early stage, such that an expansion of the financial industry tends

with an increase in firmsaccess to finance.

Beyond a certain point, financial development does not appear to contribute sig

economy.

15

20

25

30

35

40

Jan-0

2

May-0

2

Sep-0

2

Jan-0

3

May-0

3

Sep-0

3

Jan-0

4

May-0

4

Sep-0

4

Jan-0

5

May-0

5

Sep-0

5

Jan-0

6

May-0

6

Sep-0

6

Jan-0

7

May-0

7

Sep-0

7

Jan-0

8

May-0

8

Sep-0

8

Jan-0

9

May-0

9

Sep-0

9

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

May-1

1

Sep-1

1

Jan-1

2

May-1

2

Sep-1

2

Jan-1

3

May-1

3

Sep-1

3

Jan-1

4

May-1

4

Sep-1

4

Jan-1

5

May-1

5

Sep-1

5

%y% Credit/GDP GDP Growth (RHS)

Liquidity condition: LDR is relatively high


46/58


Slowing growth of LDR reflects that the expansion of credit has

tighter liquidity..

40

50

60

70

80

90

100

Jan-03

Sep-03

May-04

Jan-05

Sep-05

May-06

Jan-07

Sep-07

May-08

Jan-09

Sep-09

May-10

Jan-11

Sep-11

May-12

Jan-13

Sep-13

May-14

Jan-15

S e p - 1 5

%%LDR LDR_growth (RHS)

Liquidity condition: Funding gap increased


47/58


Funding gap increased over the past years is mainly caused by stee

outstanding loans as well as declining liquidity condition..

-80

-60

-40

-20

0

2040

60

80

100

0

20

40

60

80

100

120

140

Jan-03

Sep-03

May-04

Jan-05

Sep-05

May-06

Jan-07

Sep-07

May-08

Jan-09

Sep-09

May-10

Jan-11

Sep-11

May-12

Jan-13

Sep-13

May-14

Jan-15

Sep-15

%yoy% Funding Gap Funding Gap_growth (RHS)

Liquidity condition: liquid asset has declined


48/58


The availability of liquid asset to face potency of withdrawal of th

declined, indicating that liquidity risk tends to rise.

15

20

25

30

Jan-1

2

Feb-1

2

Mar-12

Apr-12

May-1

2

Jun-1

2

Jul-12

Aug-1

2

Sep-1

2

Oct-12

Nov-1

2

Dec-1

2

Jan-1

3

Feb-1

3

Mar-13

Apr-13

May-1

3

Jun-1

3

Jul-13

Aug-1

3

Sep-1

3

Oct-13

Nov-1

3

Dec-1

3

Jan-1

4

Feb-1

4

Mar-14

Apr-14

May-1

4

Jun-1

4

Jul-14

Aug-1

4

Sep-1

4

Oct-14

Nov-1

4

Dec-1

4

Jan-1

5

Feb-1

5

Mar-15

Apr-15

May-1

5

Jun-1

5

Jul-15

Aug-1

5

% Liquid Asset/Third Party Fund

120

130

140

150

160

170

180

190

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

%Liquid Asset/Non Core D

Liquidity condition: higher spread indicates thelimitation of banks to get funding in the market


49/58


0

5

10

15

20

25

30

35

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

%

Spread PUAB (high-low) PUAB_HIGH

0

5

10

15

20

Jan-00

Oct-00

Jul-01

Apr-02

Jan-03

Oct-03

Jul-04

Apr-05

Jan-06

Oct-06

Jul-07

Apr-08

Jan-09

Oct-09

%Spread (JIBOR_LIBOR) JIBOR 3 mon

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

2

4

6

8

10

12

14

Jul-05

Sep-05

Nov-05

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-0

8

Mar-08

May-0

8

Jul-08

Sep-0

8

Nov-0

8

Jan-0

9

Mar-09

May-0

9

Jul-09

Sep-0

9

Nov-0

9

Jan-1

0

Mar-10

May-1

0

Jul-10

Sep-1

0

Nov-1

0

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-1

2

Mar-12

May-1

2

Jul-12

Sep-1

2

Nov-1

2

Jan-1

3

Mar-13

May-1

3

Jul-13

Sep-1

3

Nov-1

3

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

%% Spread 3 mo TD Rate BI Rate

Outlook 2015Facing risks ahead..


50/58

Global

Expectations of higher US interest rates

Weak commodity prices will keep Indonesiasexports weak Chinasfurther devaluation or PBOC loosening monetary policy will lead

currencies

Domestic

Rupiah instability will lead to capital flight of foreign hot money

Dependency on commodities will shrink exports performance Government spending needed in short term to stimulate private consumpt

Deepening Indonesia financial market in order to attract investment

Outlook 2016Scenarios


51/58

Optimistic

BI Rate: 7.25%

JCI Index: 5,000

Bond yield (10yr):8.00%

USD/IDR:13,500

Moderate

BI Rate: 7.50%

JCI Index:4,600


USD/IDR:13,900

Pessimistic

BI Rate: 7.75%

JCI Index:3,900


USD/IDR:14,500

FX Outlook


52/58

7 Sep'15 Spot Q1a Q2a Q3 Q4 Q1 Q2

EUR/USD 1.12 1.07 1.11 1.12 1.10 1.09 1.09 USD/JPY 119 120 123 121 123 124 124

GBP/USD 1.53 1.48 1.57 1.56 1.54 1.55 1.54

AUD/USD 0.69 0.76 0.77 0.70 0.70 0.70 0.69

USD/SGD 1.43 1.37 1.35 1.43 1.40 1.41 1.42

USD/CNY 6.37 6.20 6.20 6.40 6.42 6.47 6.55

USD/IDR

14,290 13,075 13,333 14,200 13,950 14,050 14,200 1

2015f 2016f

Indonesia macro economic indicator


53/58

This document is issued by Global Markets PT. Bank Permata, Tbk. (PermataBank) for information and private circulation purpose only. It does not constitute any offer, proposal, recomm

into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movement in rates or prices or any representation that any

shown in any illustration. All reasonable care has been taken in preparing this document, no responsibility or liability is accepted for error, omissions, negligence, and/or inaccuracy of fact

projection and estimates are subject to change without notice. PermataBank and/or its members of Board of Director and Commissioners, employees, affiliates, agents and/or its advisors

relating to or resulting from the use of this document whatsoever which may be brought against or suffered by any person as a result of acting in reliance upon the whole or any part of the

make your own independent judgment with respect to any matter contained herein, by fully aware of any consequences obtained on said judgment.

Macro Economic Indicator

Inflation (%YoY) 6.96 3.79 4.30 8.38 8.36 4.50

Exchange Rate Eop (Rp/US$) 8,991 9,068 9,670 12,189 12,440 13,950 1

Curent Account (% GDP) 0.72 0.20 -2.78 -3.18 -2.95 -2.30

Fiscal Balance (% GDP) -0.73 -1.14 -1.77 -2.23 -2.15 -2.30 Interest Rate

BI Rate (% p.a) 6.50 6.00 5.75 7.50 7.75 7.50

Time Deposit 3 month (% p.a) 7.06 6.81 5.76 7.61 8.94 8.25

Lending rate working capital (% p.a) 12.83 12.16 11.49 12.12 12.79 12.60

Growth (% YoY)

Credit 22.80 24.59 23.08 21.60 11.44 11.00

Deposit 18.54 19.07 15.81 13.60 12.17 13.50

NPL Commercial Banks (%) 2.50 2.17 1.87 1.77 2.20 2.70

Car Sales (1000 Units) 765 894 1,116 1,230 1,208 1,000

Car Sales Growth (%) 57.33 16.93 24.84 10.10 -1.78 -17.22

Motorcycle Sales (1000 Units) 7,373 8,013 7,064 7,745 7,867 6,300 6

Motorcycle Sales Growth (%) 25.99 8.67 -11.83 9.63 1.59 -19.92 Government Capex (Rp tn) 80.3 117.9 140.2 180.9 147.3 290.2 3

Unemployment Rate (%) 7.14 6.56 6.14 6.25 5.94 5.90

International Reserve (US$ bn) 96.2 110.1 112.8 99.4 111.9 101.0

GDP Growth (%) 6.22 6.49 6.26 5.78 5.02 4.75

Note : the red numbers are forecast

Source : PermataBank Economic Research

2015F 201Indicators 2010 2011 2012 2013 2014

Fiscal policy


54/58

F I S C A L

Policy

Govt. set an ambitious tax revenue target.It is most likely not met.

2013 202014


55/58

Source: Ministry of Finance and PermataBank Economic Research

2013

Growth To Growth

(%) September (%) S

REVENUES & GRANTS 1,529.7 1,635.4 6.9 1,081.3 66.1 1,761.6 7.7

Domestic Revenues 1,525.2 1,633.1 7.1 1,079.9 66.1 1,758.3 7.7 Tax 1,193.0 1,243.1 4.2 807.2 64.9 1,489.3 19.8

Domestic 1,134.3 1,189.8 4.9 773.0 65.0 1,440.0 21.0

Income Tax 584.9 569.9 -2.6 388.3 68.1 679.4 19.2

Oil and Gas 71.4 83.9 17.5 59.4 70.8 49.5 -41.0

Non Oil and Gas 513.5 486.0 -5.4 329.0 67.7 629.8 29.6

Value Added Tax 423.7 475.6 12.2 280.9 59.1 576.5 21.2

Others 125.7 144.4 14.9 103.8 71.9 184.1 27.5 International Trade Tax 58.7 56.3 -4.1 34.3 60.9 49.3 -12.4

Non-Tax 332.2 386.9 16.5 272.7 70.5 269.1 -30.4

Natural Resources 197.2 241.1 22.3 163.3 67.7 118.9 -50.7

Profit Transfers From SOE's 33.5 40.0 19.4 34.0 85.0 37.0 -7.5

Others 101.5 105.9 4.3 75.4 71.2 113.2 6.9

Grants 4.5 2.3 -48.9 1.4 60.9 3.3 43.5

20

APBN State

Budget

2014

State

Budget %

Massive increase in capital expenditurebut low realization.

2013 2014


56/58


2013

Growth To Growth

(%) September (%)

EXPENDITURE 1,683.0 1,876.9 11.5 1,234.7 65.8 1,984.1 5.7

Personnel 241.6 258.4 7.0 184.4 71.4 293.1 13.4

Material 200.7 195.2 -2.7 98.3 50.4 238.8 22.3Capital Expenditures 184.4 160.8 -12.8 59.8 37.2 275.8 71.5

Interest Payment 113.2 135.5 19.7 103.3 76.2 155.7 14.9

Interest of Domestic Debt 80.7 120.6 49.4 93.6 77.6 141.2 17.1

Interest of Foreign Debt 32.5 14.9 -54.2 9.7 65.1 14.5 -2.7

Subsidies 317.2 403.0 27.0 283.2 70.3 212.1 -47.4

Energy 274.7 350.3 27.5 254.7 72.7 137.8 -60.7

Fuel 0.0 246.5 183.4 74.4 64.7 -73.8

Electricity 0.0 103.8 71.4 68.8 73.1 -29.6Non Energy 42.5 52.7 24.0 28.5 54.1 74.3 41.0

Grant 3.6 2.9 -19.4 0.2 6.9 4.6 58.6

Social Assistance 73.6 96.7 31.4 62.8 64.9 107.7 11.4

Other 20.0 27.9 39.5 2.0 7.2 31.7 13.6

Transfer to regions 528.6 596.5 12.8 440.7 73.9 664.6 11.4

Village Fund 0.0 20.8

BALANCE -153.3 -241.5 -153.4 -222.5

2014

State

Budget

State

Budget % APBN

Massive increase in capital expenditurebut low realization.

2015 2016


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Assum tions GDP Growth (%yoy)

Inflation (%yoy)

Exchange rate (Rp/USD)

Treasury Note 3m(%)

ICP (USD/barrel)

Oil lifting (kbpd)

Gas lifting (kboepd)

2015

Growth

(%)

REVENUES & GRANTS 1,761.6 1,822.5 3.5

Domestic Revenues 1,758.3 1,820.5 3.5

Tax 1,489.3 1,546.6 3.8

Domestic 1,440.0 1,506.5 4.6

Income Tax 679.4 757.2 11.5

Oil and Gas 49.5 41.4 -16.4Non Oil and Gas 629.8 715.8 13.7

Value Added Tax 576.5 571.7 -0.8

Others 184.1 177.6 -3.5

International Trade Tax 49.3 40.1 -18.7

Non-Tax 269.1 273.9 1.8

Natural Resources 118.9 124.9 5.0

Profit Transfers From SOE's 37.0 34.2 -7.6

Others 113.2 114.8 1.4

Grants 3.3 2.0 -39.4

EXPENDITURE 1,984.1 2,095.7 5.6

Central Government Expenditure 1,319.4 1,325.5 0.5

Ministerial 795.4 784.1 -1.4

Non-ministerial 524.0 541.4 3.3

Subsidies 212.1 182.6 -13.9

Energy 137.8 102.1 -25.9

Fuel 64.7 63.7 -1.5

Electricity 73.1 38.4 -47.5

Non Energy 74.3 80.5 8.3

Transfer to regions 664.6 770.2 15.9

Village Fund 20.8 47.0 126.0

FISCAL SURPLUS/DEFICIT -222.5 -273.2 22.8

As a percentage of GDP -1.90 -2.15

Revised Budget State Budget

2016

Six important government policies/responses


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Fuel SubsidyReform

Removepremiumsubsidy.Introducefixed subsidyfor solar

CreatedRp175tn offiscal space

StimulusPackage I

Deregulation Accelerating

strategicprojects

Boostingproperty

Village fund,Raskin,interestsubsidy

StimulusPackage II

Simplifyinvestmentpermits

Relax importregulation

Cut incometax forexporter(interest)

StimulusPackage III

Loweringenergy tariff

SimplifyingKUR facility

Shorten timerequired toprocessCultivationRights (HakGuna Usaha)

from 90 daysto 7 days andHGB from 50days to 30days.

StimulusPackage IV

Standardizedformula forminimumwage

Wider lendingcriteria forKUR

LPEI (LembagaPembiayaanEkspor Impor)

will havedifferentregulationfrom Bank.

StimulusPackage V

Assetrevaluation

Eliminatingdoubletaxation foinvestmentfunds engagin Real EstaProperty aInfrastructu

Deregulatioin ShariahBanking

indonesia credit outlook & liquidity condition (1).pdf

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