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Indonesia Economic Update: Clearing Skies

Available in: Bahasa (Indonesian)

Sept, 2009

  • Indonesia's economic recovery has gained steam following the turbulence of the start of the year

  • Domestic consumption has remained robust

  • ...although investors have become very cautious

  • The banking sector has proved far sturdier than many commentators expected, although new loan approvals have remained constrained

  • Financial markets have continued strengthening
    through mid-2009

  • ...and portfolio investors have returned to Indonesian markets. Rollover rates on debt have been high, leaving the
    balance of payments in a small surplus in Q2

  • Inflation, after being more subdued than expected
    earlier in the year, has started to rise since August

  • Employment has grown at a faster rate than the working age population, although few of the new jobs are formal

  • Public finances in the first half of 2009 have been more stimulatory than in recent years

  • ... and there is scope for more ambitious spending
    in 2010 than the government's proposed
    budget envisages

  • The trend of a gradually recovering economy should continue into 2011, with accelerating output, and prices, and the end of the government's cash transfers slowing the gains in poverty

Full Report
(632kb .pdf)
Executive Summary
(24kb .pdf)
By Sections

Section A:
Economic Update

Section B:
Looking Ahead: A Gradual Recovery

See Graphs From the Report

Press Release

Presentations (.ppt)
English | Bahasa

Past Economic Updates

Regional Economic Update (East Asia Update)


Figure 1: Indonesia's economy troughed in the final quarter of 2008, and has since resumed growing at close to its recent average

Click the thumbnail below to display the graphs
Figure 1: Indonesia's economy troughed in the final quarter of 2008, and has since resumed growing at close to its recent average
Figure 2: ..and the global economy stabilized and started to recover in the second quarter
Figure 3: Q2 growth was driven by the recovery in exports relative to imports, and further supported by ongoing solid growth in government consumption
Figure 4: ...while services activity made a much larger contribution to GDP growth in Q2 than in Q1
Figure 5: Three versions of Indonesian GDP growth
Figure 6: Consumer sentiment indicators are very strong
Figure 7: ...and this is translating into actual purchases
Figure 8: Moderate rises in prices in recent months suggest a turning point in the headline Inflation rate
Figure 9: Average consumer prices barely moved in the first half of 2009
Figure 10: The appreciating Rupiah has offset the recent rise
in commodity prices
Figure 11: Indonesia's inflation rate remains higher than most of its trading partners and neighbors...
Figure 12: ...although the fall in its inflation rate has been in line with other economies
Figure 13: Trade flows are recovering...
Figure 14: along with commodity prices, which have driven Indonesia's merchandise exports prices
Figure 15: The IDX has gained more than most regional indices since mid April
Figure 16: As the FRB's broad USD index weakened from early March, the IDR appreciated rapidly against the USD
Figure 17: The trade surplus has helped buoy the rupiah's recent strength
Figure 18: Indonesian 5 year bond yields have dropped since March but still remain higher and more volatile than sovereign yields in other Asian countries
Figure 19: The yield curve has steepened after starting the year abnormally flat due to very high short-term yields
Figure 20: Indonesian USD bond spreads have been falling since February and are now lower than the global emerging market average
Figure 21:Little of BI's cuts in policy rates have been passed into banks’ lending rates
Figure 22: Average CAR, ROA and LDR numbers indicate a relatively robust banking sector
Figure 23: The ratio of non-performing loans fell in June and remains well below 2006-2007 levels, while the slowdown in overall lending since late 2008 has stabilized
Figure 24: Credit growth has slowed more in Indonesia than elsewhere, relative to Indonesia's very rapid lending growth since 2006
Figure 25: A more stimulatory fiscal balance and lower government deposits at BI are working to lessen the slowdown
Figure 26: Tax revenues have fallen faster than nominal GDP has slowed
Figure 27: Tax receipts are generally weaker, reflecting lower commodity prices, weaker demand plus the government's cut in tax rates
Figure 28: The collapse in oil prices in late 2008 and early 2009 have contributed significantly to the cut in non-tax revenues
Figure 29: The fall in subsidy spending more than offsets higher central government programmed spending
Figure 30: Employment continued rising, despite the global downturn, with the number of workers in trade and other service industries recording the largest increases
Figure 31: ...but most of this growth has been in less formal types of employment
Figure 32: Poverty and the open unemployment rate fell from early 2008 to early 2009, despite the weaker economy around the turn of the year
Figure 33: Indonesia's growth should rise towards its potential by 2011
Figure 34: Indonesia's major trading partners are projected to continue recovering, gradually, over the coming two years
Figure 35: ...and these generate a wider distribution of potential paths for the Indonesian economy
Figure 36: While roll-over rates on Indonesia's external debt have also been high in the first half of 2009
Figure 37: Indonesia is the only major economy in the region to experience higher average inflation after the 1997/98 Asian crisis than before
Figure 38: The GDP deflator has grown faster than consumer prices, and this divergence is projected to continue
Figure 39: Central government budget shifts resources from subsidies to personnel, interest payments and material costs

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