1

Ministry of Finance of The Republic of IndonesiaJune 2009

STATE OF THE GLOBAL ECONOMY STATE OF THE GLOBAL ECONOMY AND ITS EFFECT ON INDONESIAAND ITS EFFECT ON INDONESIA

1. Recent Global Economic Condition

2. Impact on Indonesia’s Economy

3. Indonesia’s Policy Response

4. Conclusion

OUTLINE

2

Recent Global Economic Condition

3

Global Economic: Good News dan Bad News

4

Moodys revised Indonesia credit rating outlook to positive

5

• World Economic Growth in 2009 revised down from 3,2% (2008) to -1,3% (2009)

• The decline on world trade flows from 2,5% (2008) to -11% (2009)

• Capital inflow to emerging market drop by USD 700 billion (2007-2009)

• Value of leading financial institutions contracted by the crises

6

The 2008/2009 Global Crisis

The projection of world economic growth and trade projection are getting lower, but optimistic rise in 2010

6.90

2.10

-2.80

-11.02

0.62

(15.0)

(10.0)

(5.0)

-

5.0

10.0

Jan-08 Nov-08 Jan-09 Apr-09 Proyeksi 2010

Trade growth projection is negative in 2009 and revised to be positive in 2010 supported by increasing of trade activities (Baltic Dry Index).

Jan -08 Oct -08 Jan -09 Apr-09 2010pWorld 4.4 3.0 0.5 -1.3 1.9

USA 1.8 0.1 -1.6 –2.8 0.0

Europe 1.9 0.2 -2.0 –4.2 –0.4

Japan 1.7 0.5 -2.6 –6.2 0.5

China 10.0 9.3 6.7 6.5 7.5

India 8.2 6.9 5.1 4.5 5.6

ASEAN-5 6.2 4.9 2.7 0.0 2.3

Indonesia 6.4 6.0 4.5 2.5 3.5

Economic Growth Projection 2009 & 2010

7

1646

6/2/09, 4106

11269

8596002

6809

46475538

11033

0

2000

4000

6000

8000

10000

12000

14000

1/2/07 4/2/07 7/2/07 10/2/07 1/2/08 4/2/08 7/2/08 10/2/08 1/2/09 4/2/09

Baltic Dry IndexBaltic Dry Index

World and Asia economic growth getting slowersince Q4 2008

World Economic Growth

  US Europe China Japan Singapore Indonesia Malaysia Thailand Philippines

2008-Q1 2.5 2.2 10.6 1.3 6.7 6.2 7.4 6.0 3.9

2008-Q2 2.1 1.5 10.1 0.6 2.5 6.4 6.7 5.3 4.2

2008-Q3 0.7 0.6 9.0 -0.3 0.0 6.4 4.7 3.9 4.6

2008-Q4 -0.8 -1.4 6.8 -4.3 -4.2 5.2 0.1 -4.2 2.9

2009-Q1 -2.5 -4.6 6.1 -9.7 -10.1 4.4 -6.2 -7.1 0.4

8

GDP growth of Indonesia (%) is positive as well as China and India

9

Indonesia resilience to the global crises better than others

Indonesian contribution in export lower than others

9

% PDB

Increasing in commodity price followed by the oil price

400450500550600650700750800850

25

45

65

85

105

125CPO WTI

10

US dollar depreciate, while Asian currency dan Rupiah appreciate.

3 Mar 2009 117.2

1 Dec 200874.5

27 Dec 2008 91.2

IDR 15 Jun 93.2

11

Indonesia CDS getting lower…

5 Jan 09 : 723

8 Jun 09 : 285

Thailand 8 Juni 105.3

Philippines

China

12

Mitigate the global economic crisis (G20)2009 – 2011 : USD 5T

• Bank Recapitalization : USD 1,1 Billion

• Toxic Asset Restructure : USD 1,4

billion

• Fiscal Stimulus(globally phase one): USD 1,4

billion

• Capital increase and IFIs : USD 1,1

billion

13

14

The World Financial Sector Recovery Program Through Toxic Asset and Banking Recapitalization (commitment : 2,5 trillion USD)

US 1,8 T China 19,2 M

Russia 32,6 M

South Korea 19,3 M

Eropa 349,3M

Australia 5,2 M

Brazil 3,8 M

Japan 147,6 M

Canada 59,6 M

Singapore dan Hong Kong 10 M

In $US

Amerika Serikat

-0.2

0.7

2.1

-0.50

0.5

11.5

22.5

33.5

06 07 08 Q408

%

Stimulus1,2% GDP

Deficit5,8% To GDP

Stimulus 5,5%Deficit 12,30%

Inggris

1.7

0.3

-1.8-3

-2

-1

0

1

2

3

4

06 07 08 Q408

%

Stimulus1,1% GDP

Deficit5,3% To GDPStimulus 1,0 %

Deficit 10%

China

6.8

9

10.1

02

46

810

1214

06 07 08 Q408

%

Stimulus0,6% GDP

Deficit0,2% To GDP

Stimulus 13,3%Deficit 3%

Jepang

0.7

-0.2

-4.6-5

-4

-3

-2

-1

0

1

2

3

4

06 07 08 Q408

%

Stimulus1,0% GDP

Deficit0,25% To GDPStimulus 3,1 %

Deficit 7,1%

Indonesia6.42

6.41

5.2

01

23

45

67

06 07 08 Q408

%

Stimulus1,4% GDP

Deficit1% To GDPStimulus 1,4 %

Deficit 2,5%

Malaysia

Singapura

6.3

4.7

2.7012345678

06 07 08 Q408

%

Stimulus4,4% GDP

Deficit3,1% To GDP

-3.7

-0.2

2.1

-6

-4

-2

0

2

4

6

8

10

12

06 07 08 Q408

%

Stimulus1,1% GDP

Deficit% To GDPStimulus 6,4%

Deficit 1,1 %

Stimulus 4,4%Deficit 3,1%

Filipina

4.55

4.4

0123456789

06 07 08 Q408

%

Stimulus% GDP

Deficit% To GDPStimulus 4,%

Deficit 2,2%

The Cost of Fiscal Stimulus Program in some countries: US$ 1.4 Billion

15

Impact on Indonesia’s Economy

16

9,500

10,000

10,500

11,000

11,500

12,000

12,500

Jan-09 Feb-09 Mar-09 Mar-09 Apr-09 May-09 Jun-09

1,200

1,350

1,500

1,650

1,800

1,950

2,100

Exchange Rate (LHS) Stock Index (RHS)

Macroeconomic of Indonesia is improving

Market Capitalization and JCI

-

500

1,000

1,500

2,000

2,500

3,000

Jan/0

8

Feb/0

8

Mar/

08

Apr/

08

May/0

8

Jun/0

8

Jul/0

8

Aug/0

8

Sep/0

8

Oct/08

Nov/0

8

Dec/0

8

Jan/0

9

Feb/0

9

Mar/

09

Apr/

09

May/0

9

Jun/0

9 500

1,000

1,500

2,000

2,500

3,000

Market CapIHSG

z

2090.9

1.0068

17

Stock Net Foreign Buying 2009Stock Indices & Exchange Rates

Bond Net Foreign Buying 2009

(Rp billion)

As of Juni 23, 2009, Rupiah appreciate 5% dan JCI stronger 33% since 2008.

(1,160)

(562)

1,815

2,602

1,974

(2,000)

(1,000)

0

1,000

2,000

3,000

Jan Feb Mar Apr May

(1,580)

(5,120)

(1,070)

3,880

5,193

(6,000)

(4,000)

(2,000)

0

2,000

4,000

6,000

Jan Feb Mar Apr May

Source: Bloomberg, as of 23 June 2009.

YTD Performance as of 23 June 2009

33%

19%

16%

20%

13%

16%

39%

64%

19%

-2%

-2%

0%

-13%

0%

1%

3%

-5%

-1%

Indonesia

Thailand

Singapore

Philippines

Malaysia

Korea

India

China

Brazil

% change in stock index % change in currency

IHSG 3rd Best Performance below India dan China....

Capital outflow happened in Q3 & Q4 2008 and inverse in Q1 2009

Source : BI dan BPSSource : BI dan BPS

19

May 200957,8

Foreign reserve has risen up to USD 57.87 billion

43,3

55.9 60.6

57.87

20

Economic Growth projection Q1 2009 4,37% Much better than the WEO projection (April 2009) 2.5%

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2009Q1 Q2 Q3 Q4 Q1

Household Consumption 5,67 5,52 5,33 4,84 5,84

Government Consumption 3,62 5,26 14,06 16,35 19,35

Investment 13,73 12,01 12,15 9,14 3,51

Export 13,64 12,36 10,63 1,82 -19,13

Import 17,99 16,11 10,97 -3,53 -24,09

Growth 6,25 6,42 6,4 5,18 4,37

2008

Source: Indonesia National Statistic BureauSource: Indonesia National Statistic Bureau

Private consumption increase in Q1 2009..

22

Agriculture sector keep stable, while Manufacturing and trade drop because of global crises.

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Global crises hit the non-tradables sector significantly..

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Investment is not fully recover

Investment Credit Working Capital Credit

Investment and Working capital Credit Growth

Capital Goods Import Growth (YoY) and Domestic Cement Sales

Capital Goods Import Domestic Cement Sales

25

Export and import remain in a low level…

Export Import Profile Non Oil and GasExport Import Profile

Non Oil and GasExport Import GrowthInternational Commodity price index

Agriculture Manufacture Mining

Ytd

Gro

wth

Ytd

Gro

wth

US

D M

illi

on

Total Ekspor Impor

-60%

-40%

-20%

0%

20%

40%

60%

80%

0

2

4

6

8

10

12

14

8000

6000

USD MillionGrowth

26

But export growth in some sectors reversingin March 2009

-60

-50

-40

-30

-20

-10

0

10

20

30C

oal

Pal

m O

il

Ele

ctro

nic

s

Mec

han

ical

Dev

ice

Ru

bb

er

Tex

tile

Pu

lp a

nd

Pap

er

Fu

rnitu

re

Fis

h a

nd

Sh

rim

p

Jan- Apr 09 Mar - Apr 09

27

Export growth based on country destination in 2009

Even the export to Japan and Singapore still negative, it still supported by the export to US, South Korea, and China.

Even the export to Japan and Singapore still negative, it still supported by the export to US, South Korea, and China.

Jepang

Korea Selatan

China

Total Ekspor

Amerika Serikat

Singapura

-40,00

-30,00

-20,00

-10,00

0,00

10,00

20,00

30,00

40,00

50,00 Jan - Apr 09

Apr - Mar 2009

Singapore

USJapan

South Korea

28

Indonesia’s Policy Response

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What we have done, 2009:

1. Monetary Policy and BOP

2. Financial Sector

3. Fiscal Policy

4. Export Promotion and Real Sector

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1. Monetary Policy and BOP1. Central Bank reduce policy rate and LPS rate and the

commercial banks to follow-up

2. Coopertaion in Currency Swap1. CMIM: ASEAN+3

2. BSA-Japan, BCSA-China

3. Upcoming Rp-Yen swaps

2. Financial Sector1. Handling Trouble Banks: Century Bank and Bank IFI

2. Non-bank Financial Sector Reform

3. Law on Financial System Safety Nets (JPSK)

Government measures to mitigate the crises

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3. Fiscal Policy: Implementation of fiscal stimulus 2009 and improve spending

•Contigency Loans 2009 and 2010•Front Load Bonds issuance and Samurai Bonds•Laws: VAT and Local Taxes•Prepate budget 2010 to continue stimulus, social spending, defense budget, bureaucratic reform, and expand infrastructure.

•Continue reform: MoF, tax, customs, budget, treasury, bonds market and financial sector

4. Export Promotion and Real Sector•Trade Financing: JBIC, Bilat, ADB and IFC•Tax incentives (Rate, Minimum Treshhold, Tax on Employee, ….. Energy costs)

•Extending KUR and other support for SME•Securing Financing for 10.000 MW and other major infrastructure projects

Government measures to mitigate the crises

32

-450

-375

-325-300

-250 -250-225

-250

-189-175

-150-125

-87

-30

-500

-450

-400

-350

-300

-250

-200

-150

-100

-50

0

UK

AU

S

KO

R HK

BR

A

CA

N

THA

IDN

CH

N

US

A

MS

PH

I

SN

G

JPN

Indonesia’s fiscal stimulus to mitigate the global crisis impact in line with other Asian countries ...

Decreasing of BI RateDecreasing of BI Rate IndonesiaIndonesia,s,s fiscal stimulus budget fiscal stimulus budget amounted 1.4% GDPamounted 1.4% GDP

0

0.5

1

1.5

2

2.5

3

CHI IND JAP IDN NZ AUS KOR HK

Fiscal Stimulus Measures in the 2009 Budget(in percent of GDP)

The BI Rate decreased 225 bps sinceSep 2008

33

JP

NJP

N

Conclusion …

•Despite the global recession, Indonesian economy expected to remain strong and solid.

•Macroeconomic management is improving capital inflow continued to support the stable rupiah, an effective stimulus fiscal will likely outlast the election session.

•The 2009 growth expected to achive 4 to 4,5% and accelerated in 2010, sipported by external factor & investment pick-up.

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THANK YOU

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