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UNDER EMBARGO
UNTIL 12:00 BANGKOK TIME,
05:00 GMT, 6 MAY 2010
Indonesia
Briefing Notes for the Launch in Jakarta, 6 May 2010
Growth performance and prospects
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Indonesia grew by 4.5% in 2009, an impressive performance given the backdrop of
the global economic crisis.
With exports accounting for only 27% of GDP and an export product mix that only
has a small proportion in electronics, machineries and other highly income sensitive
items, Indonesia was less vulnerable to trade shocks emanating from the global crisis
than other countries in Southeast Asia. Besides, less than 20% of its exports are
directed towards the US and EU, the most affected areas of the global economic
crisis. In fact, Indonesia was exporting more to the rapidly growing economies such
as India and China.
The decline in total exports in 2009, owing to the anemic world demand, was more
than made up for by the robust consumption spending in both the public and private
sectors. In the last quarter of 2009, exports and imports growth rates started to turn
positive, a concrete turnaround since the downward spiral in 2008.
In addition, given its big domestic market – 226 million strong – supported by a
stimulus package, Indonesia was in a better position to shrug off the recessionary
forces, effectively decoupling from the developed economies.
In contrast to 2008, the current account for 2009 became positive as imports fell more
sharply than exports especially in the first three quarters of 2009.
The Indonesian economy is expected to pick up by 2010 at the rate of 5.5%. Buoyant
consumption, as well as ready availability of credit on top of the government stimulus
package will facilitate investments in 2010.
Inflation and Monetary Policy
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After surging to double digit in 2008, inflation as of the December 2009, dwindled to
around 2.8%, the lowest since July 2000. The average inflation rate for 2009, is 4.6%.
However, inflation has picked up in January at 3.7% but this is still below the
threshold upon which monetary policy is expected to be tightened.
Headline inflation has been observed to fall below core inflation, indicating that the
contribution of highly volatile consumption items, such as food and energy, to
inflation has been negative.
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ESCAP’s Economic and Social Survey of Asia and the Pacific 2010 – Briefing notes: Indonesia
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To counteract the recessionary pressures, Indonesian monetary authority embarked on
an expansionary monetary stance. As of the first half of 2009, credit expansion has
been robust, registering an average of 15%.
The Indonesian rupiah appreciated in 2009, owing to the strong performance of the
economy, as well as the positive current account balance. This served to further arrest
inflation in the past year.
Fiscal situation and perspectives
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Like most of the economies in the subregion, Indonesia has embarked on a stimulus
package that combined spending on infrastructure with programs on poverty
reduction.
Because of the pump priming activities, the government has gone into deficit
financing at the rate of 1.5% of GDP in 2009, which is quite manageable given the
low inflation in that period. The budget deficit will subsequently narrow as the fiscal
stimuli winds down in 2010-11.
Creditable Performance
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Indonesia’s performance is all the more creditable given the global crisis engulfing
the economic landscape.
The challenge for 2010 is how to exit in an orderly manner without choking off
economic trouble. One important challenge is how to tighten monetary policy while at
the same time managing the inflow of foreign currency and maintain exchange rate
stability.
Published by the UN Economic and Social Commission for Asia and the Pacific – May 2010
Not an official document
http://www.unescap.org/survey2010
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