31 May 2018
Indonesian Economy 2018
By Yanuar Dananjaya

Indonesian Economy 2018

If we observe the Indonesian economy in 2017, it will give us an idea of ​​what will happen in 2018

Indonesia's economy in the end of 2017

- Economic growth of 2017 5.19%, which is the highest in the last 4 years

  • 2014 5%, 2015 4.9%, 2016 5%
  • Growth in 2017 is mainly supported by investment and public consumption

- Inflation in 2017 is about 3.5% => considered low. Ordinary 4% - 5%

- BI interest rate 4.25% => including low. Ordinary 6% - 7%

- Unemployment rate 5.5%, usually around 6%

- Reserves of 130 billion dollars => highest in history

- The Ease of Doing Business rating rises from 106 in 2015 => 91 in 2016 => 72 by 2017

- The Global Competitiveness Index ranks from 41 in 2016 to 36 in 2017

- Standard and Poor's upgraded Indonesia to Investment Grade (worth investment)

- Debt to GDP ratio 29%

  • Increase from previous year (+/- 25% - 26%) => still low !!!
  • Under the Act it should not exceed 60% of GDP
  • IMF and World bank: healthy debt rate does not exceed 60%
  • America 100%, Japan 243%, India 67%, Germany 90%, Singapore 100%, Malaysia 48%
  • Indonesia's debt level is still low
  • Indonesia's debt quality is better. Debt for infrastructure development. It used to subsidize fuel

- Community consumption 2017:

  • Consumption of goods is reduced => many outlets close
  • Community consumption figures rise
  • => there is a shift in consumption patterns from goods (goods) to experience (experience)
  • => first if you have money to buy clothes, shoes, TV, etc .. Now eat to restaurants, hang out at cafes, sightseeing
  • => online shopping. Still about 3% of all goods shopping, but it keeps on increasing

Economic forecast 2018

- Predicted IMF and World Bank economic growth 5.3% - 5.4% => higher than 2017

- Inflation remains intact 3% - 4%

- => overall the economy is getting better

- Enter the political year => Pilkada simultaneously and ahead of the 2019 presidential election. Opportunities and threats:

  • Increased spending on campaigns => drives the economy
  • Uncertainty, security threats, SARA politics

-          The increasing number of middle-class and millennials (born after 1981)

  • Characteristics of the middle class: have the power to buy, want to spend
  • Millennial characteristic: IT technology literate, digital minded, disregard for goods, experience / leisure, want to express themselves
  • => Developing industry:

-          Digital Economy: telecommunications, Fintech, online shop,

-          Leisure economy: tourism, culinary, hotel, transportation, Gym,

The weakness of the Indonesian Economy

- Low credit penetration

  • Credit / GDP is only 47%.
  • Malaysia 144%, Thailand 173%, Singapore 121%

- Financial Inclusion is low

  • Percentage of population with bank account => 40%
  • Malaysia 80%, Thailand 80%, Singapore almost 100%

-          Opportunities for Peer to Peer lending

- Low tax rate

  • Tax to GDP ratio of 10%
  • Malaysia 14%, Singapore 14%, Thailand 16%
  • Because the tax base is low: less than 10% of the population pays taxes

Economic Growth Threat 2018

- US trade war: Americans impose import duties on metals, to be avenged by affected countries

- US fiscal policy: taxes down, spending increases. The difference is covered by debt => funds flow into the US

- Risk of war in North Korea and the Middle East

- An increase in US interest rates

GATEWAYS FOR
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