Remain Unchanged
The global upswing in economic activity is strengthening in moderate levels. The IMF expected the global economic growth for 2018 and 2019 reached 3.9%, improving from 3.7% in 2017 estimation. Meanwhile, China's economy maintained growth at 6.8% y-o-y in 4Q 2017, stable compare with the previous quarter. The China’s Purchasing Manager Index (PMI) manufacturing indicator decreased to 51.3 in January 2018 compare 51.6 in the previous month. The China’s Industrial Production Index growth maintained growth at 6.6% y-o-y in December 2017, stable compare with one month earlier. The China’s export was improving growth to 11.1% y-o-y in January 2018 from 10.9% y-o-y in the previous month. Meantime, EU economy growth slowed to 2.7% y-o-y in 4Q 2017 from 2.8% y-o-y in the previous quarter. European PMI Manufacturing indicator decreased to 59.6 in January 2018 from 60.6 in one month earlier. European Industrial Production Index growth slowed to 3.3% y-o-y in November 2017, compare 3.9% y-o-y in the previous month. Meanwhile, Japanese economy growth improved to 2.1% y-o-y in 3Q 2017, compare with 1.6% y-o-y in the previous quarter. In the other hand, Japanese PMI Manufacturing indicator increased from 54.0 in December 2017 to 54.8 in January 2018. Japan industrial production index was improving growth to 5.7% y-o-y in December 2017 compare 3.6% y-o-y in previous month. Meantime, the US economy was improving growth to 2.5% y-o-y in 4Q 2017, compare 2.3% y-o-y in the previous quarter. US unemployment rate in January 2018 was maintained at to 4.1%, unchanged compare with the previous month. Furthermore, the US Purchasing Manager Index (PMI) slightly decreased to 59.1 in January 2018 compare 59.3 in one month earlier. The US industrial production index was improving growth to 3.6% y-o-y in December 2017 from 3.5 % y-o-y in previous month.
On the domestic side, Indonesian economy accelerated on moderate pace by 5.07% in 2017. In 2018, exports and imports performance is expected to be slightly lower compare than 2017 due to the moderate increase commodity prices. On the demand side, investment improved on the back of government infrastructure projects and the expanding role of private investment. Meanwhile, private consumption growth expected to improve due to the increasing purchasing power (impact of the rising commodity prices and cash labor intensive program). Government spending also expected improve in 2018 caused by infrastructure project and election spending. We expect Indonesia’s Economic grow 5.30% y-o-y in 2018, improving from 5.07% in 2017.
Indonesia's trade balance recorded a deficit US$ 0.27 billion in December 2017, worse from a surplus US$ 0.22 billion in November 2017. The decline in trade balance surplus was due to the decrease in exports faster than imports. Indonesia’s exports in December 2017 stood at USD 14,79 billion fell by 3.45% m-o-m. On yearly basis, Indonesia’s exports increased by 6.93% y-o-y. On the other hand, the total imports in December 2017 reached to USD 15,06 billion, fell by 0.29% m-o-m. On yearly basis, Indonesia’s imports increased by 17.83% y-o-y. Meanwhile, Indonesia’s current account deficit in 2017 reached 1.70% per GDP, slightly improved from 1.82% per GDP in 2016. Forward looking, we expect Indonesia's current account deficit will be reached approximately -2.20% per GDP in 2018, widening from -1.70% per GDP in 2017. It’s caused by domestic economic recovery leads to increased imports, at the same time export performance is still depend on the prices of commodity and the recovery of global demand.
Yearly inflation eased to 3.25% y-o-y in January 2018, compared with 3.61% y-o-y in the previous month. Furthermore, consumer price index reached by 0.62% m-o-m in January 2018, decreased compare from 0.71% m-o-m in the preceding month. Meanwhile, the monthly inflation in January 2018 mainly comes from higher prices of foodstuffs, prepared foods, and cigarette. Looking ahead, we expect yearly inflation will reach 3.50% in 2018 slightly decrease compare 3.61% in 2016. The easing inflation rate projection in 2018 due to the government does not raise the energy prices in 2018 and continue to keep food prices.
The rupiah slightly strengthened 1.00% m-o-m to 13413 in January 2018. Nevertheless, to date the Rupiah is at around 13625 due to the strengthening of USD against the world's currency. Meanwhile, foreign inflows occurred on Indonesia stock market. Foreigners booked net-buy of USD 132.4 million in January 2018. On other side, foreigner booked net buy in bond market during the month of January 2018 by adding IDR 33.6 trillion. Furthermore, Indonesia's foreign reserves in January 2018 rose to US$131.98 billion, compare from US$ 130.20 billion in the previous month. The increase was mainly due to foreign exchange receipts, among other form tax revenues and government oil & gas export proceeds, withdrawal of government foreign loan, as well as auction of Bank Indonesia foreign exchange bills. The receipts surpassed the uses of foreign exchange primarily for repayments of government external debt and Bank Indonesia foreign exchange bills matured during the period.
Indonesia’s money supply (M2) growth in December 2017 slowed. M2 position in December 2017 stood at Rp 5,418.5tn, or grew 8.3% y-o-y, lower than 9.3% y-o-y in the previous month. This development is caused by slowing growth of all components of M2, both M1 and quasi money. M1 growth slowed from 13.1% y-o-y in November 2017 to 12.4% y-o-y. Meanwhile, quasi money grew slowly from 8.0% y-o-y in November 2017 to 6.8% y-o-y in December 2017. Meanwhile, bank loan grew 8.3% y-o-y in December 2017, higher from 7.5% y-o-y in November 2017. However, the growth of third party funds slowed to 9.0% y-o-y in December 2017 compare with 9.8% y-o-y in the previous month.
Based on the above factors and to maintain the balance of Indonesia's macroeconomic stability and the momentum of domestic economy recovery, we expect Bank Indonesia remains unchanged the policy rates in this month. We expect the BI 7-day reverse repo rate is maintained at 4.25%, the deposit facility rate at 3.50%, and the lending facility rate at 5.00% on the Board of Governors Meeting February 14th-15th, 2018.
Regards,
Juniman
Chief Economist
PT Bank Maybank Indonesia Tbk
Sentral Senayan III, 8th Floor
Jl. Asia Afrika No. 8, Gelora Bung Karno
Jakarta 10270, Indonesia
Tel : +62 21 29228888 Ext.29682
Fax : +62 21 29228849
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