Indonesia's 2017 state budget and impact on bond market

Indonesia's 2017 state budget and impact on bond market

• There is risk on the IDR bond market seeing that the deficit is expected to rely on an increase in government securities offerings in the coming year. Deficit financing for 2017 is expected to rise to IDR332.8 billion in 2017 from the (revised) budgeted IDR296.7 billion in 2016. This is an increase of 12.1% yoy. Moreover, there is added risk being that the government has a higher allocation for interest payments in 2017, up 15.8% to IDR221.4 trillion.
• Yet, overall impact on the IDR bond market is still positive in our view. We see positive factors being;  
• Government borrowings are still low
• Demand expected to remain strong
• Government could take advantage of low interest rates