Remain Unchanged
The
process of global economic recovery is still at a steep road and haunted by a
variety of challenges such as the economic slowdown in China, the impact of
Brexit, tightening of US monetary policy, the impact of Trump policy, and
geopolitical problems that occur in some countries in the world. As a result,
prospects across the main countries and regions remain uneven in this year.
China's economy growth slightly improved to 6.8% y-o-y in 4Q 2016, compare from
6.7% y-o-y in the previous quarter. Meanwhile, the China’s Purchasing Manager
Index (PMI) indicator slightly increased to 51.6 in February 2017 compare with
51.3 in the previous month. The China’s Industrial Production Index was slowing
growth at 6.0% y-o-y in December 2016, compare with 6.2% y-o-y in one month
earlier. The China’s exports growth fell by 1.3% y-o-y in February 2017. EU
economy growth slowed to 1.7% y-o-y in 4Q 2016, compare 1.8% in the previous quarter.
European PMI indicator increased to 55.4 in February 2017 from 55.2 in one
month earlier. European Industrial Production Index growth slowed to 1.8% y-o-y
in December 2016, compare 3.0% y-o-y in the previous month. Meanwhile, Japanese
economy growth improved to 1.6% y-o-y in 4Q 2016, compare with 1.1% y-o-y in
the previous quarter. In the other hand, Japanese PMI indicator increased from
52.7 in January 2017 to 53.3 in February 2017. Japan industrial
production index was slowing growth to 1.5% y-o-y in January 2017 compare 4.9%
y-o-y in December 2016. Meanwhile, the US economy improved growth to 1.9%
y-o-y in 4Q 2016, compare 1.7% y-o-y in the previous quarter. The US PMI
increased to 57.7 in February 2017 compare 56.0 in one month earlier. The US
industrial production index was slowing growth to 0.0% y-o-y in January 2017
from 0.7 % y-o-y in December 2016.
On
the domestic side, we expect Indonesian economy to growth
around 5.06% in 1Q 2017 slightly improve compare 4.94% in 4Q 2016. It’s
supported by improvement in export performance due to higher commodity
prices. Household consumption is expected to remain solid, supported by the
improvement in sales of durable goods such as automotive, electronics, and
property. Implementation of the local elections simultaneously has an impact on
increasing household consumption and non-profit institutions. Meanwhile,
government spending is expected to remain slow in line with the budget
efficiency. Investment is expected to moderate growth in the early quarter of
this year. Going forward, we also expect the Indonesia’s economy will grow
5.10% in 2017 slightly improve compare with 5.02% in 2016.
Indonesia's
trade balance recorded a surplus US$ 1.40 billion in January 2017, increased
from a surplus US$ 1.05 billion in December 2016. The widening of trade surplus
is due to the decrease in imports faster than exports. Indonesia’s exports in
January 2017 stood at USD 13,384.8 million fell by 3.2% m-o-m. On yearly basis,
Indonesia’s exports increased by 27.71% y-o-y (the highest in the last five
years). On the other hand, the total imports in January 2017 reached to USD
11,989.0 million, fell by 6.2% m-o-m. On yearly basis, Indonesia’s imports
increased by 14.54% y-o-y. Meanwhile, Indonesia’s current account deficit
recorded -0.75% per GDP in 4Q 2016, better from -1.92% per GDP in 3Q 2016.
Current account deficit narrowed in 4Q 2016, mainly driven by the growing trade
surplus and declining services and primary income. Meanwhile, we expect
Indonesia's current account deficit will be reached approximately -1.95% per
GDP in 2017, widening from -1.75% per GDP in 2016 due to 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 rose to 3.83% y-o-y in February 2017, compared with 3.49% y-o-y in
the previous month. Meanwhile, consumer price index slowed to 0.23% m-o-m in
February 2017 from 0.97% m-o-m in the preceding month. Furthermore, the monthly
inflation in February 2017 mainly comes from higher prices of electricity
tariff, the mobile phone tariff, housing rent, gasoline (non-subsidized), car,
and gold jewelry. Looking ahead, we expect yearly inflation will reach 4.28% in
2017 increase compare 3.02% in 2016. The increase in inflation this year
due to the increase in administered tariffs such as electricity rates, vehicle
registration fee, and the price of non-subsidized fuel. On the other hand, food
prices are still fluctuating in this year
Rupiah
relatively stable at around 13400 in February 2017 compared to the previous
month. Meanwhile, foreign outflows occurred on Indonesia stock market. Foreigners
booked net-sell of USD 60.3 million in February 2017. On other side, from
latest data showed foreigner booked net buy in bond market during the month of
February 2017 by adding IDR 6.4 trillion. Furthermore, Indonesia's foreign
reserves in February 2016 rose to US$119.9 billion, compare from US$ 116.9
billion in the previous month. The increase was
primarily attributable to foreign exchange receipts, among other from tax
revenues and government oil & gas export proceeds, withdrawal of government
foreign loans, as well as auction of Bank Indonesia foreign exchange bills. The
receipts surpassed the use of foreign exchange for repayments of government
external debt and Bank Indonesia foreign exchange bills matured during the
period.
Indonesia’s
money supply (M2) growth in January 2017 slightly slowed. M2 position in
January 2017 stood at Rp 4,938.7 tn, or grew 9.8% y-o-y, lower than 10.0% y-o-y
in the previous month. By component, slowing M2 growth derived from lower
growth component of M1 to 14.1% in January 2017 from 17.3% y-o-y in the
previous month, as well as the component securities other than shares fell by
8.5% y-o-y in January 2017 compare grew by 0.9% y-o-y in the previous month.
Meanwhile, bank loan grew 8.2% y-o-y in January 2017, higher from 7.9% y-o-y in
December 2016. Meanwhile, the growth of third party funds slightly improved to
9.7% y-o-y in January 2017 compare with 9.6% y-o-y in the previous month.
Based on the above factors and to maintain the balance of
Indonesia's macroeconomic stability and the recovery of the domestic economy,
we expect Bank Indonesia remains unchanged the policy rates in this month. We
expect the BI 7-day reverse repo rate is maintained at 4.75%, the deposit
facility rate at 4.00%, and the lending facility rate at 5.50% on the Board of
Governors Meeting March 15-16th, 2017.
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