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About Invest stor or Relation ons s Unit (IRU) U) ABOUT THE REPUBLIC OF INDONESIA INVESTOR RELATIONS UNIT The Republic of Indonesia Investor Relations Unit (IRU) has been established as the joint effort between the Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and address concerns of investors, especially financial market investors. IRU is expected to serve as a single point of contact for the financial market participants. As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is being administrated by the International Department of Bank Indonesia. However, investor relations activities involve a coordinated efforts which are supported by all relevant government agencies, i.e. Bank Indonesia, the Ministry of Finance, the Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of Industry, State Ministry of State Owned Enterprises, State Asset Management Company, and the Central Bureau of Statistics. IRU also holds an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit – Republic of Indonesia Contact: Wiwit Widyastuti K. (International Department - Bank Indonesia, Phone: +6221 2981 8279) Dalyono (Fiscal Policy Office – Ministry of Finance) Subhan Noor (Debt Management Office - Ministry of Finance, Phone: +6221 381 0175) E-mail: contactIRU-DL@bi.go.id 1
Table of Content Exec ecut utive e Summa mmary Improved ed Intern ernati ational nal Percep epti tion n and Risi sing ng Invest estme ment nt Pre reser served ed Macroec econo nomi mic Stability ty Pruden ent Fisc scal al Manag nageme ement nt Governmen ernment t Debt t Performa manc nce 2
Executive Summary 3
Executive ve Summa mary ry The first-quarter growth in Indonesia was moderate, with a rebound forecasted in the second quarter of 2015. Consumption was expected strong in the first quarter, while investment and exports indicated a slow down. Looking ahead, there is a risk that the economy in 2015 may grow slower, nearing the lower end of the 5.4-5.8% range. This will be determined by the vast and promptness of Government infrastructure projects realization, along with resilient consumption and gradually improving exports. Indonesia’s trade balance was expected to record a surplus in March 2015, primarily bolstered by a non-oil and gas surplus. The trade surplus in March 2015 is projected to be higher than that of the previous month, mainly due to a buoyant non-oil and gas trade surplus. A decrease in oil and gas trade deficit also occurred on the January-March 2015 period, as an implication of the Government subsidy reform. The rupiah depreciated as the US dollar gained on nearly all global currencies. The rupiah slid by an average of 2.37% (mtm) to Rp13,066 per US dollar in March 2015. Point to point, the rupiah closed down 1.14% at Rp13,074 per US dollar. Albeit weakening, depreciation of Rupiah was somewhat limited compared to other emerging market currencies. Inflation was controlled in March 2015, thereby supporting the inflation target of 4 ± 1% in 2015. After experiencing deflation during the first two months of 2015, inflation was 0.17% (mtm) or 6.38% (yoy) in March 2015, stemming from administered prices. Nonetheless, volatile food deflation and smaller core inflation helped to keep March inflation under control. Financial system stability remained solid, supported by banking system resilience and stable financial market performance. The banking industry remained resilient, with credit, liquidity and market risks well mitigated and the support of a sound capital base. The Capital Adequacy Ratio (CAR) in February 2015 was 21.3%, well beyond the 8% minimum, while non-performing loans (NPL) remain low and stable at 2.0%. Bank Indonesia Board meeting on April 14, 2015 has decided to hold the BI Rate at 7.50%, setting the Deposit Facility rate at 5.50% and Lending Facility rate at 8.00%. This decision is in line with the ongoing efforts to keep inflation within the target of 4 ± 1% for 2015 and 2016, and to control current account deficit towards a healthier level at 2.5-3% of GDP in the medium term. Bank Indonesia remains strongly committed to strengthening its monetary and macroprudential policy mix , as well as stepping-up coordination with the government to curb inflation and current account deficit, while encouraging speedy structural reforms. On the fiscal front, Indonesia will continue its prudent fiscal management in 2015 with strong commitment to fiscal consolidation . Recent reform policy represents an essential step and integral part of structural reforms to strengthen economic fundamentals in Indonesia. 2015 revised budget deficit is projected at a safe level of 1.91% of GDP . 4
Executive ve Summa mary ry GDP Growth Inflation Foreign Exchange Reserves Balance of Payments 5 * Preliminary Figures
Executive ve Summa mary ry Central Government Debt to GDP Ratio (% of GDP) Debt Composition 120% 30% 24.9% 24.7% 24.5% 100% 23.1% 23.0% 25% 80% 43.3% 43.8% 45.1% 44.5% 46.3% 46.8% 20% 60% 15% 40% 56.7% 56.2% 10% 54.9% 55.5% 53.7% 53.2% 20% 5% 0% 2010 2011 2012 2013 2014*) Mar-15 0% Domestic Debt Foreign Debt 2010 2011 2012 2013 2014* Table of Debt to GDP Ratio Source: Ministry of Finance Note: Using GDP at Current Market Prices [2010 Version] 6 *) Preliminary Figures
2015 Policy y Summa mary ry Government coordinates policy tools to stabilize growth with macroeconomic management Revenue and tax policy Monetary policy mix Bold and pre-emptive policy through regulation of BI Policy Rate, Improvement of tax revenue administration. responsively adjusting to current macroeconomic condition. Improvement of regulations related to tax revenues, especially Exchange rate flexibility to facilitate external adjustments. income tax, VAT, and VAT – Luxury Goods. Financial market deepening and capital flows management. Increase law enforcement conducted through intensification and improved examination of the taxpayer and certain business sectors. Macroprudential and supervisory actions. Extending additional new tax subject and VAT Activities related to Policy coordination with the government and financial stability ‘Build Your Own’ . forum. Optimization of customs and excise policy implementation as it has Central bank cooperations, including second line of defences. been presented in the State Budget 2015. Optimization of oil & gas lifting and cost recovery, as well as the improvement of the system and administration of non-tax state revenues. Expenditure policy Financing and debt management policy Increasing infrastructure spending to support growing economy. Capital injection to state-owned companies, as agents of development in supporting national priorities Reduction of poverty through conditional cash transfers. Optimizes Governments securities issuance from domestic sources Increase the effectiveness of targeted subsidies. to fulfill Budget need and uses foreign debts as complimentary. Support the accelerated achievement of minimum essential force in Determines debt instrument by taken into account of market need national defense in regard to market development and portfolio management. Support the management of natural resources in improving food, Issues Retail Bond for instrument diversification and financial water, and energy security. inclusion. Expanding access and quality of education. Optimizes foreign and domestic loan instrument to fulfill Budget Improve the implementation quality of the National Social Security need on capital expenditure. System in terms of health and employment. Conducts active portfolio management of Government securities in Minimizing the impact of uncertainty through the support of fiscal order to promote market liquidity and stability. risk reserves. Strengthens the function of Investor Relations Unit. 7
Improved International Perception and Rising Investment 8
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