MINISTRY OF FINANCE REPUBLIC OF INDONESIA INDO DONES NESIA IA MA MACROE OECONO ONOMIC MIC UPDATE TE th of Novembe Jakarta, a, 20 th ber r 2019 1
Downward pressure Global economy grows at its lowest pace since 3,8 % 3,4 % 3,4 % 3,6 % 3,0 % Global economic growth the 2008 GFC 2016 2017 2018 Proyeksi Proyeksi • 2019 2020 Revised projections Global trade volume Global economic growth projection keeps growth 5,5 % 3,6 % 3,2 % 2,2 % 1,1 % having downward revision. In the past one year, global economic growth projection 2019 has declined by 0,7 ppt Downward from its initial projection. pressure Source: WEO October, IMF • Economic slowdown The slowdown occures both in advanced Global Risks and emerging economies, including Indonesia’s major trading partners. • Response to the slowdown Trade War Geopolitics Declining Economic The slowdown is responded by monetary Tension manufacturing Recession easing and fiscal expansion. & Investment 2
Amid global economic GDP Growth’s Contribution by Expenditure 6 slowdown, 5 Household 2.69 2.69 Consumption Economic growth and inflation could be 4 maintained. 3 1.38 Government Investment Consumption 2.24 2 0.08 Government 1 Net 1.83 Inflation (%, yoy) 0.48 Consumption Export 0.49 0 8 Net -0.98 -1.05 Others 7 Export -1 6 Q3 2018 Q3 2019 5 3.61 GDP Item Growth Q3 2019 4 3.35 3.13 3.13 3.02 (%) 3 2 Private Consumption 5.06 1 Government Consumption 0.98 0 Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Oct Investment (GFCF) 4.21 2015 2016 2017 2018 2019 Exports 0.02 Sumber: CEIC and MoF Imports -8.61 GDP 5.02 3
Healthy economic development improves Indonesian welfare Unemployment Level (%) Gini Ratio Poverty Level (%) 17,75 0,382 0,360 9.11 9,41 5.28 2011 2018 2014 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2019 2006 2008 2010 2012 2014 2016 2018 2007 2008 2009 2010 2011 2012 2013 2015 2016 2017 2018 2019 Unemployment Target 2019 Poverty Target 2019 Gini ratio target 2019 4.8% - 5.2% 8.5% - 9.5% 0.38 – 0.39 HDI : 71.98 Challenges Challenges Challenges - Access to food, health, and education for - Disparity in access to capital - Economic changes structure of poor people - Geographical condition employment - Climate change food price - Skill mismatch - 4 th Industrial Revolution (automation, artificial intelligence) Source: Central Bureau of Statistics, processed 4
Mid-Term Government Priorities Human capital development remains a main priority in response to the demographic dividend Aimed at creating a generation of hardworking dynamic Indonesians who master knowledge and technology Need for a large endowment fund to manage human capital Optimizing work/labor allocation and skill matching within each industry Human Capital Development Developing infrastructure to continue supporting the activities of the people, develop the economy and enhance accessibility Infrastructure Development Widespread simplification of regulations, including the removal and streamlining of MID-TERM MID-TERM existing overlapping laws, to encourage economic growth and investment GOVERNMENT GOVERNMENT President Jokowi will ask Parliament to issue two omnibus laws that target the creating of PRIORITIES Regulatory PRIORITIES Streamlining and jobs and empowerment of SMEs Simplification Reducing the bureaucratic process and easing echelonisation (bureaucratic hierarchy), creating greater flexibility Bureaucratic Efficiency Ensure echelon levels are meritocratic and based on competence and expertise Transforming the country’s economy legacy from a high dependence on agriculture / natural resources towards manufacturing and value-added services Economic Transformation Increasing the joint prosperity of the nation 5
2020 5.3 2018 Outlook 5.17 2019 State budget is directed to be 2017 2016 5.08 5.07 Countercyclical 5.03 2015 in order to respond the risk of 4.9 weakening economy Economic Growth(%) ========================== Budget Deficit as Percentage of Budget deficit GDP(%) is still maintained at healthy and sustainable level 2020 2019 2018 (1.76) (1.84) (1.82) 2017 2016 Outlook 2015 (2.51) (2.49) (2.59) 6
2020 BUDGET Accelerating Competitiveness through Innovation and Strengthening Quality of Human Resources 2018 2019 Growth th 2020 Growth 2020 BUDGET Realization Outlook (%) Budget (%) (Trillion Rupiah) 1,943.7 2,030.8 4.5 .4 2,233.2 10.0 I REVENUE TAX REVENUE 1,518.8 1,643.1 8.2 .3 1,865.7 13.5 NON-TAX REVENUE 409.3 386.3 (5.6) .0) 367.0 (5.0) GRANT REVENUE 15.6 1.3 (91.7) .5) 0.5 (61.5) 2,213.1 2,341.6 5.8 .0 2,540.4 8.5 II EXPENDITURE CENTRAL GOVERNMENT EXPENDITURE 1,455.3 1,527.2 4.9 .4 1,683.5 10.2 TRANSFER TO REGION AND VILLAGE FUND 757.8 814.4 7.5 .5 856.9 5.2 (11.5) (34.7) 201.7 .4) (12.0) (65.4) III PRIMARY BALANCE (269.4) (310.8) 15.4 .2) (307.2) (1.2) IV DEFICIT % Surplus / Deficit to GDP (1.82) (1.93) 6.04 1) (1.76) (8.81) 305.7 310.8 1.7 .2) 307.2 (1.2) V FINANCING 7
In 2020, budget deficit will be maintained at level 1.76% to GDP Directed to be healthier and adaptive to face the economic risks Tax revenue for supporting the 0.0 0.00 (11.5) (12.0) competitiveness with the realistic and (50.0) (34.7) (0.50) optimal target (100.0) Budget spending will be prioritized for (1.00) (150.0) (124.4) (125.6) (142.5) productive spending (1.76) (1.82) (1.50) (200.0) Budget financing will be decreased and will (1.93) (250.0) be utilized for competitiveness (2.00) (2.51) (269.4) improvements (300.0) (308.3) (298.5) (2.50) (307.2) (310.8) (2.49) (350.0) (2.59) (341.0) (400.0) (3.00) 2015 2016 2017 2018 2019 2020 Budget Outlook Budget Deficit (Trillion IDR) Primary Balance 11.6 11.4 11.6 11.1 10.8 10.7 TAX RATIO 2015 2016 2017 2018 2019 Outlook 2020 Budget 8
2,000 1,861.8 1,865.7 Improvement to Support Taxation Tax Revenue (Trillion Rp) 1,643.1 1,518.8 • Increasing the tax compliance 1,343.5 1,500 1,285.0 1,240.4 • Service quality improvement, counseling, and 14.8 13.4 supervision through the strengthen IT system and 10.5 1,000 12.6 13.0 13.5 tax and administration 8.2 8.2 • Equalizing the level playing field 5.8 4.6 • 500 3.6 Improving the business process especially for VAT refund 2.9 • Implementing the AEoI - • Extensification of excise goods 2015 2016 2017 2018 2019 2020 2020 Outlook RAPBN APBN • Budget Plan Budget Adjusting the excise duty rates on tobacco Oil & Gas Non Oil & Gas Tax PPh Migas Pajak nonmigas Kepabeanan dan Cukai Custom & Excises Pertumbuhan Penerimaan Perpajakan (%) Tax Revenue Growth (%) Pertumbuhan Pajak nonmigas (%) Non Oil & Gas Tax Revenue Growth (%) 409,3 Non Tax Revenue 386,3 370,0 359,3 (Trillion Rp) The role of the non-oil and gas PNBP sector continues to be 311,2 262,0 strengthened accompanied by increased services to the 255,6 community • Management and Utilization of Optimal, Effective and Efficient Natural Resources 31.5 18.8 (5,0) 2.5 (7,0) • (5.6) Service Improvement and Tariff Adjustment (35.9) • Improvement of BUMN Efficiency and BLU Performance 2020 2020 2015 2016 2017 2018 Outlook 2019 RAPBN 2020 APBN 2020 • Improving Governance Budget Plan Budget 9 PNBP Migas (Triliun Rp) PNBP Nonmigas (Triliun Rp) Pertumbuhan (%) Oil & Gas (Trillion Rp) Non Oil & Gas(Trillion Rp) Growth (%)
Ministry of Finance Fiscal Policy Agency Fiscal incentives to promote investment Government keeps committed to promote investment through among others tax and custom facilities Income Tax Facility VAT Facility Several • Tax Holiday Incentives in the VAT exemption for: • Tax Allowance • Capital goods pipeline: • Exemption from Import • Health and education service • Social service Income Tax • Inve nvestment t Allo lowance • Export services • Super Deduction for R&D for or labor int ntensiv ive and vocational training proje pr ojects • Deduction of Net Income based on amount invested capital • Omn mnib ibus Law Law Lowering the corporate income tax in a bid to attract more investment Custom Facility Special Facility and boost the country’s • Free import duty on capital economic growth. goods • Facility in special economic • KITE zone (KEK) • Bonded Storage Area • Facility in industrial zone • Import duty borne by the • Free Trade Zone government 10
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