Indonesia Investments Report - March 2021 Edition: Light at the End of the Tunnel?
Update COVID-19 in Indonesia: 1,542,516 confirmed infections, 41,977 deaths (6 April 2021)
6 April 2021 (closed)
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
Jakarta Composite Index (6,002.77) +32.48 +0.54%
Below is a list with tagged columns and company profiles.
Today's Headlines GDP
August is typically a special month for Indonesia because on the 17th of August the nation commemorates its Independence Day. Unfortunately, however, celebrations had to be quite sober this year as the novel coronavirus (COVID-19) pandemic is still spreading across the country.
On Wednesday (02/09/2020) Indonesia Investments released the August 2020 edition of its monthly report. In this edition, titled 'In Search of a Vaccine', we discuss the efforts that are being made in Indonesia to deliver a safe and reliable vaccine for the COVID-19 virus and provide an overview of Indonesia's pharmaceutical industry.
On Wednesday (05/08/2020) Indonesia Investments released the July 2020 edition of its monthly report. In this edition, titled 'A Modest Rebound', we discuss the impact of the COVID-19 crisis on the Indonesian economy, Indonesia's automotive industry, and a range of other topics.
On Wednesday (03/06/2020) Indonesia Investments released the May 2020 edition of its monthly report. In this edition, titled 'in the Eye of the Storm', we focus specifically on the social implications of the novel coronavirus (COVID-19) crisis on Indonesian society. Hence, unemployment and poverty are two topics that deserve specific attention.
On Tuesday (05/05/2020) Indonesia Investments released the April 2020 edition of its monthly update. In this edition, titled 'Bracing for Impact', we focus on the impact of the novel coronavirus (COVID-19) crisis - and subsequent restrictions on social behavior and business - on the Indonesian economy and Indonesian society.
Statistics Indonesia (BPS) released its Q1-2020 gross domestic product (GDP) data for Indonesia on Tuesday (5 May 2020). According to the agency, the Indonesian economy expanded by 2.97 percent year-on-year (y/y) in the first quarter of 2020. The result is well below forecasts, and considering the real impact of the coronavirus crisis (COVID-19) on the Indonesian economy is to occur in the second quarter, we expect to see a deep red number in Q2-2020 (possibly extending into the following quarter).
On Thursday (08/04/2020) Indonesia Investments released the March 2020 edition of its monthly update. In this edition, titled 'Coronavirus Panic Peaks Worldwide', we obviously focus on the impact of the novel coronavirus (COVID-19) outbreak on the Indonesian economy and Indonesian society.
For the sixth straight month manufacturing activity in Indonesia remained in the red zone. It therefore was a very disappointing second half of 2019. Moreover, it raises room for concern about Indonesia’s overall economic growth in 2019.
For the fifth straight month manufacturing activity in Indonesia remained in the red zone, implying that the fourth – and last – quarter of 2019 is bound to be a disappointing quarter in terms of manufacturing activity (possibly becoming the weakest quarter in four years). And this is certainly not a good omen for Indonesia’s economic growth in Q4-2019.
On Thursday (05/12) Indonesia Investments released the November 2019 edition of its monthly update. The report aims to inform the reader of the key political, economic and social developments that occurred in Indonesia in the month of November 2019 and also touches upon key international developments that made an impact on the Indonesian economy.
Latest Columns GDP
In line with expectation, the central bank of Indonesia (Bank Indonesia) cut its benchmark interest rate (BI rate) by 25 basis points to 6.75 percent on Thursday (17/03) at its two-day policy meeting. It is the third straight month of monetary easing in Southeast Asia's largest economy. In the preceding two months the lender of last resort had also cut borrowing costs by 0.25 percent, each month. Furthermore, the deposit and lending facility rates were also cut by 25 basis points to 4.75 percent and 7.25 percent, respectively (effective per 18 March 2016).
The International Monetary Fund (IMF) expects Indonesia's economy to expand 4.9 percent year-on-year (y/y) in 2016, slightly up from a 4.8 percentage point (y/y) growth of gross domestic product (GDP) in 2015. On Tuesday (15/03) Luis Breuer, IMF Mission Chief for Indonesia, said the Washington-based lender projects limited growth (+0.1 percent) of Indonesia's private consumption this year. Regarding growth of investment and government spending in 2016, the IMF holds a more positive view. On the same day, the World Bank cut its forecast for Indonesia's 2016 GDP growth by 0.2 percent to 5.1 percent.
When we look at all of the activity in financial markets this year, some interesting trends have started to emerge for those looking to invest in Asia. Stock markets in Indonesia have shown strong rallies, and have started to reverse many of the multi-year declines that have been characterizing the region. This inspired a great deal of attention for Indonesia’s stock benchmarks, as it is looking increasingly likely that improvements in the underlying economic data will continue bringing in buyers for these markets.
The Indonesian economy expanded 5.04 percent year-on-year (y/y) in the fourth quarter of 2015, slightly beating analyst expectations and constituting the highest quarterly growth pace since Q1-2014 thus providing optimism that Indonesia's economic growth will finally be able to accelerate in 2016 after six years of economic slowdown (therefore Indonesia's benchmark Jakarta Composite Index surged a staggering 2.85 percent on Friday). In full-year 2015 the economy of Indonesia expanded 4.79 percent (y/y), the slowest growth pace since 2009.
Tomorrow (05/02), Statistics Indonesia is scheduled to release Indonesia's official full-year 2015 economic growth figure. Nearly all analysts expect to see a figure that reflects the continuation of slowing economic growth. Southeast Asia's largest economy expanded 5.0 percent in 2014 and this is expected to have eased further to 4.7 percent or 4.8 percent in 2015 on the back of (interrelated) sluggish global growth, low commodity prices, and weak export performance. Domestically, Indonesia has or had to cope with high interest rates and inflation (hence curtailing people's purchasing power and consumption as well as business expansion).
While Indonesia is currently in the middle of expanding its 4G network, the nation remains placed among the countries that have the poorest Internet penetration rate in the world. A recent World Bank report, titled 'World Development Report 2016: Digital Dividends', zooms in on the economic and social impact that occurs when a relative large part of the population cannot be connected to the Internet or when the government fails to keep pace with the growth of technology.
Consumer goods producer Unilever Indonesia, one of Indonesia's leading consumer goods firms, is expected to show better corporate earnings in 2016 compared to the preceding years on improving purchasing power of Indonesia's population. The company's net profit is estimated to grow by 15 percent compound annual growth rate (CAGR) in the coming two years, while its EBIT margin is expected to remain above 23 percent as higher costs of raw materials are compensated by higher selling prices.
Both car sales and motorcycle sales declined in 2015 in Indonesia. Primary reason for this decline was people's weaker purchasing power amid the slowing economy and persistently low commodity prices. Indonesia's GDP growth is estimated to have fallen to 4.7 percent year-on-year (y/y), the slowest growth pace since 2009. Meanwhile, amid the sluggish global economy (especially China's slowdown) and falling oil prices, Indonesia gains relatively little from its commodity exports.
The performance of Astra International, one of Indonesia's leading diversified conglomerates (but particularly known for being the dominant force in the country's automotive industry), is expected to improve next year on the arrival of new car models, estimated accelerated economic growth and its rivals' stagnating production capacity expansion. As such, Astra International should be able to increase its market share and feel less need to offer its cars to customers at discounted rates.
Ace Hardware Indonesia, one of Indonesia's leading retail companies that is engaged in the markets of home improvement and lifestyle products, is expected to show modest (single-digit) growth in 2016. Same store sales growth is estimated to grow in the range of 8-10 percent year-on-year (y/y). This modest performance is caused by weak purchasing power in Indonesia amid sluggish economic growth and due to the fragile rupiah (against the US dollar).
