2. 2 Wellington Capital
Advisory
Table of Contents
I. Indonesia poised to become the world’s 4th largest economy 3
II. The New Economic Drivers 7
Omnibus Law 8
Regional Comprehensive Economic Partnership Agreement(RCEP) 10
II. The Impact of the COVID-19 Pandemic 11
Current Economic Snapshot 12
National Ratings and Foreign Direct Investments 13
Inflation, BI Rate, and Money Supply 14
Current Trade Surplus to Spur 2021 Recovery 15
Ample Forex Reserves from Trade Surplus and Strong Liquidity Position 16
Credit Restructuring Policy and AbundantLiquidity 17
Indonesia Mobility Index and Workforce 18
III. Government Policies and Spending 19
Fiscal Policies: National Economic Recovery Program2020 20
Monetary Policies 21
State Expenditure 2021 22
4. 4 Wellington Capital
Advisory
4 Wellington Capital
Advisory
Indonesia is poised to become the 4th largest economy in the world by 2030
The GDP of Indonesia will eclipse that of established global powerhouses such as Japan,
Germany and UK
Source(s): IMF; Standard Chartered Bank
2017
2030
$23.2T
$64.2T
$9.5T
$46.3T $31.0T
$19.4T $3.2T
$10.1T
$5.4T
$7.2T
World
Rank
#1
#1
#3
#2 #4
#7
#9
#4
#3
#2
China India USA Indonesia Japan
5. 5 Wellington Capital
Advisory
The new Omnibus Law
is the most significant
economic reform ever
enacted in Indonesia
Resilient domestic
demand and increasing
foreign direct
investment flows will
drive growth
RCEP membership and
pragmatic monetary and
fiscal policies will
underpin economic
resilience
Indonesia will
emerge strongly
during the post-
COVID recovery
period
Omnibus Law RCEP participation
Foreign direct investment flows
will accelerate as the economy is
transformed through increased
liberalization and transparency.
Government spending is the primary
instrument that will underpin a
sustained economic upturn in 2021
GDP is expected to grow by 4 to6%
in 2021, as the domestic market
is only partially exposed to downside
macro-economic risks.
Newly-emerging
economic drivers
Established economic
fundamentals
RCEP participation
The long-anticipated and
most comprehensive “Big Bang”
economic reform ever enactedin
Indonesia
The Omnibus Law amends various
sectoral laws in order to improve the
prevailing investment eco-system
Participation in the Regional
Comprehensive Economic
Partnership Agreement (RCEP)
was ratified in November 2020
Indonesia will be empowered to
assert greater influence and
involvement in global supply chains
6. 6 Wellington Capital
Advisory
Key Takeaways 01
The Indonesian market is attractive to
investors, by virtue of strong near term
economic recovery potential coupled with a
positive long term growthoutlook.
The continuing increase in realized direct
investment and the positive ratings from
market commentators are clearevidence.
02
Governmentspending is the key instrument
to kick-start the economic recovery in 2021.
The prevailing low BI interest rate and the
abundant liquidity reserves in the banking
system will enable growth to be sustained.
03
Indonesia is expected to grow 4 to 6% in
2021, as the economy is largely shielded
from regional and globaltrends.
Government focus is on stimulating the
domestic economy as the primary engine of
near-term growth.
04
Both domestic and foreign direct investment
in Indonesia is expected to strengthen in
2021 with the Omnibus Law and Regional
Comprehensive Economic Partnership
Agreement (RCEP) being put inmotion.
Attention will be on both theimplementation
and impact of theseinitiatives.
05
The trade surplus created in 2020 allows
Indonesia to better prepare for a positive
growth trajectory in 2021
Global trade is expected to resume in 2021.
The consequent increase in the tradedeficit,
will remain within acceptablelimits.
06
Strong forex reserves, the stable USD/IDR
rate, and continuing strong commodityprices
will further spur the economicrecovery.
Commercial interest rates maystill remain
at a higher level due to the inherent risk
premium.
07
The continuing acceleration of monetary
expansion throughout 1H 2021, will translate
to increase in the demand for consumer and
small business loans.
The additional liquidity will be a further
stimulus to consumerspending.
08
Annual consumer price inflation is expected
to remain at historically low levels (c. 2.0%
p.a.) in 2021.
Food prices and transportation costs are
suppressed due to the governmentsubsidy
program and reduced mobility levels.
09
Sustained uplift in economic growth is
expected throughout 2021/22 withcurrent
activity still below pre-pandemic levels.
Further economic slowdown is unlikely with
mass vaccination drive to start in early 2021.
High degree of appeal
to investors - driven
by strong economic
potential
Positive growth
trajectory for the
medium-to-long term
Government spending
will kick-start an
immediate upturn
The Omnibus Law will
be a major accelerator
8. 8 Wellington Capital
Advisory
Omnibus Law
The most
comprehensive “Big
Bang” economic reform
ever enacted in
Indonesia.
It arises from the failure
of numerous individual
reform packages
launched from 2015 to
2019.
Attention is centered on
the implementation of
the new regulations in
2021 and ensuring their
effectiveness,
especially at the local
and provincial
government level.
The bill is a long-awaited key structural reform for Indonesia that lays the ground for downstream
sector, including manufacturing.
The rationale of the bill are: [1] to create formal jobs; [2] to improve the ease of business
licensing; [3] to increase Incremental Capital Output Ratio (ICOR) by attracting investments in
downstream sector; [4] to boost MSMEs, making up ~90% of labor force.
The Negative List of Investments, governing the number of industries limited to foreign industries,
is expected to shrink from >300 to just 48, counting ICT, energy, tourism and creative economy
amongst the many that will see the restrictions removed
The bill is key to lower the reliance on commodities-based shipments and grow in the
manufacturing sector to create jobs and formalize the economy.
President Jokowi’s supermajority coalition of 74% in the parliament creates an advantage in
gaining approval and execution of the bill e.g. law amendments that typically require 2-3 years
could be completed in < 12 months.
The implementing regulations (PP and Perpres) will be finalized by January 2021. The
effectiveness of the implementation will set the pace for future economic growth. The present
cabinet is expected to improve execution in the local/provincial government level.
Omnibus Law on Financial Services is expected to be passed into law by early 1H21 with the
main objective of strengthening supervisory capacity and decision-making power in the financial
sector, which is the concern of many investors.
9. 9 Wellington Capital
Advisory
Key excerpts from Omnibus Law on Job Creation
Subject Previous Regulations Amendments Significance
Labor
on minimum wage
Yearly minimum wage increases to be capped at national real GDP growth +inflation Yearly minimum wage to increase using a formula involving regional GDP growth and inflation. More
details to be set in the follow-up Government Regulations.
Ambiguous
Labor
on severance pay
In the case of layoffs, employers are required to pay severance pay depending on the
circumstances of the layoffs, the length of employment, additional service payment and
compensate for rights such as leave, medical benefits, etc.
In the case of layoffs, employers are required to pay severance pay depending on the length of employment,
additional service payment and compensate for rights such as leave, medical benefits, etc. Details on
severance pays during specific cases i.e. in the case of M&A or company incurring losses shall be ruled by
separate regulations
(+) for businesses
Broadcasting analog switch-off(ASO) N/A Media companies are required to convert from analog to digital technology within two years after the
Omnibus Law comes into effect
(+) for new entrants
~ to (-) for incumbents
Telecommunication
on infrastructure and frequency sharing
N/A Any entity in possession of passive telecommunication infrastructure is required to open access to
telecommunication providers and/or broadcasting agencies based on B2B agreements
(+) for new entrants
~ to (-) for incumbents
Radio frequency band business permit holders can: a) conduct radio frequency band sharing for new
technology applications; and/or b) transfer radio frequency band use to other telecommunication
providers, with prior approval from CentralGovernment
Encouraging M&As
Land Banking Agency N/A Government to form a Land Banking Agency that is tasked with planning, acquiring, procuring,
managing, utilizing and distributing land for public needs on a non-profit basis
(+) for infrastructure
development
Foreign ownership of apartmentunits Foreigners may not own property in Indonesia Foreign entities (authorized foreign individuals, foreign corporations with a representative office, and foreign
country representatives in Indonesia) may obtain Ownership of Apartment Units under strata title status
(+) for real estate
industry
Central Government investmentarm N/A 2 core vehicles: (1) The Minister of Finance; (2) an Agency with special authority to manage
Government Investments
(+) for infrastructure
development and
capital market
Negative list All sectors are open for investments except for certain sectors deemed as 'closed’ and
'conditionally open’ for investments
Simplification from 20 to 6, with a presidential regulation on a Prioritized Investment List to follow (+) to attract new FDIs
on downstream sector
Dividend from domestic sources Domestic corporate taxpayers and domestic individual taxpayers are subject to
dividend tax
Dividend received by tax subjects from domestic companies are tax free if reinvested in Indonesia
and 20% for foreign tax subjects subject to the prevailing Tax Treaty
(+) for businesses
Dividends from foreign sources Dividends received by domestic corporate and individual taxpayers are subjected to
normal incometax
Dividend received by domestic corporate and individual taxpayers from foreign companies are not
subject to tax if reinvested in Indonesia
(+) for businesses
9 Wellington Capital
Advisory
Indonesia is poised to become the 4th largest economy in the world by 2030
The bill addresses important issues of concern to FDI institutions, ranging from bureaucratic
complexities to labor market rigidity
10. 10 Wellington Capital
Advisory
84
49
14
165
2
19
0 100
Asia
Americas
Rest of the World
200
US$ Billions
Real Income 2030 (USD Bn)
RCEP CPTPP
Regional
Comprehensive
Economic
Partnership
Agreement (RCEP)
RCEP will facilitate
Indonesia’s greater
involvement in the global
supply chain
The government expects
that RCEP will also
expedite a post-pandemic
economic recovery
RCEP willcomplement
the newly-enacted
Omnibus Law
Increased focus on
industrial and commercial
competitiveness
Investment-led expansion
in key vertical markets
Trade inGoods
Trade
Facilitation
Rules of Origin
Trade in
Services
Investment
E-Commerce
Sanitary &
Phytosanitary
Intellectual
Property
Regulations
Competition
Government
Procurement
MSMEs
RCEP
Source(s): Asian Development Bank
The 15 economies within RCEP have an aggregate GDP of USD 38.8 Bn. and are inter-connected through multilateral trade agreements.
They represent 30% of the world’s population - comprising a global community of 2.3 Bn people
RCEP aims to streamline trade in goods and services and to reduce the associated bureaucracy by effectively establishing the largest
integrated trading bloc in the world
Harmonization of trading standards and tariffs, enhanced legal protection and non-discriminatory practices are key components
MSMEs are poised to gain expanded access to market such as China, Hong Kong and Taiwan in the form of cross-border commerce
Current levels of Foreign Direct Investment (FDI) into Indonesia will also be stimulated by participation in the RCEP agreement
12. 12 Wellington Capital
Advisory
12 Wellington Capital
Advisory
In Indonesia, total number of cases has taken 23.3 Mn people
out of 101.4 K cases.
The major issues threatening the global economic recovery in
2021 include: the pandemic, de-globalization, as well as US-
China dispute.
IMF is forecasting a strong 5.4% YoY recovery in 2021 with
Indonesia expected to enjoy a stimulus from global tailwinds.
Weighted by the large-scale social restrictions (PSBB), the
infection rate was slowed albeit not arrested. However, the
decrease in mobility shrank GDP to -5.3% YoY in 2Q 2020.
The economic situation improved when the restrictions were
relaxed and GDP growth in 3Q 2020 managed to rebound to
+5.0% QoQ, albeit still at -3.5%YoY.
The drop in GDP growth was mainly due to the reduction in
domestic consumption (which contributes c. 54% of total
GDP on average).
The government has allocated approximately IDR 695.2 Tn
(USD 46.6 Bn) to support economic recovery as a demand-
side stimulus.
Additionally, the gradual unwinding of social and mobility
restrictions in 2021 - coupled with the widespreaddistribution
of the COVID-19 vaccine - will restore annual economic
growth in the range from +4.4 to +6.1% YoY.
2,4% 1,9%
0,8%
4,9%
-4,9%
-8,0%
-10,2%
1,0%
-2,0% -1,5%
5,4%
4,5%
6,0%
8,2%
6,2%
5,1%
6,1%
4,8%
Global US EU China ASEAN 5 Indonesia
Since the initial occurrence in late-2019 the pandemic has
taken 1.88 Mn people out of 87.2 Mn cases.
Global GDP Growth Forecast
2020 Prev. 2020 Revised 2021F
-6%
-4%
-2%
0%
2%
4%
6%
Indonesia GDP YoY Growth
860,85
931,88
1.015,62
1.119,19
970,00
2015 2016 2017 2018 2019 2020F
The government was slow to act initially, but it has
implemented broadly-based actions to tackle both the infection
and the associated downside economic risks.
Indonesia GDP
(US$ Bn)
Q1 Q2 Q3 Q4
1.042,24
Source(s): IMF; BPS; The Coordinating Ministry for Economic Affairs of Indonesia; Trading Economics; WCA
Current Economic Snapshot
A sustainable recovery in economic growth recovery is forecast, driven primarily by a stimulus
to domestic demand
13. 13 Wellington Capital
Advisory
National Ratings
and Foreign Direct
Investment
In April 2020, S&P downgraded Indonesia’s rating to negative when the government was still in denial of the pandemic - with no clear
policies and fiscal remedies in place. Meanwhile, the USD/IDR rate stood at a 21-year high.
In August 2020, the ‘Big Three’ credit rating agencies - S&P, Moody's and Fitch - maintained Indonesia’s credit status at a positive rating in
contrast to the corresponding downgrading of >30 countries including UK, Italy, and Hong Kong.
Total FDI continued to grow by 5% in 3Q 2020 despite the pandemic, especially in key sectors: healthcare services, metals, and mining.
Several industries that were heavily hit by the pandemic saw a massive drop in FDI; these included commercial property, utilities, and
construction services
Source(s): The Investment Coordinating Board of Indonesia; The Ministry of Finance of Indonesia; WCA
Indonesia presents an
attractive market with
strong economic
recovery potential in
the near future and a
positive growth
outlook in the long
term.
50
60
70
80
90
100
110
120
Realized Direct Investments (IDR Tn)
Domestic Direct Investments Foreign Direct Investments
6.081
6.992 7.001 7.021
6.804 6.780
7.371
40
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
FDI YoY (US$ Mn)
Agency Rating Outlook
Fitch BBB Stable
Moody’s Baa2 Stable
S&P BBB Negative
14. 14 Wellington Capital
Advisory
Bank Indonesia (BI) has cut BI-
7DRRR by a total of 125 bps to
3.75% during 2020.
As pandemic hit the demand side
the hardest, fiscal policy is the key
to kick start an economicrecovery.
Additionally, it is unlikely for BI to
lower the rate as significantly asin
2020 as such a policy will lose
effectiveness over time.
Hence, we expect BI to perform
modest rate cut or to remain the
same. This will spur economic
growth as government spendingis
expected to be maintained at
2H 2020 levels.
Inflation,
BI Rate, and
Money Supply
Saving ratios are increasing as
people curb discretionaryspending
due to the level of near term
uncertainty
Food prices and transportation
costs exhibited a huge drop,with
food consumption contributing to
the overalllow inflation figure
Weexpect consumer price inflation
to remain low (~2%) in 2021, while
government spending continues to
drive demand sideactivity
0,0%
5,0%
10,0%
15,0%
20,0%
2,00%
4,00%
6,00%
8,00%
0,00%
2015-Jan 2015-Jul 2016-Jan 2016-Jul 2017-Jan 2017-Jul 2018-Jan 2018-Jul
Source(s): The Central Bank of Indonesia; The Ministry of Trade of Indonesia; WCA
2019-Jan 2019-Jul 2020-Jan 2020-Jul
Inflation vs. Money Supply (YoY growth)
Inflation (LHS) M1 (RHS) M2 (RHS)
In 1H21,
government spending is
expected to stimulate
economic recovery.
In 2H21,
low BI rates and
abundant money supply
in the banking system
are the keys to
sustainable growth.
0,00%
1,00%
2,00%
3,00%
4,00%
5,00%
6,00%
7,00%
8,00%
9,00%
2015-Jan 2015-Jul 2016-Jan 2016-Jul 2017-Jan 2017-Jul 2018-Jan 2018-Jul 2019-Jan 2019-Jul 2020-Jan 2020-Jul
Inflation has dropped to a20-year
low amidst the pandemic where
demand plunged to 1.4% in Sept
2020.
Inflation vs. BI Rate
Inflation BI Rate BI 7DRRR
15. 15 Wellington Capital
Advisory
-10.000
-5.000
0
5.000
10.000
15.000
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
Current Account(CA)
Balance of Payments
Financial Account (FA) Direct Investment(DI) Overall
Indonesia has recorded a negative current account (CA) deficit since 2011 and has remained in deficit until 3Q20.
The decline in CA deficit stemmed from a trade surplus, as import activity declined in response to weakening domestic demand.
Additionally, declining yield payments to foreign investors (due to faltering company performance) further narrowed the deficit.
The declining yield payment to foreign investors negatively affected the performance of the Direct Investment (DI) account in 3Q 2020 as
investors grew wary.
The result of the trade surplus led to a corresponding surplus on the balance of payments (BoP) in 2Q 2020 onwards. This is the largest
surplus under President Jokowi’s leadership (USD 9.2 Bn in 2Q 2020), which mainly comprised investment inflows attributable to the
issuance of global bonds by the Indonesian government.
We expect global trade to resume in 2021 as the economy starts to recover, This will lead to a net trade deficit, as import recovery should
exceed export growth. This is mainly due the demand for imported goods by domestic manufacturers.
The 2020 trade surplus has positioned the economy for a positive growth trajectory in 2021. Indonesia booked a trade surplus USD 21.74 Bn
in 2020, with total exports recorded at USD 163.31 billion and imports valued at USD 141.57 Bn.
The current
trade surplus will
spur an
economic
recovery in 2021
Source(s): Investing.com; The Ministry of Finance of Indonesia; WCA
Interest rates offered
by commercial banks
may still remain at the
currently higher level
This is driven by the
inherent risk
premium and the lag
in implementing rate
cuts
16. 16 Wellington Capital
Advisory
In March 2020, USD/IDR rate hit a record of 16,625 when the pandemic led to a global USD shortage. The global financial markets stabilized
later on as worldwide central banks introduced coordinated monetary easing policies.
BI managed to control the liquidity through 2 key actions:
1. USD 60 Bn repo facility from the Fed in early May 2020, which led to a sharp 22% USD/IDR appreciation to 13,870
2. The Ministry of Finance agreed to buy bonds directly from the government at a discounted interest rate (“Burden Sharing”) worth IDR 575 Tn (USD
39.7 Bn). This initially stimulated outflows of foreign capital, but eventually allowed the government to fund its fiscal policy that led to economic stability
Indonesia recorded an all-time high forex reserves in Aug-20 at USD 137 Bn, which was sufficient to support 9 months of imports and short-
term debts. Furthermore, IDR was not affectedby the weaker dollar index rate. The main reasons are as follows:
1. Slow foreign capital inflow to Indonesian equity and debt markets between 3Q20 and 4Q20
2. The abundant liquidity onshore as seen in the M1, M2, and third-party deposit growth
3. Increasing balance of payment due to trade surplus
4. Low BI rate that disincentivised people to save in IDR
5. Massive government bond issuance which led to increasing foreign exchange reserves
However, exchange rates may weaken as the economy picks up in 2021 - due to the recovery of imports and tighter liquidity at USD/IDR
rates in the range of 14,000 -15,000.
Ample Forex
Reserves from
Trade Surplus
and Strong
Liquidity Position
Source(s): Investing.com; The Central Bank of Indonesia; The Ministry of Finance of Indonesia; WCA
90
100
110
120
130
140
12.000
13.000
14.000
15.000
16.000
17.000
11.000 80
2015-Jan 2015-Jul 2016-Jan 2016-Jul 2017-Jan 2017-Jul 2018-Jan 2018-Jul 2019-Jan 2019-Jul 2020-Jan 2020-Jul
USD/IDR Rate vs. Forex Reserves
USD/IDR Rate (LHS) Foreign reserves in US$ Bn (RHS)
Indonesia has sufficient
Forex reserves - coupled
with a stable USD/IDR
exchange rate outlook -
to support the economic
recovery in 2021.
Strong commodity prices
towards the end of 2020
helped to further bolster
the Forex reserves.
17. 17 Wellington Capital
Advisory
In March 2020, the Financial
ServicesAuthority (OJK) allowed
ease of credit restructuring for
affected debtors. This led to a
c.20% of restructured loan ratio,
with 16.35% being pandemic-
related.
The result was lower than the
initial estimationof 30-40% to be
re-structured.
The provision of a stimulus for
affected debtors was set to be
effective for one year, beforebeing
extended for another year after
NPL rose to 3.0% level – similar to
the peak of 2016 credit cycle.
Credit
restructuring
policy and
abundant liquidity
Loan growth decelerated in 3Q20
mainly due to low utilization of
working capital loan by companies
and insignificant generation ofnew
consumer loans.
We expect the tmpact of monetary
expansion to occur in 1H2020,
stimulating consumer loandemand
which is rate sensitive.
Working capital loans will also
recover once companies have
regained confidence, which is
expected in late 2Q2021
Subdued loan growth also resulted
in abundant liquidity, which is
mostly enjoyed by the larger
banks.
Source(s): The Financial Services Authority of Indonesia (OJK); The Central Bank of Indonesia; The Ministry of Trade of Indonesia; WCA
2,89% 3,11% 3,14%
2,03%
13,35%
16,35%
0,00%
2,00%
4,00%
6,00%
8,00%
12,00%
10,00%
14,00%
16,00%
18,00%
2015 2016 2017 2018 2019 2020-Jan 2020-Feb 2020-Mar 2020-Apr 2020-May 2020-Jun 2020-Jul 2020-Aug 2020-Sep 2020-Oct
NPL Ratio vs. Pandemic-related Restructured Loan Ratio
(Commercial banks only)
NPL ratio Pandemic-related restructured loan ratio
Third-party Deposit vs. M2 vs. Loan Growth (YoY growth)
Third-party deposit M2 Loan growth
18,00%
16,00%
14,00%
12,00%
10,00%
8,00%
6,00%
4,00%
2,00%
0,00%
-2,00%
2015-Jan 2015-Jul 2016-Jan 2016-Jul 2017-Jan 2017-Jul 2018-Jan 2018-Jul 2019-Jan 2019-Jul 2020-Jan 2020-Jul
Excess liquidity
should act as a
catalyst to provide
cheaper funding costs
for banks
The cost of debt
obligations to
Indonesian companies
is also falling
accordingly
18. 18 Wellington Capital
Advisory
The pandemic has deterredoverall
economic activities and
established mobility patterns
Grocery store and pharmacyvisits
experienced a rebound as people
were able to fulfill dailyneeds.
However, the prevailingwork-from-
home (WFH) protocolsreduced
the usage of both public transport
and public recreationalfacilities.
The decline in GDP performance
in 2Q and 3Q 2020 plunged
Indonesia into the first economic
recession since the monetary crisis
of 1998 (‘Krismon’).
Indonesia
Mobility Index
and Workforce
Source(s): Google; BPS; WCA
-8%
-6%
-4%
-2%
0%
2%
4%
-50
-40
-30
-20
-10
0
10
2020-Mar 2020-Apr 2020-May 2020-Jun 2020-Jul 2020-Aug 2020-Sep 2020-Oct 2020-Nov 2020-Dec 2021-Jan
Indonesia Mobility Index vs. GDP YoY Growth
Indonesia mobility index (LHS) GDP YoY growth (RHS) GDP 4Q20 Forecast(RHS)
Workforce Distribution vs. YoY%
Agriculture
Wholesale and Retail Trade 19,23%, +0.46%
Manufacturing 13,61%, -1.30%
Accomodation and Services 6,65%, 0%
Construction 6,28%, -0.46%
Other Services 4,99%, +0.05%
Education 4,69%, -0.29%
Transporation and Storage 4,35%, -0.04%
Public Administration 3,56%, -0.28%
Healthcare and Social Work 1,56%, ++0.02%
Professional Services 1,40%, -0.11%
Financial Services 1,21%, -0.17%
Mining and Quarrying 1,05%, -0.06%
Information and… 0,73%, +0.02%
Water Supply and Waste 0,38%, -0.01%
Real Estate 0,31%, -0.01%
Electricity and Gas Supply 0,24%, -0.04%
29,76%, +2.23%
Unemployment
(in Mn people)
Unemployed Exiting the labor force
Temporarily not working Reduced working hours
2,56
0,76
1,77
24,03
Total population
(Workingage):
203.97 Mn people
Total population
(Workforce):
138.22 Mn people
Unemployment levels:
9.77 Mn people @ 7.07%
The pandemic brought
structural changes to the
employment types:
o Full-time : -10.3%
o Part-time : +14.9%
o Partially unemployed : +58.5%
The pandemic heavily
impacted underlying
GDP growth in
Indonesia
A partial rebound in
GDP performance is
expected in 1H 2021
The impact on reported
unemployment levels is
relatively low due to the
dominance of the
informal labor sector
20. 20 Wellington Capital
Advisory
Fiscal Policy:
National Economic
Recovery Program
2020
Healthcare
IDR 97.26 Tn
1. Pandemic-related expenses
2. Incentives to healthcareworkers
3. Death compensation
4. Funding for National HealthInsurance
5. COVID-19 task force
6. Tax incentives to theindustry
7. Funds for 2020 vaccinesand
healthcare treatment
8. Funds for 2021 vaccines
MSMEs
IDR 114.81 Tn
1. Interest subsidy
2. Financing fund
3. MSME credit guarantees
4. MSME working capital stop loss
5. Income tax breaks
6. Funding to MSME Incubatorfund
7. Working capital forMSMEs
State Capital Injection
IDR 62.22 Tn
1. Capital injection toSOEs
2. Loans to SOEs
3. Corporate credit guarantees
4. Corporate working capital stop loss
5. Funding for sovereign wealthfund
Tax incentives
IDR 120.61 Tn
1. Corporate income tax breaks
2. Import tax breaks
3. Individual tax breaks
4. Early VAT/PPN payments
5. Others
o Waive of electricity subscription fee
o Waive of importduty
o Tax shortfall
Local Government
IDR 65.97 Tn
1. Labor intensive program
2. Incentives to residentialhousing
3. Incentives to the tourismindustry
4. Fund for economicrecovery
5. Fund for boarding schoolsand
workforces
6. Investments in food estate and
environment
7. Fund for agricultureindustry
8. Fund for Ormas
Social Protection
IDR 234.3 Tn
1. Program Keluarga Harapan(PKH)
2. Groceries
3. Social assistance
4. Pre-employment card
5. Electricity bill breaks
6. Cash transfers to village fund
7. Salary subsidies viaThe Ministry of
Manpower
8. Salary subsidies to contractteachers
9. Mobile data subsidies
National Economic Recovery Program 2020 : IDR 695.2 Tn (USD 46.6 Bn)
Source(s): The Ministry of Finance of Indonesia; The Coordinating Ministry for Maritime and Investment Affairs of Indonesia; WCA
Progress: 65.3% Progress: 94.0% Progress: 93.0%
Progress: 46.5%
Progress: 100.0%
Progress: 96.7%
The public spending
program got off to a slow
start in 1H20. but the
pace has picked up
subsequently
A realization of 83% of
the total budget was
achieved by end-2020
The program has been
one of the key drivers of
GDP recovery in 2020
21. 21 Wellington Capital
Advisory
Monetary Policies Monetary Instruments
to withstand the Crisis
(Q1 2020)
Financial market
intervention
- Strategic intervention
in spot markets
- Trade DNDF
- Buying national
securities in
secondary markets
Lower minimum reserve
8% to 4% in
conventional banks
Lower minimum reserve
for conventional bank
that supports
export/import activities
Widening the coverage
for underlying
transaction from foreign
Global investors may
use domestic and global
custodian banks to
invest in Indonesia
Increase and maintain
market sentiment
Increase foreign
exchange liquidity and
maintain rupiah value
Maintain balance of trade
and compensate new
trade cost
Preventing capital
outflows and increasing
investor trust
Policies Implication to
Economy Conditions
(Q2 - Q4 2020)
Maintain inflation rate to
stay low (<3%) as respond
to decreasing purchasing
power in the market
Stabilized Rupiah value
after its highest point at
16,550 per USD on March
and maintain it at avg
14,000 per USD on Q2-Q4
Maintain export surplus from
May to November 2020
which indicates the
economy remains relatively
buoyant
Surplus capital flows in Q2
and Q3 after deficit in Q1
BI has managed the
crisis through the
implementation of
co-ordinated
monetary policies
and economic
diplomacy
Stabilizing inflation,
minimizing exchange
rate fluctuations, and
managing trade and
capital flows are the
primary elements
22. 22 Wellington Capital
Advisory
Fiscal Policy:
State Expenditure
Source(s): The Ministry of Finance of Indonesia; WCA
Central Government: IDR 1,954.5 Tn
State Budget 2021 : IDR 2,750 Tn
Ministry (52.8%) Non-Ministry (47.2%)
Local Government : IDR 795.5 Tn
Local Government (90.9%) Commuinity Fund(9.1%)
National Economic Recovery Program 2021 : IDR 356.5 Tn
Healthcare:
IDR 25.4 Tn
Social Protection:
IDR 110.2 Tn
Assistance to Ministries and Local Governments:
IDR 152. 4Tn
MSMEs:
IDR 48.8 Tn
State Capital Injection:
IDR 14.9 Tn
Tax Incentives:
IDR 20.4 Tn
Education Healthcare Social Protection Infrastructure Food Security Tourism ICT
The Government is
aiming for 4.5 to 5.5%
GDP growth in 2021
The state expenditure
policy centers on
7 key economic pillars
The National
Economic Recovery
Program for 2021 is
defined and underway
23. 23 Wellington Capital
Advisory
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23 Wellington Capital
Advisory
24. 24 Wellington Capital
Advisory
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This document is exclusively intended for selected client employees. Distribution, quotations and duplications –
even in the form of extracts – for third parties is only permitted upon prior written consent of WCA.
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