In a bid to revive the stuttering economy, Indonesian officials have planned to economic reopening in stages starting from June with some health protocols remaining in place.
As Covid-19 pandemic hits on every sector, it brought significant impact to financial account it swung to a deficit of USD2.93 bn due to the capital flight amid pandemic compared to surplus of USD9.86 bn in 1Q19.
Trade performance in 2018 and 2019 were way worse than Jan-Apr 2020 performance. This could be a signal of 2020 weaker global demand of Indonesia’s export, supported by the lower inflation of OECD member states with lower trend ahead.
Continuing the global economic downturn in 2019, Covid-19 hit us all where Indonesia’s economic growth plunged sharply in 1Q20.
Low inflation in Apr-20 is unusual since it historically used to be higher compared to March.
Our economist now expects a U-recovery for the Indonesia economy as our baseline scenario instead of V-recovery. With cases of Covid-19 are on the rise we believe it would peak in June and be brought under control by third quarter of this year.
Eventually, Indonesia has launched the foremost stimulus package on target compared to the previous stimulus packages.
Talking about basic monetary policy, it emphasizes more on demand side as it may affect the liquidity in society. Covid-19 does not only bring impact on demand side, but supply side as well.
Covid-19 is not only affected the supply side but also the demand side. In that case, a global economic contraction could become inevitable.
Monthly inflation in February is always lesser than January inflation in last 10 years.
Due to the COVID-19 outbreak, Bank Indonesia (BI) decided to cut its BI 7-Day Reverse Repo Rate (BI-7DRRR).
According to Indonesia Statistic Office (BPS), the country had always recorded trade deficit in every January within the last three years.
A better outcome in 4Q19 brings a better prospect for the Indonesia fundamental, supported with the highest foreign exchange (forex) reserves since Jan-18.
Dec-19 is the only month which successfully recorded positive growth on export within 2019 and the first increase in exports since Oct-18. The data completed the overall 2019 trade performance where the deficit was due to the deficit from oil and gas (OG) sector.
In January, our portfolio declined by only 1.4% outperforming the JCI which dropped by 5.7% (-4.2% in USD terms) weighed down by the unexpected shock from the coronavirus outbreak.
Economic slowdown is unavoidable since Indonesia’s economy is susceptible with the global economic downturn.
It is very uncommon for Indonesia to have a relatively low Inflation in the beginning of the year where the last January inflation that under 3% in yearly basis was in 2019.
Inflation in Dec-19 has made a new significant record as it was the lowest inflation since year 2000 in yearly basis.
The reason of the unchanged rate is because BI expects better macroeconomic indicators coming in 4Q19 ahead such as slight global economic growth recovery, stronger consumption approaching the year end, appreciation trend of the currency and the relatively low inflation.
The increase in imports of consumer goods surged approaching year-end holidays whereas exports shrunk for 13rd straight month since Nov-18.
Some rosy aspects that may help the economy to get through, they are monetary sector, political stability, fiscal sector, and trade performance.
The core inflation came lower compared to the headline inflation as the inflation in Nov-19 was built from the food baskets that were more likely related to temporary factors that may reverse themselves later.
Indonesia stock market is more likely to rise in December according to analysis of one decade of data after Indonesian equities were under severe selling pressure in Nov-19 because of worries over slowdown in the economy.
Bank Indonesia (BI) paused its BI 7-Day Reverse Repo Rate cut cycle after 4 consecutive months of rate cuts totaling 100 bps between July–October.
The JCI posted an underperformed the region because of risks arising from escalation of global trade war while domestic macro environment is not supportive of equity market due mainly to slowdown in economic growth and widening current account deficit (CAD).