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).
Global economic downturn is inevitable because global economic events unfold in unexpected ways in 2019. There are three major events triggering world’s uncertainty: unfavorable major events in several countries, US – China trade war, and wobbling Fed Fund Rate (FFR) movement.
Indonesia export and import grew positively MoM. The surplus came from the exports that rose, while the imports grew slower due to the weakening global trade instead of stronger export substantially.
There were some adjustments on numbers of the accounts on 2Q19, such as on financial account surplus remained significant and CAD was lower than our expectation at 2.9% of GDP. The global slow down due to trade war and softening China’s expansion made us maintain our CAD target of 3.0% of GDP.
Flipped back to a trade surplus in August. Trade surplus may lead BI to become more confident to continue loosening monetary policy coupled with stronger Rupiah in the last couple of days.
Low inflation opened room for BI cutting rate for first time since 2017 to support growth.
Based on the usage, raw materials / intermediary goods became the main laggards as its import slumped.
Trade (5.26% YoY) and information and communications sectors (9.03% YoY) lifted out the growth.
Late harvest in several places as mentioned by coordinating minister of economic, mainly due to distributional problems. It made supply of shallot, chili, vegetables and some other food products were limited, hence boost the price.
Government consumption growth should also be higher at around 7.5% YoY due to election preparation. However, downside risk in investment growth.