Crédito y Caución (Atradius) | In his second term, President Joko Widodo has continued to tackle economic reforms, such as infrastructure improvement to support the manufacturing sector and digital economy, reforms of the labour market and foreign investment rules. However, some key elements of his policy agenda remain contested due to vested interests. While Widodo has broad support in the House of Representatives, the wide range of political groups in…
Trinh Nguyen (Natixis) | With the Fed persisting on raising rates in the next several months after its jumbo 75bps rate hike and Asian inflation accelerating, Asian central banks that choose to hold rates or trail the Fed substantially are de-prioritizing the inflation fight by letting their FX weakens versus the USD, absorbing more inflationary pressures on the import side. With Southeast Asia demand normalizing, supply shocks lingering, inflationary pressures…
Crédito y Caución (Atradius) | In 2020 Indonesia’s GDP shrank 2.1%, a rather small contraction compared to many other countries. This is partly due to the fact that the economy is rather closed (exports account for just about 20% of GDP, which makes Indonesia less susceptible to global trade downturns than some other Southeast Asian countries). Imports (down 14%) decreased much more sharply than exports (down 6%), while the economic performance was also sustained by higher government consumption. In 2021 the economy is forecast to rebound by 4.7%, contingent on the gradual easing of mobility restrictions and an effective vaccine rollout. While the recent spike of coronavirus cases and reinstated restrictions had a negative impact on the recovery in early 2021, the prioritization of vaccinating people of working age first could accelerate the rebound of economic activity over the course of the year.
Indonesia is the fourth most populous country in the world with 273-million people, which is expected to expand by 21% by the year 2050 to 331-million Indonesians. The challenge of how to provide jobs for the increase of 28 million working age people by 2050 on top of an already excess capacity 185 million people in 2020 is a pressing concern… After being informed by the World Bank that few firms consider Indonesia in the diversification push out of China, President Jokowi asked his ministers to come up with a reform agenda. Covid-19 forced the government to focus on short-term challenges in H1 2020, but on 5 October 2020, the government passed the Omnibus Bill that overhauled Indonesia’s investment and labor laws.
Trihn D. Nguyen (Natixis) | Currently, 32% of government bonds are held by foreign investors and the price of that debt is 5.4% for the 2-yr and 7.2% for the 10-year. Even after Bank Indonesia (BI) embarked on rate cuts of 75bps in 2020 to 4.25% and outright purchases of government bonds, the government is asking the central bank to take one step further and buy 60% financing needs in 2020 at zero interest.
MADRID | By Francisco López | Ben Bernanke’s warning about a posible withdrawal of Fed monetary stimulus a year ago prompted a notable rise of premium risks and general drops in global stock markets, but deeper in emerging economies. And it indeed hit the so-called BIITS (Brazil, Indonesia, India, Turkey and South Africa). Today, stocks have recovered and stand at levels prior to the taper shock, although some collateral damages are there.