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BAPPENAS                                               Workshop to LaunchUNDP’s Regional Synthesis Report on Global Financ...
dadang‐solihin.blogspot.com   2
Overview of Presentation                                                        BAPPENAS OVERVIEW OF MACROECONOMIC IMPACT...
Macroeconomic Overview                                                                             BAPPENAS When the inte...
Macroeconomic Overview                                                                                             BAPPENA...
Macroeconomic Impact of Crisis                                                                           BAPPENAS Decline...
Macroeconomic Impact                                                                   BAPPENAS As you can see from the g...
(y-o-y, %)                                                      Ja                                                        ...
A Reflection of Impact of                  1997/98 Asian Financial Crisis                         BAPPENAS Before going i...
A Reflection of Impact of                     1997/98 Asian Financial Crisis                                              ...
Poverty and Vulnerability                                                                    BAPPENAS While poverty rates...
Poverty and Vulnerability                                                                      BAPPENAS  Large Number of I...
Percentage of Poor People                                                    BAPPENAS      There are wide disparities in ...
Current Crisis – Impact on Poor                  Preliminary Findings                         BAPPENAS Preliminary findin...
Government Response                                                            BAPPENASFiscal Stimulus Package To strengt...
Government Response –                              Fiscal Stimulus                                     BAPPENASStimulus Pa...
Establishing a Crisis Monitoring System                                                                BAPPENAS Establish...
Beyond the Crisis                                                           BAPPENAS Impact of global crisis less severe ...
Monitoring Vulnerabilities                                                                 BAPPENAS The system seeks to t...
Monitoring Vulnerabilities                                                                               BAPPENAS         ...
BAPPENAS                      Thank You       for further information on Indonesia:        www.vulnerabilitywatch.web.id/v...
Tentang Narasumber     dadang‐solihin.blogspot.com   22
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The Impact of Global Financial Crisis on Indonesia

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Workshop to Launch UNDP’s Regional Synthesis Report on Global Financial Crisis and Asia-Pacific Region ISEAS-Singapore, 30 November 2009

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Transcript of "The Impact of Global Financial Crisis on Indonesia"

  1. 1. BAPPENAS Workshop to LaunchUNDP’s Regional Synthesis Report on Global Financial Crisis and Asia‐ Pacific Region ISEAS‐Singapore, 30 November 2009 
  2. 2. dadang‐solihin.blogspot.com 2
  3. 3. Overview of Presentation BAPPENAS OVERVIEW OF MACROECONOMIC IMPACT SOCIAL IMPACT OF CRISIS RESPONDING TO THE CRISIS • Fiscal Stimulus • Social Protection WAY FORWARD • Tracking Vulnerabilities and Early Warning System dadang‐solihin.blogspot.com 3
  4. 4. Macroeconomic Overview BAPPENAS When the international crisis hit the world, Indonesia’s overall economic  situation was promising. Prior to the crisis, the country witnessed strong growth, peaking in mid  2008 with 6.4% growth. The export sector boomed due to the world commodity boom. Budget deficits remained low and external debt ratios declined from  almost 90% in 2000 to about 33% at the end of 2008. Since the last crisis, Indonesia has also introduced several social protection  mechanisms.  This all assisted the country in dealing with the crisis and in mitigating its  impact on the economy as the next few slide will show. dadang‐solihin.blogspot.com 4
  5. 5. Macroeconomic Overview BAPPENAS Pre‐crisis: strong economic growth and performance GDP Growth (% ) 8 6.3 6.1 5.4 5.7 5.5 4.7 4.7 5 4.4 3.8 3 0.8(y-o-y, %) -2 97 98 99 00 01 02 03 04 05 06 07 08 19 19 19 20 20 20 20 20 20 20 20 20 -7 -12 -13.1 -17 dadang‐solihin.blogspot.com 5
  6. 6. Macroeconomic Impact of Crisis              BAPPENAS Decline from Q4 2008 onwards but still positive with growth (y‐ o‐y) 2009: 4.0% in QII, 4.2% in QIII Modest impact on remittances In Sept. 2008 Stock Exchange Index dropped but since QI foreign  capital inflows resumed  Since beginning 2009 most economic indicators   strengthened  again • Strong domestic (private and public) consumption          main  driver of growth • Consumer confidence high • Recovery of industrial activity dadang‐solihin.blogspot.com 6
  7. 7. Macroeconomic Impact BAPPENAS As you can see from the graph, prior to the crisis Indonesia’s export performance has been strong due to the world commodity boom. Export growth declined from QIII onwards, followed by falling imports in QI 2009. However, export growth resumed already in May 2009. dadang‐solihin.blogspot.com 7
  8. 8. (y-o-y, %) Ja n, -60 -40 -20 0 20 40 60 80 100 120 Fe 200 b, 8 M 200 ar , 8 Ap 200 r, 8 M 20 0 ay 8 , J u 200 n, 8 2 J u 00 l, 8 Au 20 g, 08 Se 200 p, 8 O 200 ct ,2 8 N 00 ov 8 , D 20 ec 08 Export Grow th , J a 200 n, 8dadang‐solihin.blogspot.com Fe 200 b, 9 M 200 ar ,2 9 Ap 00 r, 9 M 20 0 Import Grow th ay 9 Export and Import Growth, 2008-2009 (y-o-y, %) , J u 200 Macroeconomic Impact n, 9 2 J u 009 l, Au 20 g, 09 Se 20 Main Transmission Channel: Export and Imports p t 09 ,2 00 98 BAPPENAS
  9. 9. A Reflection of Impact of  1997/98 Asian Financial Crisis BAPPENAS Before going into detail about the social impact of the current crisis, it is useful to go back to the impact of the 1997/1998 crisis. In the 1997/98 crisis Indonesia’s economy contracted by nearly 14%. The impact of the crisis was compounded by the El Nino phenomenon leading to drought and a shortfall in rice production, while the instable political climate in the wake of the fall of the Suharto regime complicated the formulation and implementation of mitigation policies. As you can see from the graph, poverty increased rapidly, reaching 33.2% in late 1998 and then gradually falling again. Common coping strategies included cutting down on food consumption, moving into informality and agriculture, reducing spending on health care and education. As a result school attendance rates dropped, particularly at the secondary level and many people stopped attending health care centres. dadang‐solihin.blogspot.com 9
  10. 10. A Reflection of Impact of  1997/98 Asian Financial Crisis BAPPENAS Poverty Rates between Feb. 1996 and Feb. 200235 33.230 28.0 27.125 24.1 22.9 22.320 18.1 15.3 15.4 17.4 18.7 15.5 18.715 14.2 10.3 13.110 5 0 dadang‐solihin.blogspot.com 10
  11. 11. Poverty and Vulnerability BAPPENAS While poverty rates since then have been falling to pre-crisis levels, there is a very high clustering around the poverty line – as you can see from the graph. More than half of the population in Indonesia lives below US$2/day. These households are facing a very high probability of becoming tomorrow’s poor during an economic crisis or as a result of an exogenous shock. dadang‐solihin.blogspot.com 11
  12. 12. Poverty and Vulnerability BAPPENAS Large Number of Indonesians Vulnerable to Poverty 59.3% below US$2/dayUS$2/day (PPP) US$1/day (PPP) 10.4% below US$1/day dadang‐solihin.blogspot.com 12
  13. 13. Percentage of Poor People BAPPENAS  There are wide disparities in Indonesia with poverty rates particularly alarming in the East of the country and Aceh.  However, in terms of absolute numbers, most of the poor are concentrated in Java and Sumatra. dadang‐solihin.blogspot.com 13
  14. 14. Current Crisis – Impact on Poor Preliminary Findings BAPPENAS Preliminary findings show that overall social impact of crisis  limited  Workers in export‐oriented manufacturing   most affected  but overall employment in manufacturing grew Unemployment rates continue to decline Food insecurity levels, however, remain high and make  many susceptible to increases in food prices dadang‐solihin.blogspot.com 14
  15. 15. Government Response BAPPENASFiscal Stimulus Package To strengthen and maintain stability of domestic financial  sector To stabilize and stimulate domestic economy by fiscal  expansion in 2009Social Protection Mechanisms Rice for the poor (RASKIN) Community Empowerment Programme (PNPM) Cash transfers (BLT, etc.) dadang‐solihin.blogspot.com 15
  16. 16. Government Response – Fiscal Stimulus BAPPENASStimulus Package 2009 (In IDR Trillion) Description IDR Trillion 1 Tax Savings 43 Reductions in Income Tax Rates: 32 Lower Corporate Tax Rate 18.5 Lower Personal Income Tax rate 13.5 Income tax-free band raised to IDR 15.8 million 11 2 Tax /Import Duty Subsidies for Business/Targeted Households 13.3 VAT on oil/gas exploration, cooking oil 3.5 Import duties on raw materials and capital goods 2.5 Payroll tax 6.5 Geothermal tax 0.8 3 Pro-business/Jobs subsidies + budget expenditures 15 Reduced price for automotive diesel 2.8 Discounted electricity billing rates for industrial users 1.4 Additional infrastructure expenditures + subsidies + government 12.2 equity injection Upscaling of Community Block Grants (PNPM) 0.6Total Stimulus 73.3 dadang‐solihin.blogspot.com 16 Source: Coordinating Ministry of Economic Affairs, 2008
  17. 17. Establishing a Crisis Monitoring System BAPPENAS Establishment of crisis monitoring and response system • To understand the impact of crisis on vulnerable  • To undertake appropriate, targeted and effective policy  response Ongoing data collection activities include • Crisis impact household survey (World Bank/BPS) • Pilot food security and nutrition monitoring survey  (WFP/UNICEF/ILO) • Qualitative studies • Regional assessments dadang‐solihin.blogspot.com 17
  18. 18. Beyond the Crisis BAPPENAS Impact of global crisis less severe than anticipated Current economic crisis intersects with food price crisis,  follows fuel price crisis Different crises show that policy makers lack data to design  and target response in timely manner Setting up a crisis impact and vulnerability monitoring and  response system Preparing for future crises/ exogenous shocks ‐ early warning  system  Building a sustainable system  Linking monitoring with response dadang‐solihin.blogspot.com 18
  19. 19. Monitoring Vulnerabilities BAPPENAS The system seeks to track vulnerabilities across multiple dimensions of distress and will focus on vulnerabilities caused or exacerbated by external shocks. A simple, manageable indicator framework is being developed with both, lower frequency, ‘contextual’ indicators drawn from existing data bases and higher frequency, ‘pulse’ indicators drawn from ongoing qualitative and quantitative assessments. As you may know, on the global level the UN, on request of the G20, is setting up a Global Impact and Vulnerability System (GIVAS) which envisions to include similar data and analysis on the global level. For those interested, we have provided the web addresses of our evolving website as well as the one of GIVAS. dadang‐solihin.blogspot.com 19
  20. 20. Monitoring Vulnerabilities BAPPENAS MDGs/Human Development Indicators (DevInfo, BPS, Disaster UNDP) Risk Vulnerability Monitoring Response/ Indicators Social Protection (DESINVENTAR) Schemes VULNERABILITY  PNPM, etc. INDICATORSMacro Indicators (early  warning/ transmission  Crisis Impact channels) IndicatorsBank of Indonesia, IMF, BPS,  Food Insecurity MoF (BPS/WB survey; UNICEF/WFP/ILO; JICA)) dadang‐solihin.blogspot.com 20
  21. 21. BAPPENAS Thank You for further information on Indonesia: www.vulnerabilitywatch.web.id/v1/for further information on Global Impact and  Vulnerability Alert System (GIVAS): www.voicesofthevulnerable.net dadang‐solihin.blogspot.com 21
  22. 22. Tentang Narasumber dadang‐solihin.blogspot.com 22
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