Indonesia & The Crisis

Alanda Kariza, Indonesia INDONESIA & THE CRISIS

We had this crisis Mid of 1997 • A trade surplus of more than $900 million • Forex reserves of more than $20 billion • 1 USD = Rp2380 • GNP $205 billion Mid of 1998 • Lost 13.5% of our 1997 GDP • 1 USD = Rp14150 • GNP = $34 billion More? • GNP & exchange rate roughly dropped by 83% • Real GDP growth = 0.3% • Inflation = 77%

We managed to get up Jakarta Stock Exchange was the best performing market in Asia up by 42% (2004). Economic growth reached 5.6% (2005). Now, the average number is around 5-6%. Real per capita income has reached fiscal year 1996/1997 levels. We held up relatively well although the fuel price was increased.

What about now? Based on the 2008 Monetary Policy Report of Indonesia, these are the impacts of the crisis: 1. The decline in commodity prices  Pressing us to export  Declining balance of payment  declining performance in exchange rate 2. Shock & fluctuation in money, forex and obligation markets 3. Pressure on the Balance of Payment of Indonesia 4. Increased perception of the risk of emerging markets On the other hand… 1. Encouragement on the decrease of inflation pressure occurs 2. Inflation trends will continue to decline, to reach approx. 5-7%

What about now? 1. In 2008, economic condition was still positive: - economic growth was still above 6% - financial sector is still showing strong performance (stable exchange rate, increasing JCI and decreasing SUN) 2. Balance of Payment of Indonesia recorded a deficit in the same year. 3. The balance sheet transactions and financial capital still recorded a surplus. 4. The govt sets the economic growth rate of 6.2%. The World Bank forecasted that it will slow down to 4.4%. 5. Balance Running Transactions in 2009 estimated that the deficit will be around 0.11% of GDP due to the weakened performance of export. 6. National banks still have the resistance that is good enough. Capital adequacy ratio is still high, although slightly decreased to 14.3%. NPL was even tended to increase to 5%.

What about our govt? They have done several things… 1. Bank of Indonesia decreased BI Rate to 8.75%. 2. Monetary policy in 2008 was aimed to reduce inflation pressures driven by high aggregate demand and the impact of fuel price increase that was pushing inflation to reach 12.1%. 3. Bank of Indonesia will take a monetary policy conducive to domestic demand to remain committed to maintain economic stability.

We are holding up well, but we are not immune We need to help each other. Remember: zero enemy - a million friends for Indonesia. President Yudhoyono

What do we suggest? These are the things that President Yudhoyono, on behalf of Indonesia, suggested to sustain the global financial condition on the last G20 Summit: 1. Act fast in a concerted and coordinated manner 2. Focus on the priorities to restore confidence and stability of the global financial system 3. Short-term actions = simple, workable 4. Mid-term actions = revitalize economic growth, protect the most vulnerable 5. Longer-term actions = the measures to solve the root cause of the problem 6. Our action must be pursued simultaneously at the national, regional and global level

What do we suggest? He also said: Learning from the crisis a decade ago where we lacked confidence, trust and coordination, we have also made sure that our response, both fiscal and monetary, brings together all the stake-holders, including the Central Bank and business. Through this summit and the next ones, we must be able to undertake coordinated and concerted efforts. Our action must be credible, furnished with strong will to implement it. Coordination of fiscal expansion and keeping markets open become a key priority. Indonesia, with our limited resources, will do all we can to ensure that our achievements to reduce poverty, unemployment and debt to GDP ratio. None of our development agenda and achievements can be sustained without regional and global cooperation.

And I, recommend… 1. Continue and improve fiscal budget stimulus to the economy. What the govt plans to do in 2009: a) maintain/increase public purchasing power b) prevent worker layoffs and improve business resilience (Rp36932 billion allocated) c) mitigate the impact of job losses and reduce unemployment (Rp8376 billion allocated) 2. Strengthen the financial and banking system. 3. Acquire additional fund resources in case of need.

But it’s not enough! This is a global crisis. We have to make a global act. Remember: a million friends! 1. Last year, President Yudhoyono suggested the G20 Leaders to form: GLOBAL EXPENDITURE SUPPORT FUND to support budget financing & regular development assistance for most vulnerable countries and the ones that have a strong track record in adopting fiscal sustainability. We should realize it. 2. Stimulate the economic growth in our respective countries. 3. Avoid protectionism. Globalization has brought many benefits to both advanced and developing countries. Commitment to open and fair international trade and finance should be the core for resolving the crisis.

Alanda Kariza, Global Changemaker, Indonesia http://alandakariza.com THANK YOU!

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Indonesia & The Crisis

by Alanda Kariza on May 20, 2009

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Indonesia & The Crisis — Presentation Transcript