This document summarizes Indonesia's economic outlook and investment environment. It finds that Indonesia has experienced relatively stable GDP growth in recent years around 5%, but growth is poised to accelerate as infrastructure projects take effect. Exports have outgrown imports on the back of a stable currency exchange rate. Monetary policy and good bank liquidity have supported stable growth and low inflation. Consumer confidence and sovereign debt risk indicators are positive. The stock market is considered fairly valued and has potential for further valuation expansion given supportive economic fundamentals.

1. INDONESIA ECONOMIC AND
INVESTMENT OUTLOOK
08 FEBRUARY 2018
Dr. Adrian Teja
Adrian.teja@pmbs.ac.id

2. INDONESIA GDP GROWTH RELATIVELY
STABLE … READY TO ACCELERATE
…WAITING FOR INFRASTRUCTURE BENEFITS
TO KICK IN
5.065.015.014.945.03
5.21
4.94
5.15
4.784.744.83
5.054.934.94
5.12
5.585.525.595.54
5.875.94
6.216.11
5.946.01
6.27
6.486.49
6.18
6.76
6.08
0
1
2
3
4
5
6
7
8
7/6/2009 11/18/2010 4/1/2012 8/14/2013 12/27/2014 5/10/2016 9/22/2017 2/4/2019
Indonesia GDP Growth

3. JOKOWI ADMINISTRATION ABLE TO IMPROVE
INDONESIA PRODUCTS COMPETITIVENESS IN
INTERNATIONAL MARKET
0
2000
4000
6000
8000
10000
12000
14000
16000
-40
-20
0
20
40
60
80
7/6/2009 11/18/2010 4/1/2012 8/14/2013 12/27/2014 5/10/2016 9/22/2017 2/4/2019
Indonesia Export Grow Higher than Import on the back of Relatively Stable USD IDR Exchange
Rate
Export Import USD IDR

4. STABLE GDP GROWTH SUPPORTED BY
EXPANSIONARY MONETARY POLICY, GOOD
BANK LIQUIDITY, RELATIVELY STABLE
RUPIAH AND LOW INFLATION RATE
3.25
4.25
4.93574
13389
0
2000
4000
6000
8000
10000
12000
14000
16000
0
1
2
3
4
5
6
7
8
9
7/6/2009 11/18/2010 4/1/2012 8/14/2013 12/27/2014 5/10/2016 9/22/2017 2/4/2019
CPI 7 Day Repo Rate BI Rate JIBOR USDIDR

5. POSITIVE OUTLOOK ON FUTURE INFLATION
(10 YEAR GOVERNMENT BOND YIELD) AND
INDONESIA SOVEREIGN DEBT RISK (CDS)
6.319
9.691
85.247
276.303
0
50
100
150
200
250
300
350
0
2
4
6
8
10
12
7/6/2009 11/18/2010 4/1/2012 8/14/2013 12/27/2014 5/10/2016 9/22/2017 2/4/2019
10 Y Govt Bond Yield CDS

6. ECONOMIC GROWTH STABILITY HAVE
POSITIVE EFFECT TO INDONESIA CONSUMER
CONFIDENCE INDEX
126.1
97.5
0
20
40
60
80
100
120
140
7/6/2009 11/18/2010 4/1/2012 8/14/2013 12/27/2014 5/10/2016 9/22/2017 2/4/2019
Consumer Confidence Index

7. HIGH CONSUMER CONFIDENCE CONTRIBUTE
TO PE RATIO EXPANSION AND PRICE TO
EBITDA EXPANSION
24.54
9.98
6,355.65
-
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
10/10/2006 2/22/2008 7/6/2009 11/18/2010 4/1/2012 8/14/2013 12/27/2014 5/10/2016 9/22/2017 2/4/2019
Price Earnings Ratio
(P/E)
(JCI Index)
Price to EBITDA JCI
High PE Ratio Rationale: Companies invest heavily in fixed
assets anticipating stronger economic growth, high
depreciation cost reduce companies earnings.
Price to EBITDA relatively stable and have more room to
grow.

8. CONCLUSIONS
Indonesia Economy Growth May Accelerate from High Consumer
Confidence and Bank Indonesia maintain expansionary monetary policy,
supported by low inflation outlook.
Indonesia Stock Market Valuation fairly valued (Price to EBITDA) compared
to their historical value, and there are good fundamental to support the
Jakarta Composite Index valuation and Price to EBITDA may rise further.