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Outlook 2020
M. Chatib Basri
Creco Research
University of Indonesia
2
Number of risks
Trade War
Brexit
Uncertain
economic
and
geopolitical
situation
5
Trade Channel
6
Impact on ASEAN
Impact on ASEAN: Scoreboard
Countries
15.6%
700,000
600,000
Total Trade: U SD m n
500,000
7.8%
6.5%
400,000
6.4%
4.2%
300,000
3.4%
2.5%
2.5%
2.2%
2.1%
2.1%
2.1%
2.1%
2.0%
1.9%
200,000
100,000
0
Vietnam
Australia
Malaysia
India
Russia
Hong Kong
Mexico
Germany
Brazil
UK
United States
Japan
Netherlands
Thailand
South Korea
7
Mineral Commodity Prices Data as of
July 2019
25.000 2.500
20.000 1.7972.000
1.413
15.000 1.500
13.546
10.000 1.000
7.208
5.941
5.000 500
0 0
2014 2015 2016 2017 2018 2019
GDP growth
%, yoy
9
8
7
6,71
6 6,20
5,45
5 5,05
4,93
4
3
2,31
2 2,10
1 1,20
0 0,10
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19
Source: CEIC
(2019)
10
The end is near?
Financial Channel
policy expectations; 4) VIX sudden high; 5) US dollar
5.0% appreciation and idiosyncratic events in the emerging
economies, and 6) changes in the Fomc (Federal Open
Market Committee) communication towards a more
2.5% dovish direction in 2019. The monthly variations in 11
We are subsidized by QE
the BCB risk appetite index are highly correlated with
0.0%
the monthly portfolio
w flo for a selection of emerging
countries89 (Chart 2.5.6).
Chile
Indonesia
Colombia
Mexico
Peru
Bulgaria
Turkey
India
Poland
Russia
South Africa
Brazil
Philippines
Thailand
But for how long?
The twelve-month accumulated portfolio w flo for a
2014 2015 2016 2017 2018* selection of countries were negative of US$17.7 billions
Source: IMF * 12-month accum. until 2018 Q3 in January 2019, showing
w a flo reversal, in line with the
Statistical annex recent behavior of the risk appetite index (Chart 2.5.7).
Chart 2.5.5
Chart 2.5.5 –– Risk
Risk appetite index-
index –
In fact, the risk appetite index began a more persistent
emerging economies
Emerging path of decline from February 2018 to December 2018,
Standard
Standard
deviationdeviation
of the
of the mean
showing partial recovery only in January 2019.w
mean
0.00.0
Global
Global upswing
upswing Expectationsrevision
revision- -Fed
Fed
Expectations
Several global and idiosyncratic factors contributed to the
-0.5
-0.5
reduction of risk appetite for emerging economies’ assets
USUS
elections
elections
Vix
Vix US dollar aprecition vs
US dollar aprecition vs
EMEs
throughout 2018, including a contagion
c effet between
EMEs Fed
Fed
dovish
dovish
emerging economies. Increased trade tensions, US
-1.0
-1.0
monetary policy tightening, electoral cycles in Mexico,
Turkey and Brazil and the exchange rate depreciation in
-1.5
-1.5 Argentina are examples of factors that contributed for the
worsening in the sentiment towards emerging markets. In
-2.0 time, US economic policy, including non-conventional
-2.0
Sept Nov Jan Mar Jun Aug Oct Jan Mar May Aug Oct Dez Feb
Sep Nov2017
2016 Jan Mar Jun Aug Oct 2018 Jan Mar May Aug Oct Dec 2019
Feb monetary policies adopted in the post-crisis period, has
2016 2017 2018 2019
Statistical annex been a major external element on capital flos 90, 91.
Chart 2.5.6 – Portfolio flow and risk appetite index In order to understand the ceffet s of risk appetite andw
US$ bi s.d. United States monetary conditions on the portfolio
30 0.6 flo for the emerging economies and for Brazil along
87/ South Africa, Brazil, India, Indonesia, Mexico, Russia and Turkey.
15 0.3 88/ A positive variation in the index means an increase in the investors’ risk
appetite for assets of emerging economies.
89/ For this higher frequency analysis, we used data of portfolio
w flos from
0 0 Bloomberg database for a more restricted set of emerging economies that
contain more up-to-date data. This allowed us to produce estimates until
December 2018. We selected countries whose Bloomberg monthly data
-15 -0.3 were consistent with quarterly data reported by the IMF. The countries
selected are South Africa, Brazil, Bulgaria, Korea, India, Indonesia,
Poland, Czech Republic and Turkey.
-30 -0.6 90/ Koepke, 2015, “What Drives Capital Flows to Emerging Markets? A
Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Survey of the Empirical Literature”.
2011 2012 2013 2014 2015 2016 2017 2018 2019
91/ João Barata R. B. Barroso, Luiz A. Pereira da Silva e Adriana Soares Sales,
Portfolio flow for EM (monthly)
“Quantitative Easing and Related Capital Flows into Brazil: measuring
Risk appetite index, monthly var. (Right)
Source: IMF and BCB
its ceffet s and transmission channels through a rigorous counterfactual
Statistical annex evaluation”, BCB Working Paper Series no. 313.
-1
-2
Sign of recession?
-3
-4
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
Treasury Spread: 10 yr bond rate-3 month bill rate Probability of US Recession Predicted by Treasury Spread*
Monthly Average (Percent) Twelve Months Ahead (month averages)
5 1
0 0.4
0.3
-1
0.2
-2
0.1
-3 0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
-4
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
*Parameters estimated using data from January 1959 to December 2009, recession probabilities predicted using data through Jul 2019.
The parameter estimates are =-0.5333, =-0.6330.
Updated 02-Aug-2019
Newof US
Probability York Fed,
Recession Predicted by Treasury Spread*
Twelve Months Ahead (month averages)
1 2019
0.9 Jul 2020 = 31.4788%
0.8
0.7
Yet US economy
remains strong
Decomposition of Real GDP Personal Saving Rate
Percent of disposable personal income
10-Year Annual Growth Rates 10 10
5.0 5.0
4.5 4.5 9 9
Jun
8.1%
4.0 GDP 4.0
8 8
3.5 3.5
7 7
3.0 3.0
6 6
2.5 Productivity
2.5
2.0 2.0 5 5
1.5 1.5
4 4
1.0 1.0
Employment
3 3
0.5 0.5
0.0 0.0 2 2
1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2007 2009 2011 2013 2015 2017 2019
Note: Productivity is calculated as real GDP per employee, from the Household Survey. Note: Income has been adjusted to account for temporary events
Source: Bureau of Economic Analysis and Bureau of Labor Statistics via Haver Analytics 6 Source: Bureau of Economic Analysis via Haver Analytics 10
9.0 9.0
650 650
600 600
7.0 7.0
575 575
6.0 6.0
550 550
475 475
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 3.0 3.0
2007 2009 2011 2013 2015 2017 2019 2021 2023
Notes: FOMC projection is the median, range, and central tendency for the Q4 levels, from the June 2019 meeting.
Source: Z.1 Financial Accounts of the United States via Haver Analytics 11
Red dots indicate median projections
33
Source: Bureau of Labor Statistics & Board of Governors via Haver Analytics
14
Sign of stress (McKinsey,
2019)
15
Stressed debt
16
Is Indonesia immune?
FINANCIAL CHANNEL: IMPACT ON INDONESIAN 17
ECONOMY
IDR/USD
Portfolio investment
(+/-)
Economic Growth
Currency War
Fed’s policy
CA Bank
Deficit Indonesia Monetary policy Investments
rate
Feb-16
Feb-17
Feb-18
Feb-19
Aug-15
Nov-15
May-16
Aug-16
Nov-16
May-17
Aug-17
Nov-17
May-18
Aug-18
Nov-18
May-19
Aug-19
General Transfer 706 465 757 488 7.2 5.0
Village Funds 60 36 70 42 16.7 16.4
C. Overall Balance -326 -151 -296 -199 -9.2 32.2
Overall Balance (% of GDP) -2.2 -1.02 -1.8 -1.24 -16.4
19
Government Spending and GDP Growth Discretionary Spending and GDP Growth
300.0
250.0
200.0
150.0
100.0
50.0
0.0
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Retail Sales Index Motor vehicle sales
(index 2010 = 100) (seasonally-adjusted sales growth yoy,
500
Stationary and Communication percent)
450
40
400
350
30 Motor Vehicle Sales
300 20
Retail Sales Index 10
250 Food, Drinks, and Tobacco
200 -
150 (10)
Household Appliances
(20)
100 Motorcycle sales
50 Cultural and Recreation (30)
0 (40)
Nov-14
Jan-15
Nov-15
Jan-16
Nov-16
Jan-17
Nov-17
Jan-18
Nov-18
Jan-19
May-14
May-15
May-16
May-17
May-18
May-19
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Jul-14
Mar-15
Jul-15
Mar-16
Jul-16
Mar-17
Jul-17
Mar-18
Jul-18
Mar-19
Jul-19
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
May-15
May-16
May-17
May-18
May-19
Sep-14
Nov-14
Mar-15
Sep-15
Nov-15
Mar-16
Sep-16
Nov-16
Mar-17
Sep-17
Nov-17
Mar-18
Sep-18
Nov-18
Mar-19
Sep-19
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Consumer Confidence Index Poverty and Unemployment Rate
(Index, Weighted average of 18 cities) %
Gini Ratio
150 20% Poverty Rate (Mar) 0,45
18% (Mar) 0,382
Consumer Expectation Index 0,4
140
16% 0,35
130 Consumer Confidence Index
14%
0,3
120 12%
9,41% 0,25
10%
110 0,2
8%
Unemployment Rate 5,01% 0,15
100 Current Economic Condition Index 6% (Feb)
4% 0,1
90
2% 0,05
80
0% 0
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Nov-14
May-15
Nov-15
May-16
Nov-16
May-17
Nov-17
May-18
Nov-18
May-19
Sep-14
Jan-15
Mar-15
Sep-15
Jan-16
Mar-16
Sep-16
Jan-17
Mar-17
Sep-17
Jan-18
Mar-18
Sep-18
Jan-19
Mar-19
Sep-19
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: BI, BPS, CEIC (2019)
CPO price and motorcycle correlation
1.400
1.200
Palm oil price ($/MT)
1.000
800
600
400
200
0
0 100.000 200.000 300.000 400.000 500.000 600.000 700.000 800.000
Motorcycle sales (Unit)
105
100
95
90
85
01/2014
03/2014
05/2014
07/2014
09/2014
11/2014
01/2015
03/2015
05/2015
07/2015
09/2015
11/2015
01/2016
03/2016
05/2016
07/2016
09/2016
11/2016
01/2017
03/2017
05/2017
07/2017
09/2017
11/2017
01/2018
03/2018
05/2018
07/2018
09/2018
11/2018
01/2019
03/2019
05/2019
07/2019
09/2019
Labour Wages: F armer: per Day: Real: 2012 Base
Labour Wages: Construction Work er: per Day: Real: 2012 Base
Labour Wages: Barbershop Woman: per Person: Real: 2012 Base
Labour Wages: Housekeeper: per Month: Real: 2012 Base
23
Political economy
Indonesia: 25
Unemployment
Youth UN+under
23
34
22
32
21
20 30
19 28
18 26
2014 2018 2014 2018
Youth Unemployment by
Education 70 65
Presidential Exit Vote based on Education
80 60 58
54
51
49
50
60 42
46
Percentage
40
35
40
30
20 20
0 10
Source: BPS
(2019)
Provincial Economic Growth 2014-18 and the
2019 Election Results
Jokowi-Ma'ruf win (%) - Quick-count Poltrack Economic growth (% of the median) and Election results
NTT
BALI
JATENG PAPUA
DIY
KALTENG
KALTIM SULUT
BABEL
KALBAR JATIM
SUMUT
KEPRI BENGKULU
PAPBAR
LAMPUNG SULBAR
SULTENG
DKI
MALUKU GORONTALO SULTRA
MALUT
KALSEL
RIAU JABAR SULSEL
SUMSEL BANTEN
JAMBI NTB
ACEH
SUMBAR
5 7 9 11 13 15 17
Sources: Yusuf, A. A.
Annualized percentage change in the median expenditure per person 2014-2018
(2019)
27
Thank you