Dec 16, 2016 10:59:11

Indonesia economy: Interest rate & trade balance
Economy: Indonesia
Keep an eye on global risks; Non-oil gas supports

BI keeps 4.75% rate; Eying global stability & administered prices: On 15 December, BI maintained its rate at 4.75%, FASBI at 4.00% and lending facility at 5.50%. BI is currently eyeing global policy risks from the US Fed rate hike, which can lift the global borrowing cost. For the domestic side, BI is keeping an eye on possible impacts from the administered price hikes in 2017, while still expecting 2017 inflation to be in line with the 4+/-1% y-y guidance. BI feels that the current policy accommodation stances at both the monetary and macro prudential levels are likely to support the domestic economy going forward. Furthermore, BI is acknowledging the prospect of improving oil prices after OPEC decided to cut the production quota while Indonesia exports are likely to improve in 4Q16 with the higher commodity prices. BI maintains its 2017 growth forecast at 5.0-5.4%, supported by resilient domestic consumption. On the balance of payment, BI is eyeing a CAD of below 2% on the positive non-oil and gas trade balance.

BI seeing peak NPL cycle; Well-maintained liquidity: On the financial side, BI recorded a 22.9% October CAR and 20.2% October liquidity ratio. Despite the monetary transmission with lower deposit and loan rates, October loan growth was still mild at 7.5% y-y (September: 6.5%). On the other hand, October third-party funds were higher at 6.5% y-y (September: 3.2%). In 2017, BI expects loan growth to reach 10-12% y-y and third-party funds to improve at 9-11% y-y.

Exports: 21.3% y-y (Cons: +11.6%) on non-oil and gas exports jump
§  O&G exports -26.3% y-y; Non O&G exports +28.8% y-y: November exports data indicated strong growth in the non O&G sector at +28.8% y-y (October: 8.8% y-y) and declining gas exports at -26.3% y-y. On a m-m basis, the increase in exports came from from animal/ vegetable oil at USD2.2bn, +20.4% m-m, and mineral fuels at USD1.6bn, +10.0% m-m. As for O&G, gas procurement jumped 17% y-y, to USD10.3mn.

§  Export volumes at +11.1% y-y; aggregate prices 9.2% y-y: November export volumes grew at 11.1% y-y (October: +8.9% y-y), supported by non O&G volume export growth of 14.8% y-y (October: 9.8% y-y). The export price index was already higher by 9.2% y-y (October: -3.5%) on higher oil and gas prices.

Imports: 9.9% y-y (Cons: +0.1%)
§  O&G imports 7.3% y-y; Non O&G imports 10.3% y-y: November O&G imports went up 7.3% y-y (October: -12.4% y-y), while non O&G imports saw more of an increase at 10.3% y-y (October: +6.6% y-y). On a m-m basis, the highest increases came from electrical machine and equipment at USD1.5bn, +15.23% m-m, and mechanical machine and equipment at +8.3% m-m.

§  Import volumes at +2.7% y-y; import prices index at 7.0% y-y: November import volumes grew 2.7% y-y (October: +5.7% y-y), while the import price index was at 7.0% y-y (October: -2.3%), supported by non O&G import prices at 10.8% y-y (October: -3.8%). Based on categories, the highest import increases were from raw materials at 12.2% y-y, followed by consumer goods at 6.5% y-y.