1 / 22

Economic and Social Update April 2008

Indonesia's 2007 GDP growth driven by domestic factors like investment and consumption, with a shift towards China and India in exports. Challenges include rising oil prices putting pressure on fiscal policy. Despite strengths, weak spots like high food prices and government borrowing needs persist.

mbeecham
Download Presentation

Economic and Social Update April 2008

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Economic and Social UpdateApril 2008 William E. Wallace, Lead Economist World Bank, Indonesia April 1, 2008

  2. Indonesia had sustained GDP growth in 2007

  3. Largely on domestic drivers

  4. With capital goods and construction up & consumption rebounding on falling interest rates Investment (percentage change) Consumption (percentage change)

  5. Which, in turn, supported a turn around in employment growth(and reduced unemployment)

  6. Trends continuedand services & Utilities continued strong while tradables were mixed

  7. Domestic economy is drawing in imports;while higher commodity prices supported exports

  8. But Indonesian exports are becoming less dependent on the US (and more on China and India)

  9. And commodities drove Indonesia’s stock market to one of the best performances in the world Equity Price Indices 1/2/2006=100

  10. But challenges are mounting as oil pricesput pressure on fiscal policy

  11. And energy subsides risk crowding out other spending(and distorting incentives)

  12. Gasoline price (US cents/liter) UnitedKingdom 150 KoreaRep Japan 125 100 Singapore 75 UnitedStates China 50 Malaysia UnitedArabEmirates Indonesia 25 Yemen SaudiArabia Venezuela Iran 0 100 1,000 10,000 100,000 GDP per capita (log scale) And Indonesia’s Fuel Prices are Very Low(even adjusted for income)

  13. While other commodity pricesfeed into domestic food costs(with rice an exception) CPI inflation Year-on-year percentage change Wholesale & international rice prices

  14. And borrowing spreads are rising, but remain low in historical perspective Source: Bloomberg

  15. And International conditions continue to deteriorate Industrial production growth, year on year (%) OECD leading indicator OECD IP Source: World Bank, DECPG.

  16. The global outlook for 2008

  17. But developing and high-income country growth has been diverging Developing countries High-income countries Source: World Bank, DECPG.

  18. With developing countries providing more momentum especially to trade growth Contribution to global nominal import growth in US$, year on year (%-points) Developing countries United States Source: World Bank, DECPG.

  19. But Indonesian growth to slow moderately

  20. Overview Indonesia • 2007 was a good year • Solid output growth • Accelerating investment and • Better employment outcomes. • And there are strengths going forward • Domestic momentum from credit expansion and growing infrastructure investment. • Relatively smaller trade shares (i.e. more focus on the domestic economy) with trade concentrated in commodities where prices are expected to continue relatively strong • Reduced government debt exposure (<35% of GDP) • Little exposure in the Banking system to the sub-prime debt • But weaknesses as well • Higher food prices feeding through into higher inflation and social insecurity • A high subsidy burden on the budget from controlled domestic fuel prices • High government borrowing needs

  21. Thank You!

  22. While growth and investment have fed into higher imports and commodity prices supported exports

More Related