Pt Bank Central Asia Tbk · IDX:BBCA
Pt Bank Central Asia Tbk — Investor Presentation (December 2024)
87 slides from Pt Bank Central Asia Tbk's investor presentation, Dec 31, 2024
Slide 1: Indonesian Economic Outlook 2025: Glass half-empty, or glass half-full?
Indonesian Economic Outlook 2025 Glass half-empty, or glass half-full? Barra Kukuh Mamia Samuel Theophilus Artha Head of Macroeconomic Research Economist/Analyst 31 December 2024 FOR INFORMATION ONLY NOT INVESTMENT ADVICE SEE FULL DISCLAIMERS
Slide 2: Executive Summary
Executive Summary • The root of Indonesia’s current economic paradoxes lies in a structural change in its manufacturing industry. Capital-intensive, commodity-related industries—driven by “downstreaming” program—have thrived, while labor-intensive, final goods industries have come under pressure. •
Slide 3: Introduction: Glass half-empty, or glass half-full?
0 INTRODUCTION Glass half-empty, or glass half-full? • At first glance, 2024 seemed to be an ordinary (even quite good) puzzle—whether the Indonesian economy is a “glass half-empty” year for the Indonesian economy. The GDP grew close to its long- or “half-full”—is key to our outlook of the economy i
Slide 4: Chapter overview: glass half-empty vs half-full
I Ii Iii / IV THE SUPPLY SIDE THE DEMAND SIDE FISCAL MONETARY POLICY POLICY GLASS HALF-EMPTY: GLASS HALF-EMPTY: GLASS HALF-EMPTY: Decline in labor-intensive, Decline in households’ Gov’t financing needs may final goods industries purchasing power exacerbate liquidity issues v FINAL NOTE GLASS HALF-F
Slide 5: Swimming downstream and upstream
I THE SUPPLY SIDE Swimming downstream and upstream • If infrastructure had been the main focus during the first term of • The upshot, then, is that Indonesia’s role in the global value chains former President Jokowi, “downstreaming”—i.e. the push to build may have shifted upstream rather than downst
Slide 6: Putting on an ill-fitting suit
I THE SUPPLY SIDE Putting on an ill-fitting suit • The shift from labor-intensive sectors to largely capital-intensive linked corporates [20], which could signal greater FDI. Amid the basic industries is also rather ill-suited to Indonesia, which has a twin pressures of US tariffs and deflation in C
Slide 7: Same façade, different interior
Same façade, different interior While GDP growth remains steady at around 5%, there has been a notable shift in its sectoral composition relative to pre-pandemic times 8 % YoY • Mining & downstream industries used to add about 0.2% to annual 6 growth prior to the pandemic; 4.95 now it contributes up
Slide 8: Metalhead with feet of clay
Metalhead with feet of clay The government’s “downstreaming” program has been a massive success, but it is offset by a decline in several other industries 1.0 % YoY 1.5 % YoY 1.0 0.5 0.45 0.5 0.28 0.36 0.01 0.05 0.10 0.16 0.0 0.10 0.0 -0.5 -0.5 -1.0 ― Mining & downstream industries, -1.5 -1.0 ― Non-
Slide 9: Back to basic
Back to basic Basic, upstream industries have been thriving, but—other than food and pharma*—industries making final goods are mostly struggling index (2015 = 100) index (2015 = 100) 200 200 Industrial production#: Industrial production#: ― Food ― Textiles ― Metals ― Machinery ― Footwear & leather ―
Slide 10: The Orient Express
The Orient Express Amid US-China fallout, Vietnam and Mexico are playing both sides—whereas Indonesian exports are becoming more orientated towards China Exports to United States Exports to China 350 index (2016 = 100) 400 index (2016 = 100) 350 347.8 300 271.9 300 250 250 249.8 200 192.6 182.9 208.
Slide 11: Turn off, relax, and float downstream?
Turn off, relax, and float downstream? Indonesia is moving down the metal supply chain, but losing its edge in multiple final goods industries is a substantial blow nonetheless RAW UPSTREAM DOWNSTREAM WHOLESALE RETAIL MATERIALS MANUFACTURE MANUFACTURE Example #1: • Design • Marketing • Ferronickel •
Slide 12: Feast and famine
Feast and famine Businesses spent aggressively coming out of the pandemic, but the CAPEX cycle has since begun to wane 100% YoY growth zooming in 80% YoY growth 80% 60% 60% 40% 40% 20% 21.0 20% 7.9 0% 1.4 0% -1.7 -5.7 -20% -20.2 -20% -19.7 -40% -40% Non-commodities*: ― Consumer staples -60% CAPE
Slide 13: Cavalry to the rescue
Cavalry to the rescue Revenue in most sectors is still slowing down, but recovery among commodity exporters could support domestic liquidity 50% YoY growth 50% YoY growth zooming in 40% 40% 30% 30% 20% 20% 10% 3.3 10% 9.3 0.2 0% -1.3 -4.8 0% 0.4 -10% -5.2 Non-commodities: ― Consumer staples -10%
Slide 14: Refreshed and replenished?
Refreshed and replenished? Private corporations’ net liquidity declined as commodity prices fell in 2023, although there has been some recovery in 2024 Net bank balance: Private corporates* ― Net bank balance (NBB), YoY change as reflected 800 IDR Tn, YoY change in the balance sheets of BI & commerc
Slide 15: Exogenous growth theory
Exogenous growth theory For private corporations, liquidity is largely a function of commodity prices and government dissaving 700 700 IDR Tn, YoY change index (2015 = 100) • The peak in government spending 600 600 (dissaving) in early 2024 led to 18% YoY growth in deposits by 500 500 private corpor
Slide 16: Greasing the wheels
Greasing the wheels High palm oil prices and low crude oil prices accounted for most of the terms of trade improvement in 2024 200 % YoY • The 2022 commodity boom was exceptional as it involved all three 150 of our main export commodities: coal, CPO, and nickel 100 • Being a net importer, Indonesia
Slide 17: Heat wave
Heat wave Prices of tropical products are (mostly) rising, while temperate crops have stabilized after the initial shock of the Russia-Ukraine War 450 price index (2020 = 100) 450 price index (2020 = 100) 433.9 400 Agri products, mainly tropical: 400 ― Rice ― Palm oil (CPO) Agri products, mainly tem
Slide 18: Hold the line
Hold the line Indonesian miners have been forced to curb output in a bid to stabilize prices amid weak global demand 250% YoY growth 200% YoY growth 200% Exports of ferronickel Exports of coal 150% (HS 72026000) 150% (HS 27011900) 100% 100% 50% 50% 1.5 0% 0.8 -0.7 6.4 0% -7.3 -50% -12.8 -100% -50% J
Slide 19: Cooling down
Cooling down Debt financing peaked in 2022-23, while new equity issuance has fallen far from its heyday in 2021 IDR Tn 400 IDR Tn 500 Capital market financing, 350 400 new issuance*: 300 ◼ Equities – IPO 300 ◼ Equities – Rights issue 143.2 250 ◼ Corporate bonds 200 (including sukuk) 200 100 197.8 4.
Slide 20: Low ebb, red tide
Low ebb, red tide Local companies are becoming reluctant to borrow from abroad, but China-linked companies are bucking the trend 60% YoY growth 20% YoY growth External debt, by borrower: External debt, by creditor country: 50% ― SOEs ― China (inc. HK) ― Others ― Domestic private companies 15% 40% ―
Slide 21: Informality trap all over again
II THE DEMAND SIDE Informality trap all over again • The decline in Indonesia’s labor-intensive industries appears to be • Big-ticket items like housing, vehicles, and appliances have slowed a slow-moving process—a few bankruptcies here, a thousand laid considerably [26], with an associated rise in
Slide 22: Flying on one engine
II THE DEMAND SIDE Flying on one engine • As household consumption—which still makes up 54% of the GDP • Food inflation, a persistent issue since 2022 [37], is another area —grew shakier while investment and exports ebbed along with where the government has made substantial headway, thanks to commod
Slide 23: Look under the hood
Look under the hood Despite record-low unemployment, higher levels of underemployment and informality show deeper underlying issues in the labor market 16% 60% GFC commodity taper Jokowinomics COVID-19 • In general, underemployment rate boom tantrum boom pandemic is more volatile—and more highly 14%
Slide 24: Downwardly mobile
Almost 1% of the workforce have lost formal jobs in manufacturing, forcing Downwardly mobile them to shift into small/family businesses in (e-)commerce and food service * all numbers are pct of population aged 15+ H2-19 to H1-23 Formal workers 0.05% -0.69% -0.08% -0.07% -0.22% 0.01% -0.03% -0.05% -0
Slide 25: Feels over reals
Feels over reals Consumer sentiment ebbs albeit still on a high baseline—in line with presidential approval—but is now decoupled from actual retail sales dispersion index# 40 % YoY, dispersion index* 20 • Retail sales growth broadly 10 mirrors BCA’s big data index for 30 consumer spending (see [35])
Slide 26: Most wounds heal, but some fester
Most wounds heal, but some fester Despite some output loss, consumption has returned to its pre-pandemic growth rate—except for clothing and housing/appliances 5% gap vs. pre-pandemic trend • Household consumption is ~10% lower than it should be, had there 0% not been a pandemic • Declining income m
Slide 27: Traveling without moving (countries)
Traveling without moving (countries) International tourism has not fully recovered, but this has been offset by increased travel within Indonesia 200 index (2019 = 100) 120 index (2019 = 100) 180 Outbound travel from Indonesia: Tourist visit in Indonesia: ― Departing from Jakarta ― Domestic tourists
Slide 28: Risk(y) appetite
Risk(y) appetite Consumer loan delinquency skyrocketed in the past year, which persists especially for smaller ticket-size loans Loans: Landed house Loans: Motor vehicles Loans: HH appliances 40% YoY growth 80% YoY growth 70% YoY growth 60% Growth rate: 30% 60% ― Loans 50% ― Non-performing loans 20%
Slide 29: Missing middle #1: Housing
Missing middle #1: Housing Sales of mid-sized homes have struggled since the pandemic, while larger homes have seen stronger demand but also slower price increase 60 % YoY 3.5 % YoY 50 3.0 40 30 2.5 20 2.0 2.0 10 6.8 1.5 0 1.3 -10 -8.8 -10.1 1.0 1.0 -20 Sales of residential units: 0.5 Price of new r
Slide 30: Missing middle #2: Vehicles
Missing middle #2: Vehicles Bifurcated market for motor vehicles may be another symptom of growing income disparity index (2019 = 100) index (2019 = 100) 120 450 • Low-end and mid-range cars 418.5 110 (LCGC and most 4x2) that 400 traditionally accounts for the 100 100.1 350 bulk of car sales are dec
Slide 31: Dissaving and disparity
Dissaving and disparity Households appear to no longer be a net saver—but the increase in SBN holdings suggests that wealthier households merely shift their savings Net bank balance: Households including gov’t bonds (SBN) 400 400 IDR Tn, YoY change zooming in IDR Tn, YoY change 300 300 200 200 +
Slide 32: Double trouble
Double trouble SMEs’ cashflow deteriorates, just as growth in SME loans moderates following policy-driven salvos in 2022-23 Net bank balance: SMEs SME loans 150 250 IDR Tn, YoY change zooming in IDR Tn, YoY change RPIM 100 200 50 150 0 -60.0 -50 100 -100 +63.8 +71.8 +25.9 -123.8 50 +6.2 -150 +14
Slide 33: Relying on largesse
Relying on largesse GDP growth in 2024 depended substantially on government support—both for consumption and investment 8 % YoY Elections • Gov’t spending contributed to growth not just directly as during 6 the Elections (Q1-24) … 4.95 0.46 4 0.27 • … but also indirectly by adding to 1.36 basic cons
Slide 34: New normal
New normal Construction activities improved in recent quarters, but are still considerably lower than their pre-pandemic baselines 60 % YoY 30 index (2019 = 100) Cement sales 25 Value of finished construction 50 (smoothed, 7M-CMA*) 20 40 efforts to expedite “legacy projects” (IKN, PSN) 15 30 10 8.6
Slide 35: Out of steam?
Out of steam? The economy lost momentum after the Elections, although there has been some limited improvement at the back end of 2024 40 % YoY, working days adjusted (WDA) post-COVID Election • Both of our big data indices (on hangover effect the business and consumer sides) 30 generally align with
Slide 36: Defensive rebound
Defensive rebound Imports of raw materials are rebounding nicely, but things are otherwise pointing towards softer domestic demand 70% YoY, working days adjusted (WDA), YoY, working days 3M-CMA adjusted (WDA) • Import growth broadly mirrors 60% 40% BCA’s big data indices on business revenue (see [35
Slide 37: Disinflation is good, actually
Disinflation is good, actually Slowing inflation raises concern about weakening demand, but most of the recent disinflation has come from the supply-side (foodstuffs) 7 % YoY 7 % YoY ― CPI inflation, by type: ◼ Core ― CPI inflation, by sector: ◼ Foodstuffs 6 ◼ Volatile foodstuffs 6 ◼ Housing & utili
Slide 38: Turning the tap back on
Turning the tap back on Increased rice imports have been crucial in taming the rampant food inflation of 2023-24 USD Mn • Private rice imports are controlled 1000 by a quota system, but the government can also import to refill its strategic reserves 800 • Drastic increase in imports (2018, 120.5 202
Slide 39: Need for speed
Need for speed Money supply grows at similar rates as during the late Jokowinomics boom (2018-19), but it currently circulates at much slower rates 50 % YoY index (2017 = 100) 150 • With this chart, we break down nominal GDP growth—according 40 140 to the quantity theory of money —into three drivers
Slide 40: Not so hard-core
Not so hard-core Core inflation has risen of late due to gold price, but two key determinants—imported inflation and loan growth—hint at future moderation 25 % YoY % YoY 6 20 % YoY % YoY 2.0 Core inflation 20 15 Core inflation, detrended* 1.5 5 15 10 1.0 4 10 5 0.5 0.2 5 3 0 0.0 -1.8 0 2.3 -5 -0
Slide 41: Fiscal policy: Slouching towards utopia
III Fiscal policy Slouching towards utopia • Pres. Prabowo’s rise to power was premised on the continuation • For all the potential bureaucratic and economic hurdles, however, of Pres. Jokowi’s “Golden Indonesia” vision, which aimed to make the main bottleneck in the short-term lies in financing. Th
Slide 42: Fiscal policy: Financing beyond frontiers
III Fiscal policy Financing beyond frontiers • In recent months, the government has floated several proposals • The more feasible path for Pres. Prabowo is to draw liquidity from to bridge this financing gap [47], only one of which looks certain to abroad, in the form of FDI. His diplomatic tour, wh
Slide 43: Gotta catch 'em all
Gotta catch ‘em all Pres. Prabowo’s welfare programs grab most of the headlines, but (commodity-oriented) supply-side programs require even greater financing DEMAND-SIDE (WELFARE) PROGRAMS • 2025 Budget = IDR 71 Tn (early trial/pilot) SCHOOL MEAL PROGRAM • Ideal budget = IDR 400 Tn (82.9 Mn children
Slide 44: Hurdle race
Hurdle race The new administration has to contend with several obstacles to ensure the impact and sustainability of its programs more pressing more systemic concerns in concerns in the short-run the long-run FINANCING BUREAUCRATIC ECONOMIC - Lack of fiscal space (3% deficit limit) - Unclear/overlapp
Slide 45: Hungry for land
Hungry for land Agricultural output has been kneecapped by conversion of farmlands to development—which is to be remedied by the “food estate” program Production Area harvested Productivity per unit area 250 index (2010 = 100) 200 index (2010 = 100) 140 index (2010 = 100) 180 184.2 134.5 213.9 130 1
Slide 46: Colossal task
Colossal task Raising Papua’s agricultural productivity will be a challenge—and may require large-scale transmigration from Java 6 rice productivity per area, 2023 5.68 5.11 (ton/ha) 4.82 4.87 5 4.52 13.1% 4 3.56 3.57 22.0% 3 4.6% 0.5% 2 4.1% 1 Rice production, 0 share of total, Maluku Kalimantan Pa
Slide 47: Knife to a gunfight?
Knife to a gunfight? In general, the proposals to raise public sector liquidity are rather inadequate to address the financing gap VAT to 12% (partly offset by stimulus*) BP Danantara Liquidity raised: Around 0.3-0.4% of GDP (recurrent) What it is: State-owned investment firm (à la Temasek), compris
Slide 48: Nice run while it lasted
Nice run while it lasted Government revenue greatly depends on commodity prices, and so the “pleasant surprises” of 2021-23 are not exactly replicable Tax revenue Non-tax revenue (commodity & others) 120 ratio to gov’t target 180 ratio to gov’t target 176.4 110.2 107.1 160 100 Realization, by month:
Slide 49: Stay positive
Stay positive If global rates remain elevated, the government will have to maintain a primary surplus (or close to it) to stay within the fiscal deficit limit 1.0% ratio to GDP deficit limit was suspended 40% YoY growth during the pandemic ― Nominal GDP growth 0.0% -0.26 ― Interest payment growth, d
Slide 50: Smaller headroom
Smaller headroom Amid growing interest burden and “other spending”, the portion of State Budget allocated towards capital expenditure shrinks 100% 8.3% 9.1% 8.3% 7.7% 7.4% 8.6% 7.8% 5.3% • The sharp rise in “other spending” 11.9% 10.4% 9.7% 9.9% 90% anticipates new programs by the Prabowo administra
Slide 51: Digging deep
Digging deep The public sector’s liquidity needs in 2024 has necessitated dissaving by the government, while SOEs require bridging loans Net bank balance: Government* Net bank balance: SOEs 600 250 IDR Tn, YoY change IDR Tn, YoY change 400 200 200 150 0 100 -102.8 +67.2 -200 -170.0 50 -400 0 +16.4 +
Slide 52: Savings for a rainy day
Savings for a rainy day Excess financing during the pandemic has been a valuable buffer amid challenging conditions in 2023-24 drawdown of 1400 IDR Tn accumulation of excess savings • Gov’t spending tends to be excess savings concentrated at year-ends, 1200 EOY* EOY* EOY* EOY* EOY* EOY* EOY* EOY* le
Slide 53: Sheer volume
Sheer volume Maturing bonds and growing budget deficit is likely to push gross issuance of sovereign bonds (SBN) to its highest level since 2020 IDR Tn • Issuance in 2024 would have been significantly 1,500 1,467.2 higher, were it not for the strategy to take up 1,371.3 more multilateral loans—and a
Slide 54: The pegs are larger than the pole
The pegs are larger than the pole* Nearly all sectors of the economy are now net borrowers rather than net savers, making external financing an urgent necessity 1,000 IDR Tn, YoY change • Indonesia suffers from periodic 800 bouts of financing deficit, but Sources of funds this has become a near-cons
Slide 55: Flanking maneuvers
Flanking maneuvers Faced with a lack of fiscal space, the Jokowi admin resorted to tax amnesty and SOE borrowing—a tactic to be repeated by the Prabowo admin? 400 IDR Tn, YoY change tax amnesty “peak Jokowinomics” • The 1st tax amnesty (2017) increased 300 private deposits by about IDR 150 Tn 200 •
Slide 56: Monetary policy: Painkiller but no panacea
IV MONETARY policy Painkiller but no panacea • The net liquidity (NBB) deficit, as described in Ch. 3, has obvious • Additionally, SRBI tends to shift banks’ asset allocation away from implications on monetary policy, since it connects to the country’s loans and even from SBN. Given still-muted fore
Slide 57: Monetary policy: Bend but not break
IV MONETARY policy Bend but not break • Concerns about the Rupiah also informed BI’s decision to keep its • But two things complicate the current situation. Firstly, as we saw policy rate at 6.00%—25 bps hike in April cancelled by 25 bps cut in Ch. 2, household and SME incomes are declining. This me
Slide 58: Bend but not break (cont'd)
IV MONETARY policy Bend but not break (cont’d) • The most obvious point, perhaps, is Pres. Trump’s tariffs on China. • Furthermore, we might be entering (however briefly) a period of Past experience (2018) suggests that this would be accompanied strong USD but weak commodity prices [73], which is no
Slide 59: Cash is king
Cash is king Despite a narrower CA deficit, the relative decline in financial inflows has put domestic liquidity under a sustained pressure 3 % of GDP despite large CA deficit, effect on NBB was neutralized by a surplus in the financial account • NBB is a partial measure of the savings-investment (S
Slide 60: Under pressure
Under pressure Persistent NBB deficit predicts Rupiah depreciation against the USD—albeit partially remedied by SRBI issuance 3 % of GDP % YoY 15 • NBB is a better predictor* of the exchange rate, as compared to 2 10 either CA balance or BoP 1 5 • Without foreign SRBI purchase, we reckon that the Ru
Slide 61: Shiny new tool
Shiny new tool SRBI managed to attract substantial inflows to Indonesia, despite still-lukewarm appetite for bonds and equities 15 USD Bn % YoY 10 • SRBI was first issued in Sep-23, but issuance ramped up in 2024 as 5 the Rupiah came under pressure 10 9.72 • Before 2020, the USD/IDR moved 0 in line
Slide 62: Buffer and fitter?
Buffer and fitter? BI’s FX reserves are near all-time highs, largely thanks to new instruments (SRBI and SVBI/SUVBI) 160 USD Bn • FX placements at BI consists of swaps, certificate (SBBI), term 150 150.2 deposits, and special deposits for FX receipts (TD-DHE) 15.4 140 • SRBI, SVBI/SUVBI, and FX plac
Slide 63: Relief valve
Relief valve Money market tightness persists throughout 2024, but higher SRBI yields—and the ensuing foreign inflows—provide periodic relief 1.75 % % 2.50 • Indonia (O/N money market rate) is Lebaran Lebaran Lebaran Lebaran Lebaran Lebaran Lebaran usually 50-65 bps above the “floor” 1.50 2.03 of the
Slide 64: Summertime blues?
Summertime blues? A wave of SRBI and FX bond maturity in mid-2025 calls for deft navigation by the monetary and fiscal authorities 200 IDR Tn 3.0 USD Bn SRBI, monthly: SBN (foreign currency): 180 ◼ Issuance (to date) ◼ Maturity ◼ Issuance (to date) 2.5 ◼ Maturity 160 large issuance in mid-24 maturin
Slide 65: Stepping up to the plate
Stepping up to the plate Amid limited inflows and a shift in banks’ asset allocation, SBN has mainly been absorbed by BI, households, and NBFIs IDR Tn • Net SBN selloff by banks has been driven by strong loan growth as well as a shift to SRBI • Outright purchase increases BI’s gross ownership of SBN
Slide 66: Slippery slope
Slippery slope The use of SRBI was necessitated by the US’ inverted yield curve, but bear steepening complicates BI’s exit strategy 8 % • SRBI effectively “inverted” our yield SRBI 7.30 curve to mirror the US 6.99 7.02 7 • Given the potential re-steepening of 6.85 the US yield curve under Trump— 6.4
Slide 67: Go with the flow
Go with the flow BI’s press statements appear to take a partial cue from the market’s perception of the Fed’s future policy 5.0 % BI mentioned “stability” 15 x ratio 0.7 • BI’s communiqués generally eschews and “growth” 25 x, 11:18 giving a ratio of 0.6 15:25 explicit forward guidance regarding 0.6
Slide 68: Forced savings
Forced savings As fiscal policy becomes more expansionary, BI resorts to high real rates to stabilize private liquidity and avoid Rupiah depreciation 5 % of GDP 4Q lag private % 5 • An increase in real policy rate 4.45 4 excess public spending NBB up induces the private sector to 4 was mainly for su
Slide 69: Impulse and response… or lack thereof
Impulse and response… or lack thereof BI’s latest rate hike cycle has bolstered corporate savings, but declining savings by households and especially SMEs remain an intractable problem Private corporations, Households, SMEs, YoY change in deposits YoY change in deposits* YoY change in deposits 3.5 %
Slide 70: Diverging appetite
Diverging appetite High real rates dampens household and SME loans, but corporate borrowing remains robust—a sign of strength among capital-intensive industries Private corporations, Households, SMEs, YoY change in loans & bonds YoY change in loans YoY change in loans 2.5 % of GDP 1.2 % of GDP 1.2 %
Slide 71: Deceptively strong
Deceptively strong The Rupiah has lost ground against a raging USD, but it remains overvalued compared to most of its Asian peers 120 index (2019 = 100) Real effective exchange rate • The Rupiah’s REER has been 115 USA, 114.2 kept at a relatively tight range— Singapore, 112.7 a sign of implicit targ
Slide 72: A yuan-sided match
A yuan-sided match De-Dollarization has mostly been driven by imports of Chinese goods, causing a CNY shortage equivalent to nearly USD 1 Billion each month % of total Indonesian exports, by currency % of total Indonesian imports, by currency 100 100 1.7 4.0 1.3 95 95 3.9 3.8 2.6 90 90 91.5 3.7 85 8
Slide 73: Waiting for the wheels to turn
Waiting for the wheels to turn Despite favorable commodity prices, strong USD has prevented Indonesia from reliving the “golden years” of the 1970s and 2003-13 150 index (100 = last 5Y-avg.) weak USD, • The Indonesian economy is at 140 weak USD, strong commodities 130 strong commodities its best whe
Slide 74: Recap and precap: The liquidity straitjacket
V FINAL NOTE Recap and precap: The liquidity straitjacket • Our discussion in Ch. 4—particularly charts [60] and [68]—clearly intensive industries, which depresses household savings while at shows a tradeoff between government spending, private sector the same time enlarging corporate financing need
Slide 75: Escaping the straitjacket
V FINAL NOTE Escaping the straitjacket • Our caution for the short-term, however, does not equal pessim- • The inefficiency, we should add, is apparent not just for govern- ism for the long-term. Aside from commodity booms—which are ment projects as some might think, but for also for the broader bey
Slide 76: How to finance growth? A simple trilemma
How to finance growth? A simple trilemma If fiscal expansion is a sine qua non, policymakers would have to navigate between the risk of depreciation and weaker “animal spirit” Strong & stable Rupiah How to shake loose from this trilemma? 1 Commodity boom (luck-based) Example: 2023-24 high fiscal spe
Slide 77: Growth vs. exchange rate: The ultimate tradeoff
Growth vs. exchange rate: The ultimate tradeoff Indonesia’s growth potential may best be seen in terms of financing constraint—and therefore the risk of Rupiah depreciation 8.0 % YoY % of GDP 8.0 How to read this visualization: 6.0 6.0 In Q3-24, the Indonesian GDP grew 4.95% YoY … 4.95 4.0 4.0 3.58
Slide 78: FDI: The beginning is not the end?
FDI: The beginning is not the end? Initiation of FDI projects in Indonesia seem to approach Vietnam levels—but actual inflows are considerably smaller 5.0 % of GDP UNCTAD*, 2023 • Despite its name, “investment 4.5 FDI to Indonesia, according to: realization” refers to the start/ ― Investment realiza
Slide 79: National ICOR: Still commodity-bound, after all?
National ICOR: Still commodity-bound, after all? Investment has become much less efficient, and post-pandemic improvement is likely connected to downstreaming and commodity boom 10 ratio • ICOR is the ratio of investment to commodity commodity commodity 9 boom boom boom growth—higher ICOR, therefore
Slide 80: How to grow faster? Go big or git gud
How to grow faster? Go big or git gud At current investment efficiencies (ICOR above 6), Indonesia would need China-level forced savings to achieve 7-8% growth rate 50 % of GDP • To grow at 7% YoY, Indonesia needs less efficient or more mature investment to be 39-45% of the GDP economies China —reve
Slide 81: Sectoral ICOR: Are we misallocating our resources?
Sectoral ICOR: Are we misallocating our resources? Rising ICOR across most industries are a sign of falling productivity—but also potentially misdirected investment (malinvestment) ICOR: Agriculture ICOR: Mining ICOR: Manufacturing 25 ratio 80 ratio 12 ratio 20.0 70 20 higher ICOR = lower efficiency
Slide 82: Corporate CAPEX: Good money after bad?
Corporate CAPEX: Good money after bad? Global commodity cycle predicts the CAPEX cycle, but increased CAPEX does not seem to drive revenues higher 160% YoY growth YoY growth 40% 40% YoY growth YoY growth 80% 120% BCA Inacott index 30% 30% Gross revenue growth 60% (Indonesian commodity ToT) (list
Slide 83: Can investment generate its own savings?
Can investment generate its own savings? Nickel downstreaming has boosted the trade balance, but investment in other areas seems largely unable to improve the S-I gap 600 index (2015 = 100) Manufacturing sector: Investment growth vs. trade CAGR (2015 – 23) Metal manufacturing: 533.9 Sub-sector (HS C
Slide 84: Downstreaming: Still not downstream enough
Downstreaming: Still not downstream enough Cocoa, Indonesia’s first big downstreaming success story, remains firmly stuck at the intermediate stage after more than a decade Raw material Upstream manufacture Downstream manufacture 16% share of global exports 16% share of global exports 16% share of g
Slide 85: Projection of Indonesian economic indicators
Projection of Indonesian economic indicators 2019 2020 2021 2022 2023 2024E 2025E Real GDP growth (% YoY) 5.0 -2.1 3.7 5.3 5.0 5.0 4.9 Nominal GDP growth (% YoY) 6.7 -2.5 9.9 15.4 6.7 7.0 7.9 GDP per capita (USD) 4175 3912 4350 4784 4920 4975 5005 CPI inflation (% YoY) 2.7 1.7 1.9 5.5 2.6 1.6# 2.5 B
Slide 86: BCA Economic and Industry Research
BCA Economic and Industry Research David E. Sumual Agus Salim Hardjodinoto Barra Kukuh Mamia Chief Economist Head of Industry and Regional Research Head of Macroeconomic Research david_sumual@bca.co.id agus_lim@bca.co.id barra_mamia@bca.co.id +6221 2358 8000 Ext: 1051352 +6221 2358 8000 Ext: 1005314
Slide 87: Thank You
Thank You This cover image was generated by AI at imagine.art
PT Bank Central Asia — Investor Presentation (December 2024) on 6ix