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SUMMARY :
Ř
April year-on-year (YoY) inflation fell slightly
to 15.4 percent from 15.74 percent in March, continuing an
expected gradual downward trend.
Ř
Bank Indonesia cut interest rates by 25 basis
points to 12.5 percent on May 9, a widely expected move in light
of inflation easing.
Ř
The Indonesian rupiah continued to appreciate
against the U.S. dollar in April 2006, closing at 8,775 per USD
on April 28. The
rupiah has strengthened more than 10 percent since the beginning
of the year.
Ř
Bank Indonesia’s (BI) foreign exchange reserves
in April increased to USD 42.8 billion based on increasing
export proceeds and overseas portfolio investment inflows.
Ř
Three of Indonesia’s largest state-owned banks
met with the Minister for State-Owned Enterprises and reportedly
committed to provide Rp 7 trillion (USD 777.8 million) to
finance infrastructure projects in 2006.
Ř
The Government of Indonesia (GOI) approved in
April the sale of its remaining ownership shares in two banks,
Bank Permata (26.16 percent) and Bank Internasional Indonesia
(5.52 percent).
Ř
Japan announced USD 796 million of loans to
Indonesia for infrastructure and development projects.
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Inflation Continues to Decline
On May 1, the Central
Bureau of Statistics (BPS) announced that consumer price inflation
grew 15.4 percent YoY in April 2006, and a negligible
0.05%month-on-month (MoM). A
large, 0.85 percent decrease in foodstuff prices balanced off
significant increases in prepared food, housing, clothing, and health
care prices. According to
several private investment banks, core inflation eased to 9.4 percent
YoY (compared with 9.6 percent YOY in March) and 0.4 percent MoM.
With the decrease in YoY and MoM
inflation rates, Bank Indonesia (BI) cut interest rates 25 basis
points to 12.5 percent at its May 9 monetary policy meeting, a widely
expected move. BI had
been tightening since August 2005 and kept interest rates steady at
12.75 percent since December 6, 2005.
BI Senior Deputy Governor Miranda Goeltom had told the press on
May 4 that BI would not reduce interest rates to a level that would
undermine the competitiveness of rupiah-denominated assets.
Miranda said she was confident that the 2006 inflation target
of eight percent could still be met.
CPI Components
|
Components
|
MoM
|
YoY
|
| Food stuff |
-0.85
|
16.38
|
| Food, beverages, tobacco, cigarettes |
0.43
|
12.67
|
| Housing, water, electricity, oil/gas |
0.42
|
12.82
|
| Clothing |
0.70
|
8.27
|
| Health |
0.58
|
7.34
|
| Education, recreation, and sport |
0.09
|
7.87
|
| Transportation, communication, financial services |
0.07
|
30.75
|
| TOTAL
|
0.05
|
15.40
|
Source: Central Bureau of Statistics (BPS)
Rupiah Stays Strong Against USD
The Indonesian rupiah has been
Asia's best performing currency thus far in 2006, gaining over ten
percent since the beginning of the year.
The rupiah closed at 8,775 per USD on April 28.
BI’s Deputy Governor Aslim Tadjuddin reportedly commented on
April 18 that it is important to prevent excessive volatility in the
rupiah. He said BI would
not set a target for the rupiah as the country has a floating-rate
system. Coordinating
Minister for the Economy Boediono said told a group of journalists on
April 20 that authorities only intervene marginally to reduce extreme
currency fluctuations.
BI Foreign Exchange Reserves Increase
Bank Indonesia (BI) reported its
foreign exchange reserves as of the end of April were USD 42.8
billion, up from USD 34.7 billion at the end of 2005.
Rising export proceeds along with continued inflows of
portfolio investment were contributing factors.
Indonesia’s
FX Reserves April 05–April 06
|
|
USD
Billion
|
| April
05 |
36.4
|
| May
05 |
34.6
|
| June
05 |
33.9
|
| July
05 |
32.2
|
| August
05 |
31.2
|
| September
05 |
30.3
|
| October
05 |
32.6
|
| November
05 |
33.2
|
| December
05 |
34.7
|
| January
06 |
35.1
|
| February
06 |
35.5
|
| March
06 |
40.1
|
| April
06 |
42.8
|
Source: Bank Indonesia
State
Banks to Help Finance Infrastructure Projects
On April 11, senior managers of
state-owned Bank Mandiri, Bank Rakyat Indonesia (BRI) and Bank Negara
Indonesia (BNI) met with State Minister for State-owned Enterprises
Sugiharto and managers of state companies planning infrastructure
projects. The banks
reportedly committed to provide Rp 7 trillion (USD 777.8 million) to
finance infrastructure projects in 2006.
On April 15, the head of the GOI team for infrastructure
financing, Dr. Raden Pardede, reportedly said the GOI is considering
allowing private companies participating in government-sponsored
infrastructure projects to issue long-term (10-20 year maturity)
rupiah-denominated corporate bonds.
The bonds would help finance existing infrastructure projects
as well as replace short-term bank loans, Pardede said.
"The scheme is still being discussed with the Capital
Market Supervisory Agency (BAPEPAM)," he said.
Government
to Sell Shares in Bank Permata and BII
The State-Owned Asset Management Company
(PT Perusahaan Pengelola Aset or PPA), the successor organization to
the Indonesia Bank Restructuring Agency, plans to sell the remaining
GOI shares in Bank Permata and Bank Internasional Indonesia (BII) in
2006, according to press reports. PPA Vice President Director
Raden Pardede said the company had received GOI approval in
April. PPA also plans to appoint a financial advisor for
additional divestments scheduled for the second half of 2006.
The GOI owns a 26.16 percent share in Bank Permata and 5.52 percent
share in BII. Table 3 below outlines GOI shareholdings in
majority private Indonesian commercial banks.
GOI Bank Ownership – May 2006
|
|
Percent
|
|
Bank Permata
|
26.16
|
|
BII
|
5.12
|
|
Bank Niaga
|
5.2
|
|
Lippo Bank
|
2.5
|
|
BTPN
|
28.4
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|
May Bank
|
6.1
|
Japan
Provides Infrastructure Loans
In a press statement on March 31, Japan announced it would provide Indonesia USD 796
million in new loans to fund a number of infrastructure projects and development programs.
The statement said the loans aim to improve Indonesia’s investment climate and human resource
development, as well as support the macroeconomy and ongoing governance reform. The loans
have an annual interest of 0.4 to 1.5 percent, with a 30-40 year maturity. The new loans, which
bring Japan's aggregate loans to Indonesia to about USD 34.5 billion, will finance several projects.
These include the construction of the Tanjung Priok Port access road (USD 228 million),
the Asahan No 3 hydroelectric power plant in North Sumatra (USD 237 million); the Kamojang
geothermal power plant extension (USD 8 million, for engineering services only); an integrated
water resource and flood management project in Semarang (USD 140 million); and projects
to develop the human resources of local, provincial and central governments (USD 83 million).
Selected
Economic, Monetary &
Financial Statistics
|
|
Jan
06
|
Feb
06
|
Mar
06
|
Apr
06
|
|
CPI Inflation (YoY)
|
17.03
|
17.92
|
15.74
|
15.4
|
|
CPI Inflation (MoM)
|
1.36
|
0.58
|
0.03
|
0.05
|
|
Rp/USD Exchange rate 1
|
9,392
|
9,185
|
9,075
|
8,775
|
|
30-day SBI Interest Rate 2
|
12.75
|
12.74
|
12.73
|
12.75
|
|
Foreign reserves 3
|
35.1
|
35.5
|
40.1
|
42.8
|
|
JSX Composite Index
|
1232.3
|
1230.7
|
1323.0
|
1464.4
|
|
Exports (USD billion)
|
7.51
|
7.35
|
7.45
|
|
|
% Change (YoY)
|
22.54
|
15.18
|
2.76
|
|
|
Import (USD billion)
|
4.27
|
4.51
|
4.35
|
|
|
% Change (YoY)
|
3.58
|
4.47
|
-12.65
|
|
|
Trade Balance 5
|
3.24
|
2.84
|
3.10
|
|
Source:
Bank Indonesia, BPS
(1)
Rp/USD, end of period
(2)
End of period
(3)
USD billions, end of period
(4)
Jakarta Stock Exchange average daily transaction volume, in
billions of shares
(5)
USD billions
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