BI Continues Bond Buying in 2021
Bank Indonesia, the country’s central bank, has reiterated its commitment to buy the government’s bonds issuance in the primary market until the end of this year to help plug the government’s deficit gap, Governor Perry Warjiyo said on Monday.
“BI will continue to be present in the primary market until the end of 2021,” said Perry, referring to the bank by its abbreviation. Bank Indonesia has extended an agreement with Finance Ministry, first signed on April 16 last year, Perry said. Under the agreement, the central bank would be involved in the primary market as a non-competitive bidder to buy the government’s bonds if the market failed to absorb the offerings. (Jakarta Globe)
2020 Inflation Reflects Depressed Demand
Indonesia recorded the lowest annual inflation in the country’s history in 2020 as the corona-virus pandemic ravaged the economy and battered purchasing power. The country’s annual consumer price index (CPI) stood at 1.68 percent last year as prices advanced 0.45 percent on a monthly basis in December, Statistics Indonesia (BPS) announced on Monday. The figure is the lowest full year number in history and below Bank Indonesia’s (BI) target range of 2 to 4 percent last year. While a low inflation rate is good for an economy as it means consumers can buy goods and services at affordable prices, the low figure in Indonesia last year indicates weakening purchasing power rather than balanced supply and demand.
Mining Downstream Industry 2021 Prospects
Indonesia is poised to spend this year catching up on plans to develop a downstream mining industry as the country races against time to adapt to a long-term global shift in ore demand away from coal towards metals, while prices are expected to rebound gently. Coal miners plan to continue studying the development of a downstream industry, while metal miners plan to resume their pandemic-delayed metal smelter projects. The latter particularly applies to nickel miners, who were the first to experience a government raw metal export ban. State-owned mining holding company MIND ID hopes to close several deals early this year related to the formation of a flagship, nickel-rich electric vehicle (EV) battery industry in Indonesia.
“Nickel is expected to become an alternative to the coal industry that has all this time been a major contributor to the mining sector,” said Samuel Sekuritas investment analyst Dessy Lapagu on Nov. 24. Globally, coal and metal prices are expected to start rebounding this year at a pace reflecting the world’s energy transition. That shift, according to the World Bank’s October 2020 commodity outlook report, has been hampered by the COVID-19 pandemic. The transition involves a decline in coal-fired power plants and an increase in gas-fired power plants, renewable energy plants and electrification infrastructure such as EVs and power grids, all of which require electrification-related metals such as nickel, copper and aluminum. (Jakarta Post)
Rupiah Starts Year With A Bang
The rupiah exchange rate began the new year by recouping its losses, and analysts expect the currency to further gain going forward amid risks surrounding Indonesia’s vaccination efforts and economic recovery. The rupiah climbed to its six-month high and broke below the 14,000 mark against the US dollar on Monday, appreciating by 1.1 percent on the day before depreciating 0.15 percent on Tuesday to 13,916. The currency strengthened 0.14 percent on Wednesday to 13,895 against the greenback. The recent gain was supported by fading US election risks and corona-virus vaccine developments, according to several analysts. “The rupiah’s short-term outlook is positive and likely to gain further on the back of higher demand for riskier assets, vaccine developments and the United States’ approved fiscal stimulus,” Bank Permata economist Josua Pardede said on Tuesday. “We expect more inflows into the country’s bond markets as a result of the government’s front-loading strategy, which will support the currency.” (Jakarta Post)
12% Increase in State Spending in 2020
(ANTARA) – Minister of Finance Sri Mulyani Indrawati said that state spending grew 12.2 percent (yoy) to Rp2,589.9 trillion as of December 31, 2020 from Rp2,309.3 trillion last year. The realization was pegged at 94.6 percent of the revised State Budget target of Rp2,739.2 trillion set under the Presidential Decree 72/2020, she informed. “State spending has increased to accommodate all the handling of the pandemic and economic recovery,” she said at press conference in Jakarta on Wednesday.
SOE’s Get Big Cash Injections
The government has disbursed a total of Rp 37.07 trillion (US$2.63 billion) in state capital injections (PMN) to four state-owned enterprises (SOE) and two state agencies in a bid to help revive the virus-battered economy. President Joko “Jokowi” Widodo signed several regulations in December to officially disburse the funds. As much as Rp 7.5 trillion is channeled to state-owned construction company PT Hutama Karya, Rp 6 trillion to insurance holding company PT Bahana Pembinaan Usaha Indonesia (BPUI), Rp 2 trillion to pharmaceutical holding company PT Bio Farma and Rp 1.57 trillion to infrastructure financing guarantee company PT Penjaminan Infrastruktur Indonesia. The government also disbursed Rp 15 trillion to the Indonesia Investment Authority (LPI) and Rp 5 trillion to the Indonesian Export Financing Institution (LPEI). “Everything is calculated. This is for their working capital,” SOE Ministry expert staff member Arya Sinulingga told The Jakarta Post in a phone interview on Monday. The government has allocated a total of around Rp 45 trillion in state capital injections for SOEs as part of both the 2020 state budget and the COVID-19 stimulus package. The most recent injections come at a time when the government is speeding up the disbursement of funds. Other SOEs, such as state-owned PT Indonesia Tourism Development Corporation, plantation holding company PT Perkebunan Nusantara and housing company PT Perumnas also received support. Arya said the capital injection for Hutama Karya was expected to help create jobs and improve the country’s logistics through toll road projects, including the 2,704-kilometer trans-Sumatra toll road. (Jakarta Post)
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