GROWTH AND
INEQUALITY
in Indonesia
Mohammad Faisal
CORE Indonesia
(Center of Reform on Economics)
GDP Growth:
Survived the Global Crisis, but weakening due to the fall of commodity prices
GDP Growth:
Stagnant private consumption, declining exports
2014
Component
2012
2013
2015 Q1
Q1
Q2
Q3
Q4
Private consumption
5.3
5.3
5.6
5.6
5.4
5.3
5.01
Government
1.3
4.9
3.6
-0.7
4.5
1.4
2,21
Investment
9.7
4.9
5.4
4.3
3.5
3.9
4.4
Export of goods and services
2.0
5.3
-0.4
-0.8
-0.7
-2.9
-0.5
Import of goods and services
6.2
0.1
-0.7
-5.1
-3.7
0.1
-2.2
6.3
5.7
5.1
5.1
5.0
5.0
4,71
GDP
Sumber: BPS
Recent external
challenges
China's Economic
Slowdown
- Import growth -15%
- PBC policy on yuan
- Current account deficit
(US$12,4 bill. [Q1-Q3])
- Gov. budget deficit (2,6%
GDP)
Domestic consumption
& investment
-High lending interest rate
- Unemployment & Poverty
rate hike
Low Commodity
Prices
- Oversupply
- El-Nino Impact
The Fed Policy
Uncertainty
-US$ Appreciation 10%
- Low inflation rate -2%
(Sept.15)
Declining commodity prices
Declining exports
Commodity prices index
120
100
Agricultural Raw Materials
Food & Beverage
80
Metal
60
Fuel (energy)
40
20
0
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Declining farmers purchasing power following low commodity prices
Declining farmers trade index impacted on 12,8 million households
Farmers Trade Index
104
102
100
98
Food and Horticulture
Plantation
96
94
92
90
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Rupiah & Asian currency exchange rates
Weakening Rupiah exchange rates due to fundamental factor and the
sentiment in the financial sector
Indeks, 100=5 Jan 2015
Asian currency index
Asian currency volatility, Jan-Okt 2015
130
0.80
125
0.70
120
0.60
115
0.50
110
0.40
105
0.30
100
0.20
95
0.10
90
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
Jul-15
Aug-15 Sep-15 Oct-15
Indian rupee
Indonesian rupiah
Japanese yen
Korean won
Malaysian ringgit
Thai baht
0.00
Trade Balance:
Weak export growth, slight trade surplus, depite Rupiah depreciation
Deepening fuel and gas deficit, marginal surplus in non fuel and gas
Million US$
40
30
Non Fuel and Gas
20
Total
10
0
-10
Fuel and Gas
-20
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
8
Poverty in Indonesia
The rates of poverty reduction is slowing down
40
35
Number of poor people
16
30
14
25
12
11
20
10
37
35
15
33
31
(%)
Million people
18
Percentafe of
poor people
30
29
29
28
8
10
6
5
4
0
0
(2)
(2)
(2)
(1)
(2)
(1)
(1)
-5
2
0
2007
2008
2009
2010
2011
2012
2013
2014
Source: BPS
Gini Ratio: Increasing inequality
0.5
0.43 Urban
0.4
0.41 National
0.3
0.32
Rural
0.2
2002
2007
2010
2013
Source: BPS
Increasing Inequality
Income Distribution & Gini Ratio
%
20% richest people
50
49
0.4
40
41
Gini Ratio
30
21
20
0.35
17
40% poorest
people
10
0
0.3
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: BPS
Regional Contribution to GDP, 2015
Minimum contribution of regions outside Java, depending on export commodities
3,5% 23%
1,0%
8%
7,3%
5,7%
3,7%
5,1%
Growth
Q1 2014 – Q1 2015
2%
58%
8,9%
3%
GDP Contribution (Q1-2015)
Source: BPS
New Jobs created per 1% GDP Growth:
Fewer jobs created
Thousand
%
8
500
7
6
5
600
540
433
6.1
6.5
6.7
500
400
6
4.6
4
300
215
3
164
200
2
100
1
0
0
2008
2009
Tingkat Pertumbuhan (%)
2010
2011
2012
Lapangan kerja baru per 1% pertumbuhan ekonomi
1%GDP = 433,000 jobs (2008)  1%GDP = 164,000 jobs (2012)
Open Unemployment Rates
12
10
Persen
8
6
4
2
0
Open Unemployment rates among ASEAN countries
14
12
Persen
10
8
Philippines
Indonesia
6
4
Vietnam
2
Malaysia
Thailand
2000
2002
2004
2006
2008
2010
2012
2014
Source: World Bank
Unemployment, Agustus 2015
Large proportion of workers in Informal sectors, Unpaid Workers, and part-time
Million
Working population
122,38
Working
114.82
Fully employed
72,95
Underemployment
7,56
Part-time
24,57
Openly unemployed,
7,56
Half unemployed
9,74
Source: BPS
Larger Proportion Working in Informal Sector
100%
80%
61
64
61
39
36
39
1993
2002
2012
53
53
52
47
47
48
2013
2014
2015
60%
40%
20%
0%
Formal
Informal
Stagnant growth of real wages
IHK 1996=100
900
Nominal Wage
800
700
600
500
400
300
Real Wage
200
100
0
Mar-97
Mar-99
Mar-01
Mar-03
Mar-05
Mar-07
Mar-09
Mar-11
Mar-13
Bank Loan Interest Rates
Tight monetary policy, High loan interest rates
18
16
14
Consumption; 13,68
Working capital ; 12,82
12
Investment; 12,32
%
10
Deposit 1 month; 8,31
8
BI Rate, 7.50
6
4
2
0
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Sumber: BI
High Central Bank Rates
Current Indonesia Economic Growth:
Decoupled from World Downturn, but also from Economic
Competitiveness and People Welfare
1.
Indonesian economy still grew relatively strong, even amids global economic
down turn.
2.
Some factor has supported Indonesia to be relatively resistance from global
economic down turn :
a) GDP structure: dominated by private consumption
b) Export structure: dominated by primary comodities
c) Maintaining high cost support (maintaining high interest rate and
minimum of control capital inflows)
3.
Indonesia experienced a relative long time lag of negative impact of
global crisis. Such positive performance did not result in the improvement of
competitiveness as well as the people’s quality of live.
Conclusions
•
Although Indonesia has survived the global economic crisis in 2008, the economic
growth has been weakening since 2011 due mainly to the fall of commodity prices.
•
Inequality has increased in the last fifteen years despite relatively strong GDP
growth.
•
The Monetary Authority has persistently imposed tight policy by keeping the central
bank rate high despite domestic economic slowdown, due to a fear of capital
outflow following the FFR increase.
•
Tight monetary policy has impeded the real sector growth and banking credit has
become even more difficult to get especially for SMEs.
•
Competitiveness of agricultural sector and farmer real wages continue to decline,
resulting in widening income ineqality between rural and urban sectors.
•
Unemployment and poverty rates have only marginally declined in recent years,
and has even increased in 2015.
Thank you!
www.coreindonesia.org