the republic of indonesia recent economic update july 2008

The Republic of IndonesiaThe Republic of Indonesia

Recent Economic Update

July 2008

OutlineOutline

Fundamental Economic Strengths

Fiscal Sustainability

Impact of Oil Prices and Food Staples on the Economy and 2008 Budget

Financing Strategy

Fiscal Realization and Outlook

Challenges for 2008

1

2

3

4

5

6

Fundamental Economic Strengths

Macroeconomic Stability

IDR / USD Exchange Rate BI Rate and Fed Fund Rate

Indonesia is maintaining macroeconomic stability substantiated by a stable exchange rate and increasing foreign reserves

Foreign Reserves Inflation

0%

2%

4%

6%

8%

10%

J F M A M J J A S O N D J F M A M J

Spread BI Rate – Fed Rate BI Rate Fed Rate

59.45

0

10

20

30

40

50

60

70

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Sep

t

Oct

No

v

Dec

Jan

Feb

Mar

Ap

r

May

Jun

(US$bn)

2006 2007

Spread Jun 08 = 650 bps

2007 2008

Export, FDI & Portfolio

80

85

90

95

100

105

110

115Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08

SGD Curncy PHP CurncyTHB Curncy IDR Curncy

11.03

11.70

6.006.60

0

4

8

12

16

20

'Jan

-06

Feb

Mar

Ap

rM

ayJu

nJu

lA

ug

Sep Oct

No

vD

ec'J

an-0

7F

ebM

arA

pr

May

Jun

Jul

Au

gS

ep Oct

No

vD

ec'J

an-0

8F

ebM

arA

pr

May

Jun

Jul

Au

gS

ep Oct

No

vD

es

(% y-o-y)

2006 2007

2007: 6% 1%

2008: 11.7 %

2007: 6% 1%

2008: 11.7 %

2008

Sustained Economic GrowthSustained Economic Growth

Real GDP Growth

Indonesia has been growing at a rate above 6% since 4Q06 supported by private consumption and investment

Source: Ministry of Finance

5.9% 5.8%

5.1% 5.1%5.0%

5.9% 6.0% 6.1%6.4% 6.5%

6.3% 6.3%6.0%

2.0%2.6%

6.7%

3.8%

5.6%

2.8%3.5%

4.6% 4.6%5.3% 5.1% 5.3%

14.9%

1.4%0.9% 0.8%

6.8% 7.0% 6.9%

10.4%

12.1%

13.3%

5.5%

16.7%

2.7%

10.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08

GDP Y-o-Y

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

18.0%

21.0%

GDP Consumption Investment

2005 FY: 5.68% 2006 FY: 5.48% 2007 FY: 6.32%

Strengthening Private ConsumptionStrengthening Private Consumption

Consumption Credit Growth

Source: Bank Indonesia, CEIC

Consumption credit growth is strong. Car and motorcycle sales, as a proxy of demand, have recently experienced significant growth

Indonesia Car and Motorcycle Sales

(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

1Q05 1Q06 1Q07 1Q08

Car Sales Motorcycle Sales

Y-o-Y Growth

29.2%

0%

10%

20%

30%

40%

50%

Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar

Consumption Credit

200820072005 2006

Y-o-Y Growth

Improving Investment ClimateImproving Investment Climate

Imported Capital Goods vs. Investments

Source: BKPM, CEIC1. Subject to limits for foreign participation in certain sectors of the economy.

New Investment Law passed in April 2007 aims to facilitate foreign investment. Continuous taxation reform expected to spur further investment

Significant Improvements in Investment Climate

Equal treatment for domestic and foreign investment (1)

Extends the validity of land titles

Rights to appoint foreign management

Unrestricted repatriation of profits and capital

Accelerated reform in tax administration

Simplified VAT audits and improved taxpayer services quality

5% reduction in corporate income tax rate for listed companies which meet certain conditions

Reduction in the tax rate on dividend payments to non-residents from 20% to 10%

Significant increase in budget allocation for capital expenditure

Provides better clarity in business activities that are conditionally open to foreign investors

102%

50%

13%

15%

0%

20%

40%

60%

80%

100%

120%

1Q05 1Q06 1Q07 1Q08

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Imported Capital Goods (LHS) Investments (RHS)

Y-o-Y Growth Y-o-Y Growth

Fiscal Sustainability

Budget Deficit and Debt Ratios

Budget Deficit (% of GDP)

Debt to GDP Ratio


67%61%

56%47%

39% 36% 33%36%32% 28%

24% 21% 21% 21%31% 29% 28%

23%18% 15% 12%

0%

20%

40%

60%

80%

2002 2003 2004 2005 2006 2007 2008

Total Debt to GDP Foreign Debt to GDP Domestic Debt to GDP

-1.2%

-2.5%

-1.3%-1.7%

-1.0%-0.5%

-1.0% -1.3%-2.1%

-3%

-2%

-1%

0%

2000 2001 2002 2003 2004 2005 2006 2007Revised 08

Budget

CONSOLIDATION STIMULUS

Avg. –1.54%

Avg. –0.88%

2008 Revised State Budget2008 Revised State Budget

Key Assumptions


Maintaining fiscal stability in the face of external economic shocks

Official State Budget 2008

Greater need for energy and food subsidies given persistently high crude oil and commodity price environment

Deficit could increase to 3% of GDP if no action was taken on subsidy allocation

Funding of the revised deficit is within a reasonable range given the consistent decline in the debt-to-GDP ratio over the past five years from 67% in 2002 to 35% in 2007

Fiscal policy measures to mitigate the impact of heightened food and oil prices have been and are currently being implemented

BudgetRevised Budget

GDP Growth (%) 6.8% 6.4%

Inflation (%) 6.0% 6.5%

Exchange Rate (US$/IDR) 9,100 9,100

3 Month SBI Rate (%) 7.5% 7.5%

Crude Oil Price (US$/Bbl) 60 95

Crude Oil Production (mm Bbl/day) 1.034 0.927

Fuel Consumption (mm KL) 35.8 35.5 – 37.0

BudgetRevised Budget

GDP Growth (%) 6.8% 6.4%

Inflation (%) 6.0% 6.5%

Exchange Rate (US$/IDR) 9,100 9,100

3 Month SBI Rate (%) 7.5% 7.5%

Crude Oil Price (US$/Bbl) 60 95

Crude Oil Production (mm Bbl/day) 1.034 0.927

Fuel Consumption (mm KL) 35.8 35.5 – 37.0

In Rp trillion BudgetRevised Budget

A. Total Revenues & Grants 781.4 895.0

I. Domestic Revenue 779.2 892.0

(i) Tax Revenue 592.0 609.2

(ii) Non-tax Revenue 187.2 282.8

B. Total Expenditures 854.7 989.5

I. Central Government 573.4 697.1

(i) Ministry / Agency 311.9 290.0

(ii) Non-Ministry / Agency 261.5 407.0

Interest Payments 91.4 94.8

Subsidies 97.9 234.4

– Energy 75.6 187.1

– Non-Energy 22.3 47.3

II. Regional Transfers 281.2 292.4

C. Surplus / (Deficit) (A-B) (73.3) (94.5)

% of GDP (1.6%) (2.1%)

D. Financing (I+II) 73.3 94.5

I. Domestic Financing 90.0 107.6

o/w Government Bonds, Net 91.6 117.8

II. Foreign Financing (16.7) (13.1)

o/w Program Loan 19.1 26.4

In Rp trillion BudgetRevised Budget

A. Total Revenues & Grants 781.4 895.0

I. Domestic Revenue 779.2 892.0

(i) Tax Revenue 592.0 609.2

(ii) Non-tax Revenue 187.2 282.8

B. Total Expenditures 854.7 989.5

I. Central Government 573.4 697.1

(i) Ministry / Agency 311.9 290.0

(ii) Non-Ministry / Agency 261.5 407.0

Interest Payments 91.4 94.8

Subsidies 97.9 234.4

– Energy 75.6 187.1

– Non-Energy 22.3 47.3

II. Regional Transfers 281.2 292.4

C. Surplus / (Deficit) (A-B) (73.3) (94.5)

% of GDP (1.6%) (2.1%)

D. Financing (I+II) 73.3 94.5

I. Domestic Financing 90.0 107.6

o/w Government Bonds, Net 91.6 117.8

II. Foreign Financing (16.7) (13.1)

o/w Program Loan 19.1 26.4

Tax and Non-tax Revenue

Tax revenue increasing because of ICP assumption and improved administration

Tax incentives:

– Food prices (rice, cooking oil, soy bean, flour)– Reduced tax rate for publicly listed companies – Priority sectors include oil and geothermal

Actual non-oil tax revenue collection as of March 2008 increased 48.1%

Tax Revenue Non-Tax Revenue (IDR Trillion)

Non-tax revenue increased due to:

– Higher oil prices– Higher natural resources / mining revenues– Larger Pertamina and other SOE profits

IDR tn IDR tn


0

200

400

600

800

2004 2005 2006 2007 2008Budget

2008RevisedBudget

10.0%

11.0%

12.0%

13.0%

14.0%

Tax Revenue Tax Ratio

0

50

100

150

200

250

2004 2005 2006 2007 2008Budget

2008RevisedBudget

Natural Resources SOE Dividends Others

Actively Managing Expenditures and Subsidies

Government Expenditure (IDR Trillion) Subsidies (IDR Billion)

10% cut in ministries’ spending Capital spending on infrastructure and poverty programs

remains a priority Providing for fiscal risk:

– Oil price increase– Overrunning oil consumption– Macroeconomic volatility

Fuel subsidy capped at 3% of GDP:– Consumption limit– Fuel price adjustment– Further budget adjustment

Food subsidies for price stabilisation:– Rice for the poor– Cooking oil for the poor– Soybean and flour for SMEs


0

100

200

300

400

2005 2006 2007 2008Budget

2008RevisedBudget

0

300

600

900

1200

Personnel Material Capital Social

0

50

100

150

200

250

2004 2005 2006 2007 2008Budget

2008RevisedBudget

Fuel Electricity Food Fertilizer Others

IDR tn IDR tn

Total (RHS)

IDR tn

Impact of Oil Prices and Food Staples on the

Economy and 2008 Budget

Soaring Oil Prices Cause Fuel Subsidies to Escalate Soaring Oil Prices Cause Fuel Subsidies to Escalate

International Oil Price

Source: Bloomberg

The ICP rose by 64% since the beginning of the year to average US$109.5/Bbl as of June

80

90

100

110

120

130

140

Jan-08 Feb-08 Mar-08 May-08 Jun-08

WTI ICP

US$/Bbl

ICP (US$/Bbl) 2004 2005 2006 2007 YTD June 30, 2008

Average 37.6 53.4 64.2 72.3 109.4

ICP (US$/Bbl) 2004 2005 2006 2007 YTD June 30, 2008

Average 37.6 53.4 64.2 72.3 109.4

Successfully Raised Fuel Prices to Manage DeficitSuccessfully Raised Fuel Prices to Manage Deficit

The government raised fuel prices by an average of 28.7% on May 24, 2008 and has implemented cash and food assistance programs to mitigate impact on the poor

Schedule of Fuel Price Adjustment


Type of Fuel Initial Price (Rp / KL) % Increase Adjusted Price (Rp / KL)

Gasoline 4,500 33.3% 6,000

Diesel 4,300 27.9% 5,500

Kerosene 2,000 25.0% 2,500

Reduction in subsidy payments and contingency fund provision will be allocated

to the following:

Direct Cash Distribution

ProgramFood Assistance

Educational and Social Assistance

Ensuring Fiscal Sustainability

Fuel Price Hike Lowers Price Gap and ConsumptionFuel Price Hike Lowers Price Gap and Consumption

Rise in fuel prices have reduced the price disparity and is expected to curtail over-consumption


Subsidized Gasoline Consumption & Price Gap Trend

Domestic vs. International Price Disparity

2,500

6,000

9968

9689

500

1,500

2,500

3,500

4,500

5,500

6,500

7,500

8,500

9,500

10,500

Jan-05 Aug-05 Mar-06 Oct-06 May-07 Dec-07

Kerosene (Domestic) Gasoline (Domestic)Kerosene (International) Gasoline (International)

Jun-08

(Rp / Liter)

27%1.4

0%

10%

20%

30%

40%

50%

60%

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08

(%)

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8(mm KL)

Price Gap (LHS) Subsidized Gasoline Consumption (RHS)

Jun-08

Reduction in price disparity

Fiscal Policy Response to Soaring Oil PricesFiscal Policy Response to Soaring Oil Prices

The Government has implemented a number of measures to ensure fiscal sustainability in the face of soaring oil prices

Use of Contingency

Fund

Reduction in Government

Spending

Optimizing Taxation in Nat Res &

Commodities

Optimizing Oil & Gas

Production

Fuel Price Hike &

Compensation Packages for

the Poor

Energy Savings

Initiatives

Diversified Financing

Alternatives

Fiscal Policy Measures

With these fiscal policy measures, deficit is expected to fall from 2.1% to 1.8%

Impact of Fiscal Policy Adjustments on BudgetImpact of Fiscal Policy Adjustments on Budget

Impact of Revised ICP Assumption on 2008 Revised Budget Outlook


5.9 6.8 6.8 7.4 7.8

20.1

24.3 24.126.5

28.5

13.9

19.8

14.7

19.121.3

6.6

7.8

7.6

8.6

9.1

1.5

1.6

1.5

0

5

10

15

20

25

30

35 CashDistributionProgram

ElectricitySubsidies

Oil Subsides

Oil & Gas Non-Tax Revenue

Oil & Gas TaxRevenue

US$ bn

2008 ICP Avg. US$110 / Bbl

Rp/US$ 9,100


Rp/US$ 9,600


Rp/US$ 9,000

2H08 ICP Avg. US$135 / Bbl

Rp/US$ 9,300


Rp/US$ 9,300

Fiscal Deficit% of GDP

$10.1 bn(2.1%)

Revised 2008 Budget With Fiscal Policy MeasuresRevised 2008

BudgetWithout Fiscal

Policy Measures

$13.0 bn(2.6%)

$9.1 bn(1.8%)

$9.7 bn(1.9%)

$10.0 bn(2.0%)

Financing Strategy

Disciplined Approach to Debt Management

Portfolio Management

Prudent Rules

Domestic Bond Market Development

External Loan Financing

Prioritise debt securities issuance in domestic market for deficit financing & debt refinancing

Diversify debt instruments to widen investor base

Develop market infrastructure to support efficient price discovery mechanism

Meet Millennium Development Goals (MDGs), (E.g. poverty reduction)

Finance cost recovery projects

Enhance project readiness criteria

Issue benchmark bonds on regular basis (E.g. 5, 7, 10, 15 and 20 years)

Aggressively conduct debt switching to extend duration

Buyback bonds to reduce outstanding debt and stabilize market

Diversify funding sources (e.g., Sukuk)

To minimise cost of debt within manageable riskObjective

Effective Coordination amongst Fiscal, Monetary and Capital Market Authorities

Impact of Fiscal Policy Adjustments on FinancingImpact of Fiscal Policy Adjustments on Financing

Impact of Revised ICP Assumption on 2008 Revised Budget Outlook


12.9 12.3 12.0 12.7 12.7

5.34.9 5.0

4.9 5.1

0.50.50.50.5

0.5

0

4

8

12

16

20

Non-DebtFinancing

External Loans,Gross

GovernmentSecurities, Net

US$ bn


Rp/US$ 9,100


Rp/US$ 9,600


Rp/US$ 9,000


Rp/US$ 9,300


Rp/US$ 9,300

Revised 2008 Budget With Fiscal Policy MeasuresRevised 2008

BudgetWithout Fiscal

Policy Measures

2008 Funding Strategy on TrackThe Government’s funding plans are well on-track with realized net financing at 69% of net financing required in the Revised 2008 Budget as of June 2008

Issuance in the domestic market will be prioritized

Issuance of a variety of domestic government securities

– Fixed-rate

– Variable rate

– T-Bills

– Zero coupon

– Retail bonds

– Syariah securities – Sukuk (3)

International bonds

2008 Issuance Program US$ bn

Original 2008 Budget

Government Securities Net Financing: 10.1

Revised 2008 Budget

Government Securities Net Financing: 12.9

Redemption + Buyback (1) (4.4)

Net Realization (May 30, 2008) 8.9

Issuance: 10.5

Coupon GDS (2) 3.1

Retail bonds 1.5

Zero coupon GDS (2) 1.6

International bonds 4.3

Redemption + Buyback (1.6)

Target up to end FY 2008, net 6.8

Net Issuance Realization as at June 26, 2008

Source: Ministry of Finance1. Redemption and buyback amount subject to change2. GDS stands for Government Debt Securities (SUN)3. New Syariah instruments expected to be launched in 2008 in the form of Sukuk

Composition of DebtComposition of Debt

Composition of Central Government Debt By Maturity and Interest Rate, Dec 2007

Balanced debt profile with a majority of debt being either Rp denominated or medium to long-dated

Source: Ministry of FinanceNote: Exchange rate of Rp.9,034 per US$ used for period end 2007

By Currency, Dec 2007

53% 50% 50% 53% 54%

47% 50% 50% 47% 46%

0%

25%

50%

75%

100%

2003 2004 2005 2006 2007

Domestic Debt External Debt

In US$ bn Interest Type Total

Tenor Fixed Variable Nominal %

Short term: up to 3 years 22.2 12.9 35.1 23%

Medium term: 4 to 10 years 48.8 20.7 69.4 46%

Long term: more than 10 years 39.5 6.7 46.3 31%

Total 110.5 40.3 150.8 100%

In US$ bn Interest Type Total

Tenor Fixed Variable Nominal %

Short term: up to 3 years 22.2 12.9 35.1 23%

Medium term: 4 to 10 years 48.8 20.7 69.4 46%

Long term: more than 10 years 39.5 6.7 46.3 31%

Total 110.5 40.3 150.8 100%

IDR54%

JPY17%

EUR7%

GBP1%

USD19%

Others2%

Holders of Tradable Government SecuritiesHolders of Tradable Government Securities

Holders of Tradable Domestic Gov’t Securities

There is an increasing proportion of foreign and non-bank holders of Indonesian Government securities

Source: Ministry of Finance1. New Syariah instruments expected to be launched in 2008 in the form of Sukuk

Foreign Holdings by Maturity, May 30, 2008

Developments in Domestic Market

Yearly issuance schedule publicly available

Established primary dealership infrastructure

Benchmark series

Active communication with market participants

Variety of domestic securities available

– T-Bills, fixed rate, floating rate, variable rate, zero coupon, retail bonds and Sukuk (1)

59%66%75%72% 56%

24%21%17%

25%26%

18%16%

13%

8%3%

0

10

20

30

40

50

60

Dec-04 Dec-05 Dec-06 Dec-07 May-08

Banks Non-Banks Foreign Holders

(US$ bn)>1037%

2 to 5 26%

0 to 214%

5 to 1023%

Fiscal Realization and Outlook

Macroeconomic Assumption 2008 & Outlook

APBN-P S I S II 2008

2008 Realization Projected Projected

GDP Grow th (%) 6.4 6.3 6.1 6.2

Inflation (%,y-o-y) 6.50 11.0 11.7 11.7

Exchange Rate (US$/IDR) 9,100 9,261 9,239 9,250

3 months SBI Rate (%) 7.5 8.2 10.0 9.1

Crude Oil Price (US$/Bbl) 95 109.4 145.0 127.2

Crude Oil Production (mm Bbl/day) 0.927 0.938 0.916 0.927

2008

Realization of Revised Budget 2007 & 2008

Revised Budget

Real June 29

% to Revised Budget

Revised Budget

Real June 30

% to Revised Budget

(2) (3) (4) (5) (6) (7)A. Total Revenue and Grants 694.1 292.7 42.2 894.9 425.1 47.5

I. Domestic Revenue 690.3 292.3 42.3 892.0 424.6 47.61. Tax Revenue 492.0 205.3 41.7 609.2 307.5 50.52. Non Tax Revenue 198.3 87.0 43.9 282.8 117.1 41.4

II. Grant 3.8 0.4 10.5 2.9 0.5 17.2B. Expenditure 752.4 275.2 36.6 989.4 363.6 36.7

I. Central Government Expenditure 498.2 168.0 33.7 697.0 246.9 35.4A. Ministry/Institution Expenditure 244.6 70.4 28.8 290.0 82.0 28.3B. Non Ministry/Institution Expenditure 253.6 97.6 38.5 407.0 164.9 40.5a.1 - Interest payment 83.6 39.1 46.8 94.8 45.2 47.7

- Subsidies 105.1 38.8 36.9 234.4 91.7 39.1- Oil (Pertamina) 55.6 26.3 47.3 126.8 60.5 47.7- 32.4 8.7 26.9 60.3 26.4 43.8- Subsidies non energy 17.0 3.8 22.4 47.3 4.8 10.1

a.1 Fertilizer 6.8 1.8 26.5 7.8 2.4 30.8- Other expenditures 30.9 1.8 5.8 32.1 5.5 17.1

II. Regional Transfer 254.2 107.2 42.2 292.4 116.7 39.91. Balanced funds 244.6 106.9 43.7 278.4 113.6 40.8

a. Revenue Sharing 62.7 9.1 14.5 77.7 17.5 22.5b. General Allocation Fund 164.8 95.7 58.1 179.5 89.7 50.0c. Spesific Allocation Fund 17.1 2.1 12.3 21.2 6.4 30.2

2. Special autonomy and adjustment fund 9.6 0.3 3.1 14.0 3.1 22.1C. Surplus/Deficit (58.3) 17.4 (29.8) (94.5) 61.5

% deficit to GDP (1,5) (2.1) 0.0D. Financing 58.3 11.8 20.2 94.5 62.0 65.6

I. Domestic Financing 70.8 36.9 52.1 107.6 80.5 74.8II. Foreign Financing (12.5) (25.1) 200.8 (13.1) (18.5) 141.2

0.0 29.2 0.0 123.5

20082007

Electricity (PLN)

Description

32.6728.66

54.77

35.1938.20

41.35

0

10

20

30

40

50

60

70

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

(trilli

on ru

piah

)

Realization

Target

Realization Minus DTP

6.37.0

6.7 6.97.3

8.1

0

1

2

3

4

5

6

7

8

9


(trilli

on r

upia

h)

Realization

Target

79.63

92.93

129.6

7

61.24

58.26

87.12

4.25

1.28 10

.39

1.19

1.57

2.22

18.08 20.94 23.60

5.69 7.7

510

.09

1.01

0.35 8.6

7

0

20

40

60

80

100

120

140

(Trili

un R

upiah

)

Non-oil & gasincome tax

V AT L and & building tax Duties on buildingand land trans fer

E xc is es Import duties E xport tax

up to J un 2006up to J un 2007up to J un 2008

• Tax Revenue up to June 30, 2008 reached Rp307,5 T (50,5% of R-Budget)

• Tax Revenue 112% from monthly R-Budget Target

• Customs & Excise Revenue 122% from monthly R-Budget Target

2008 1st Semester Revenue and Grant Realization

Tax Revenue

Total Revenue Customs & Excise Revenue

2008 1st Semester Expenditure Realization

• Realization of 2008 exp. Budget was similar to 2007

• Compare to 2007, realization of 2008 central gov. exp showed a rising trend

• Transfer to regions was bit lower than 2007 because of Block Grant (50%, last year 58%)

0

5

10

15

20

25

30

35

40

45

Government Exp. Central Gov. Exp. Transfer to Regions

% o

f R-B

udge

t

200620072008

05

101520253035404550

PersonnelExp.

Material Exp. Capital Exp. InterestPayment

Subsidy SocialAssistance

Other Exp.

% o

f R-B

udge

t

200620072008

Expenditure Realization up to 30 June 2008Expenditure Realization up to 30 June 2008

Realization of Central Gov. Exp. up to 30 June 2008

Central Government Expenditure

-

5.0

10.0

15.0

20.0

25.0


Tri

lio

n R

p

Realization

Projection

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Jan Peb Mar Apr Mei Jun Jul Agst Sep Okt Nop Des

Trillion Rp

RealizationProjection

Projection & Realization of Material Exp. (as of 30 June 2008)Projection & Realization of Material Exp. (as of 30 June 2008)

Projection & Realization of Capital Exp. (as of 30 June 2008)Projection & Realization of Capital Exp. (as of 30 June 2008)

Energy Subsidies

Up to 30 June, realization of subsidy was dominated by fuel subsidy BBM : Rp60,5 T, electricity subsidy: Rp26,4 T

Realization of fuel consumption Jan - June 2008 reached 19,3 million KL, 2008 projection = 39 - 40 million KL

Subsidy Realization, 2006- 2008 (trillion Rp)

Realization of Fuel Consumption (mm KL)

Projection & Realization of (as of 30 June 2008)

4.7

26.3

60.5

3.58.7

26.4

1.9 3.8 4.8

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

up to June 2006 up to June 2007 up to 30 June2008

Fuel

Electricity

Non-energy subsidy

- - 0.1

36.2

0.9

54.4

- - - - - -(3.0)

17.0

37.0

57.0

Trillion Rp RealizationProjection

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08

Kerosene Diesel Gasoline

2.8

3.4

Challenges for 2008

Challenges for 2008Challenges for 2008

Downward revision of GDP growth target from 6.4% to a range of 6.0% to 6.4% due to

lower U.S. and global economic growth and economic effects of fuel subsidy reduction

and cash transfer and food assistance programs

Inflationary pressures from persistent high commodity prices (oil and food)

With 28.7% domestic fuel price increase, the 2008 and 2009 state budget is sustainable

even if oil prices remain high

Savings from the reduction in subsidy payments will be allocated to provide direct cash

transfers and other direct subsidies to the poor households

Maintain a sound banking sector and effective intermediary function

Monetary policy will be consistently aimed at addressing external inflationary pressures

through preserving exchange rate stability and optimizing open market operation of the

central bank

Continuous improvement in investment climate to sustain robust economic growth

the republic of indonesia recent economic update july 2008

Documents

y growth slide

ministry of finance

nontax revenue tax revenue

tax revenuenontax revenue

investment source

fiscal sustainability

foreign investment

gdp debt