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Inflection Point
(dini.anggraeni@trimegah.com)
Stimulus to kick in
Couple of stimulus has been launched by government during September
November this year, attracting new investment, specifically FDI, and to
improve domestic demand. More importantly, current government direction is clearer on stimulus mode rather than mixed signal in first semester. We also anticipate another big three stimulus program including : 1)
tax amnesty, 2) corporate tax rate cut, and 3) foreign ownership in property. Expect around Rp 400tn flow to the system and consumption demand to improve in 6-12 months lag time.
Moderate inflation gave room for interest rate loosening
On persistently low oil price, we expect inflation to ground at moderate
level, i.e. 5% in 2016. The downside is if oil price jump to USD 70/barrel
~ consistent in 3 months ~ and weakening rupiah is faster than expected.
With those moderate inflation level, BI has room to lower interest rate but
we think the central bank should wait for clearer signal from US regarding
its interest rate movement.
4.73%
7.50%
6.25%
-0.08%
USD 1,019mn
-1.86% of GDP
USD/IDR*
13,775
8.66%
USD 100.7bn
* As of 19 Nov 2015
Macroeconomy Forecast
2015
2016F
2017F
Inflation
4.50%
5.00%
5.50%
GDP growth
4.80%
5.00%
5.20%
13,397
13,988
14,213
13,900
14,100
14,300
BI rate
7.50%
7.50%
7.50%
8.40%
8.20%
8.20%
ECONOMIC FOCUS
Year of stimulus..
Six stimulus package has been launched by government during September-November this year. Main purpose is
to attract new investment, specifically FDI, and to improve domestic demand. In order to attract investment,
Government mostly used tax incentives including tax allowances & tax holiday as well as shorter time required
for business permits. Meanwhile, higher PTKP; lower fuel & electricity tariff; wage increase standard; and wider
KUR facility were supposed to be the efforts to stimulate domestic demand.
More importantly, current government direction is clearer on stimulus mode rather than mixed signal in first semester. We also anticipate another big three stimulus program including : 1) tax amnesty, 2) corporate tax rate
cut, and 3) foreign ownership in property, to be executed by the end of this year or early next year.
Type
Assets
Subject
Individual or corporate
Settlement Rate
3% : reporting in 2015
5% : reporting between Jan 2016 - June 2016
8% : reporting between July 2016 - Dec 2016
Constraint
Facility
Tax subject has to give attorney to Tax dept for account access
a. Elimination of taxes payable, tax administration penalties and criminal sanctions in the
field of taxation for the tax obligations before this law is enacted which has not issued tax
assessments.
b. Not exposed to the letter forced tax collection, tax audit, preliminary evidence examination, investigation and prosecution of criminal offenses in the field of taxation on tax obligations in tax period, part of the tax year and the tax year before the legislation is enacted.
c. In the case of Individual or Agency being conducted tax audit or preliminary evidence examination for the tax obligations before this law is enacted, the top tax audit or examination
of the preliminary evidence is stopped.
ing Indonesia government could have 13% success rate, it will translate to Rp 400tn assets declared
come to the system and result in Rp 20tn additional tax revenue
ECONOMIC FOCUS
The scheme
Stimulus 1
9-Sep-15
Stimulus 2
29-Sep-15
Stimulus 3
7-Oct-15
Stimulus 4
16-Oct-15
Govt will revise 154 regulations by end of October to improve investment climate
Administered gas price for several industry (no details provided)
Price control i.e. rice, to help purchasing power for low-income group
Reducing KUR (microfinance credit) interest rate from 23% to 12%
Tax allowances to encourage investment and discourage repatriation
Tax holiday facility expanded from 10 to 20 years with wider industry coverage
Tax incentive for export proceeds deposit
Tax removal for shpyard business, railway, and airplane spareparts
Integrated logistic zone
Industry gas price discount by up to 25% (could be for selective industries) effective
Jan 2016
Avtur price cut by 5% for offshore usage and 1% for local usage (benefits airlines)
Diesel price cut by 3%, effective in three days
Pertalite price cut by 1%, effective in three days
LPG (12kg) price cut by 5%
Electricity tariff discount by 30% for late night usage (11pm - 8am)
Electricity payable facility, allowing corporates to pay 40% of its bill in installments
Shortening time required for corporates to process land leases from 50-90 days to 7-30
Days
Standardized formula for minimum wage increase p.a (inflation + gdp growth)
Wider debitur criteria for KUR
23-Oct-15
Stimulus 6
5-Nov-15
Income tax discount for Company which revaluate their assets (3% vs 10% currently
charged)
Income tax discount from 20% to 100% during 5-25 years for new KEK investment
No need to pay VAT for import and transactions between KEK player is not exposed for
VAT
ECONOMIC FOCUS
2016 RAPBN
ECONOMIC FOCUS
ECONOMIC FOCUS
The parliament has passed 2016 state budget on Oct 30. They are agreed for 5% increase in revenue
to Rp 1,848tn while spending is targeting to rise by 7% to Rp 2,121tn. Yet, lawmakers engaged in
debate over state capital injection (PMN) that resulted in a temporary moratorium on the disbursement. The Golkar, PKS, and Gerindra fractions claimed that the capital injections were not worthy
and that the funds would have better used for other purposes, such as village fund. PMN for state
owned company worth Rp 39.4tn in RAPBN 2016 frozen until revised state budget passed. About
48% of it is allocated for infrastructure company, such as PT Sarana Multi Infrastruktur (Rp 5tn),
WIKA (Rp 3tn), PTPP (Rp 2tn), Hutama Karya (Rp 3tn), Jasa Marga (Rp 1.25tn), and etc.
APBN 2016
2015
Details
APBN-P
A. Revenue
1,761.6
Domestic Revenue
2016
APBN
(%)
1,822.5
60.9
3.5%
3.5%
1,758.4
1,820.5
62.1
1,489.3
1,546.7
57.4
3.9%
PPh
679.4
757.2
77.8
11.5%
PPN
576.5
571.7
(4.8)
-0.8%
PBB
26.7
19.4
(7.3)
-27.3%
Tax Revenue
Cukai
145.7
146.4
0.7
0.5%
Import Duty
37.2
37.2
(0.0)
0.0%
Export Duty
12.1
2.9
(9.2)
-75.9%
Other
11.7
11.9
0.2
269.1
273.8
4.7
1.7%
81.4
78.6
(2.8)
-3.4%
37.6
46.3
8.7
23.3%
SOE Dividend
37.0
34.2
(2.8)
-7.5%
90.1
79.4
(10.7)
-11.9%
BLU
37.0
35.4
(1.6)
-4.2%
3.1
2.0
(1.1)
-35.5%
1,984.1
2,095.7
1,319.5
772.3
Non-Tax Revenue
Grant
B. Expenditure
1.5%
111.6
5.6%
1,325.6
6.1
0.5%
784.1
11.8
1.5%
276.0
302.3
26.3
9.5%
551.9
541.4
(10.5)
-1.9%
137.8
102.1
(35.7)
-25.9%
64.7
63.7
(1.0)
-1.5%
Electricity
73.1
38.4
(34.7)
-47.5%
74.3
80.5
Central Government
Ministry
i.e. Capital Spending
Non Ministry
20.9
6.2
8.4%
(20.9)
-100.0%
641.6
723.2
81.6
12.7%
20.0
47.0
27.0
135.0%
(68.4)
(88.2)
(19.8)
29.0%
(224.1)
(273.2)
(49.1)
21.9%
(1.9)
(2.1)
ECONOMIC FOCUS
Tax revenue only increase 3.9% YoY, align with stimulus mode
With Rp 1,822tn target for the revenue, government is aiming from tax and duty worth Rp 1,547tn (+3.9% YoY)
and non tax revenue worth Rp 274tn (+1.7% YoY). We think the number is more realistic noting that current
government focus is to give stimulus. Excise tax (cukai) target is only targeting to increase by 0.5% to Rp
146.4tn, means no significant change in excise tax rate next year. Latest cigarette tax increase was in November
from 8.7% (average) to 11.2% (average) to be effective per 1 Jan 16. Meanwhile, dividend target of SOE companies is lower by 7.5% to Rp 34.2tn.
Tax Ratio
Tax component
ECONOMIC FOCUS
ECONOMIC FOCUS
Details
2016
APBN
297.70
(20.01)
48.65
7.50
41.15
(4.47)
(64.18)
1.69
2.00
(0.31)
279.38
326.27
1.20
72.84
34.58
38.26
(5.91)
(65.73)
3.26
3.71
(0.45)
330.73
Net Issuances
Domestic bonds
Global bonds
Redemption & buybacks
Gross Issuances
Total Domestic bonds
Conventional FR/VR
T-bills/ZC bonds
Retail bonds (ORI & Sukuk)
Domestic sukuk
Private placement
10-yr Bond Yield (RHS)
Global bonds
Yankee bonds
Euro MTN
Global sukuks
Samurai Bonds
USD SUN
2013
236.5
263.7
58.4
(85.5)
328.0
263.7
165.5
53.8
35.2
9.3
-
2014
277.0
342.2
86.0
(152)
428.1
342.2
186.9
60.9
42.9
38.5
13.0
6.9
58.4
39.1
8.2
86.0
48.5
15.8
17.7
0.0
4.0
17.0
2.3
2015 F
299.3
362.3
90.6
(154)
452.9
362.3
90.6
2015 YTD
358.5
331.0
113.6
(86.0)
451
331.0
180.3
52.9
49.0
42.8
6.0
7.9
113.6
51.2
18.5
26.3
10.9
6.7
2016F
326.3
356.5
152.8
(183.0)
509.3
356.5
152.8
ECONOMIC FOCUS
ECONOMIC FOCUS
10
ECONOMIC FOCUS
11
Retail SSSG
Sector wise
ECONOMIC FOCUS
12
ECONOMIC FOCUS
13
Loan growth
ECONOMIC FOCUS
14
ECONOMIC FOCUS
15
CAD
Services account deficit also narrowed from USD 7.7bn 9M14 to USD 6.5bn 9M15 on more frequent tourist coming post wider visa free and lower cargo loading transportation on slowing import.
Bigger infrastructure spending and pick up on consumption might widen Indonesia CAD to 2.27%% of GDP in
2016 vs 1.90% of GDP in 2015 (est) which lead to currency weakening. Stronger USD post the anticipated US
interest rate hike also will add another pressure to rupiah. We expect rupiah to hover at 14,100/USD by end of
2016 and 13,988/USD average level.
ECONOMIC FOCUS
16
Trade balance
ECONOMIC FOCUS
17
Inflation
Expect moderate inflation in 2016, which gave room for monetary loosening
We expect moderate inflation for 2016 at 5% on the back of persistently low oil price. Bloomberg consensus expect oil price will hover around USD 55/barrel in 2016. The downside is if oil price jump to USD 70/barrel ~ consistent in 3 months ~ and weakening rupiah is faster than expected. With those moderate inflation level, BI has
room to lower interest rate but we think the central bank should wait for clearer signal from US regarding its
interest rate movement.
ECONOMIC FOCUS
18
Economy in a brief
Month
Survey
Actual
Previous
Oct 15
-0.02
-0.08
-0.05
Oct 15
6.38
6.25
6.83
Oct 15
5.05
5.02
5.07
Oct 15
Nov 15
725
7.50
1,019
7.50
1,017
7.50
3Q 15
4.80
4.73
4.67
GDP (% YoY)
Revised
1384
Inflation re-base
Household expenditure group
2002
2007
2012
Raw food
25.5
19.6
18.9
17.9
16.6
16.2
25.6
25.4
25.4
Clothing
6.4
7.1
7.3
Health
4.3
4.5
4.7
6.0
7.8
8.5
14.3
19.1
19.2
ECONOMIC FOCUS
19
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