LAMPUNG PROVINCE ECONOMIC OVERVIEW
Bandar Lampung, May 8th2018
OUTLINE
2
Domestic Economic Overview Global Economic Overview
Lampung Economic Overview
Economic and Inflation Projection
GLOBAL ECONOMIC OVERVIEW GLOBAL ECONOMIC
OVERVIEW
Global economy to gain further growth as higher than expected GDP for 2018 anticipated due to strong economic growth in advanced economies....
• Stronger WTV (World Trade Volume) is predicted in 2017 compared to the previous year, with export cited as the main driver of growth
• Assumption of 2018 crude oil prices is revised upward to USD60/bl to reflect higher demand pressure, better compliance of OPEC members, and geopolitics condition
WEO IMF Jan-18
2018 2019
World 3.9 3.9
Advanced Economies 2.5 2.2
USA 2.9 2.7
Euro Area 2.4 2.0
Japan 1.2 0.9
Emerging & Developing
Economies 4.9 5.1
Developing Asia 6.5 6.6
China 6.6 6.4
India 7.4 7.8
World Trade Volume 5.1 4.7
Oil (USD/barel) 62.3 58.2
USA GDP continue to expand…
•Revised upward of USA GDP to 2,7% -> tax reform, increasing FFR
•Higher inflation pressure is expected -> economic activity, employment and wage
•Expected hikes of FFR (3x di 2018, in Mar, Jun, Des) -> even 4x (September)
Stronger economic growth...
•Acceleration of EU economy driven by stronger net export in line with improved global trade, and better consumption spending
•ECB is expected to mantain accommodative monetary policy up to the end of 2018
China economy grew 6,9% (yoy) in 2017, higher than expected (6,8%) supported by increasing export and domestic demand…
•Shifting trend to innovation-driven and green economy - R&D spending increase continually
- will affect commodity demand (i.e. decreased metal and coal demand)
GLOBAL ECONOMIC OVERVIEW
DOMESTIC ECONOMIC OVERVIEW DOMESTIC ECONOMIC
OVERVIEW
Economic activity continued to expand at a healthy pace in the first quarter of 2018, although slowing down from the previous quarter, in line with its seasonal trend...
DOMESTIC ECONOMIC OVERVIEW
Source of Growth Production
Approach
Expenditure Approach
Industry Construction Trade Info & Com Others
Household Consumption Gross fixed capital formation Net Export Others
Contribution per Island:
Compare to Q-1 2017 Compare to Q-4 2017
Highest Growth: Production Approach Information and
Communication Sector
NPI (Non-Profit Institution) Serving household Consumption Highest Growth: Expenditure Approach
• Information and communication sector recorded strong growth from last year
• Simultaneous election of local government leader in mid 2018 boost the growth of NPI (Non-Profit Institution) Serving Household Consumption
• The value of the Indonesian rupiah continue to weakened since Feb2018
• Weakening currency to dollar happened globally
• Weakening factors: 1)Hawkishstatement of the Fed Chairman pushed market expectation to faster and higher increase ofFFR(FFR expected to increase 3x: March 21th, June, December, and even for 4x increase i.e. in September); 2)inward-oriented trade policy, 3) Positive performance of employment and wage in USA
National Trade Balance Foreign Exchange Reserve
Currency Market (USD/IDR)
Defisit TB 2018 -> Jan: USD 0,76 Milar Feb: USD 0,12 Miliar
DOMESTIC ECONOMIC OVERVIEW
In March 2018, Indonesia recorded surplus on trade balance supported by accelerated export of non-oil and gas
March 2018:
Equivalent to:
126 Trillion USD*
*well above the international standards of reserves adequacy i.e.
equal to three months of imports Month of OR
import
Month importof
servicing of government external debt repayments
12,400 12,600 12,800 13,000 13,200 13,400 13,600 13,800 14,000 14,200
04/01/16 04/02/16 04/03/16 04/04/16 04/05/16 04/06/16 04/07/16 04/08/16 04/09/16 04/10/16 04/11/16 04/12/16 04/01/17 04/02/17 04/03/17 04/04/17 04/05/17 04/06/17 04/07/17 04/08/17 04/09/17 04/10/17 04/11/17 04/12/17 04/01/18 04/02/18 04/03/18 04/04/18 04/05/18
IDR/USD
IDR/USD Harian Monthly Average
Inflation Rate on April 2018
0,10%
(mtm) 3,41%
(yoy)
Inflation rate in April remain stable, lower than the previous month in line with improved crop and (volatile food) supply
0,15%
(mtm) -0,29%
(mtm) 0,24%
(mtm) 3,41%
(yoy) 5,08%
(yoy) 4,04%
(yoy)
Lower inflation driven by deflation on volatile foodsand slower growth of core commodities
1,09%
(ytd)
DOMESTIC ECONOMIC OVERVIEW
PROSPECT RISK
• Higher uncertainty on money market
• Oil-price hikes
• Trade war of USA-China
• Geopolitics factor in Middle East
Economic Growth Inflation Credit Growth
Current Account Deficit Third Parties Fund
POLICY MIX:
FIXED FIXED FIXED
LAMPUNG ECONOMIC OVERVIEW LAMPUNG ECONOMIC
OVERVIEW
10
LAMPUNG ECONOMICS: GRADUALLY IMPROVING ECONOMY?
Regional GDP growth increased slightly from 5,15% in 2016 to 5,17% in 2017,above National economic growth
Lampung’s economy is gradually recovering in the midst of domestic economic consolidation but only driven by the same source of growth over the last decade, both on expenditure and production approach
Lampung’s need to be pushed for higher growth to create a stronger and more sustainable economic structure
Source: Lampung Central Bureau Statistic
Share of Regional GDP: Expenditure Approach
• Q-4 2017: dominated by private/household consumption expenditure
• Increased of Investment driven mainly by construction of National Strategic Project -> drive investment growth todouble digitin the last 3 quarters
Good News:relatively resistant ofexternal shocks
Bad News:Too much reliance on household consumption -> limited growth acceleration
Share of Regional GDP: Production Approach
•Q-4 2017: share of economic still dominated by 3 main sector ->
Agriculture (incl. forestry, fishing & livestock) 24,27%; Manufacturing 20,85%; Wholesale & Retail Trades 12,09%
•Aside the 3 sectors: share of construction sector, info-communication evidenced higher gain in the last 3 quarters (now it gets 4)
•Share of Manufacturing in the last 3 years tend to be stagnant?
Source: Lampung Central Bureau Statistic
Sumber: BPS, diolah
59.29%
1.47%
8.60%
31.56%
0.44%
-1.36%
-10% 0% 10% 20% 30% 40% 50% 60% 70%
Pengeluaran Konsumsi Rumah Tangga Pengeluaran Konsumsi LNPRT Pengeluaran Konsumsi Pemerintah Pembentukan Modal Tetap Bruto Perubahan Inventori Net Ekspor
2017 2016
STRUCTURE OF LAMPUNG ECONOMY
34.96%
33.94%
32.98%
25.51%
33.90%
33.88%
33.30%
24.46%
32.60%
32.59%
31.87%
24.27%
18.32%
19.29%
18.80%
20.83%
17.81%
18.39%
18.20%
21.08%
17.89%
18.41%
18.54%
20.85%
10.38%
10.33%
10.64%
11.60%
10.72%
10.90%
11.15%
12.18%
11.17%
11.29%
11.15%
12.09%
0.00% 20.00% 40.00% 60.00% 80.00% 100.00%
2015 - I 2015 - II 2015 - III 2015 - IV 2016 - I 2016 - II 2016 - III 2016 - IV 2017 - I 2017 - II 2017 - III
2017 - IV Agriculture, forestry, fishing, and
hunting Mining Manufacturing Electricity and Gas Supply Water Supply, Sewerage, Waste Management
Construction
Wholesale & Retail Trades, Repair of Motor Vehicle & Motorcycle Transportation & Storage Accomodation & Food Services Activities
Information & Communication Financial & Insurance Services Real Estate
Professional and Business Services Public Administration, Defense, Compulsory Social Security Educational Services
Net Export Changes in inventory
Household consumption Gross fixed capital formation Government Consumption NPI serving household consumption
12
GROWTH DRIVER: INVESTMENT (STILL) MATTERS
Household Consumption Export
5.78
0 1 2 3 4 5 6 7
0 20 40 60 80 100 120 140
2010 2011 2012 2013 2014 2015 2016 2017
% YoY Rp. Trillion
Konsumsi RT Growth - rhs
-10 -5 0 5 10 15 20 25 30
-20 -10 0 10 20 30 40 50 60 70 80 90 100
2010 2011 2012 2013 2014 2015 2016 2017
% YoY Rp. Trillion
Ekspor Net Ekspor Growth Ekspor - rhs
01 23 45 67 8 910 1112 13
0 10 20 30 40 50 60 70 80
2010 2011 2012 2013 2014 2015 2016 2017
% YoY Rp. Trillion
PMTB (Investasi) Growth - rhs
Investment
Source: Lampung Central Bureau Statistic
Household consumption grew at 5,78% (yoy) in 2017, but still under its 5 years average of 5,81%
Export growth acceleration in 2017 (6,09% yoy) has yet positively contribute to economic growth net export remain negative due to even stronger import growth. Export growth also sensitive to demand and price fluctuations in commodity market.
But, investment grew substantially at 8,07% (yoy) in 2017, with double digits growth observed from mid to end of 2017 boosted by construction of several National Strategic Projects
Investment Household
Consumption
Export Net
Export
13
GROWTH DRIVER: INVESTMENT (STILL) MATTERS
40,71%
2011 2012 2013 2014 2015 2016 2017 2018
-100 -50 0 50 100 150 200 250 300 350 400
0 50 100 150 200 250 300
2012 2013 2014 2015 2016 2017
PMA (US$ Juta) Growth PMA - rhs
16,28%
2011 2012 2013 2014 2015 2016 2017 2018
-200 -100 0 100 200 300 400 500
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
2012 2013 2014 2015 2016 2017
PMDN (Rp Miliar) Growth PMDN - rhs 0%
5%
10%
15%
20%
25%
30%
35%
0 50 100 150 200 250 300 350 400 450
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Rp Milyar
PDRB Investasi Pangsa Investasi terhadap PDRB-rhs
• Amid strong household consumption share to regional GDP growth, Investment share to gradually improved since 2014
• However, Foreign Direct Investment in 2017 only rank 28thfrom 34 Province, while Domestic Investment rank much better i.e. 11thnationally
Source: Lampung Central Bureau Statistic
Source: NSWI BKPM Lampung: 31,56%
Sumsel: 38,51%
Sumut: 31,19%
Foreign
Investment Growth Foreign Investment - RHS
Domestic Investment Billion Rp
Billion Rp
Growth Domestic Investment - RHS
INVESTMENT SECTOR PREFERENCE (2017)
Foreign Investment Domestic Investment
Source: NSWI, BKPM
Agriculture
3% Hunting
1% Fishery 4%
Mining 8%
Food Industry 37%
Basic Chemical Industry, Pharmacy
1% Rubber and Plastic Industry
1%
Metal Industry, Machinery and Electronics
6%
Electricity, Gas and Water
30%
Trade and Repair 3%
Transportation, Warehouse and Telecommunication
6%
Agriculture 3%
Food Industry 10%
Wood Industry 3%
Electricity, Gas and Water
55%
Construction 28%
Other Services 1%
15 -1.0
-0.5 0.0 0.5 1.0 1.5
Jan Feb Mar Apr Mei Jun Jul Agust Sep Okt Nop Des
%mtm 2015 2016 2017 2018 Rata-rata 5 tahun terakhir
5.19%
1.45%
3.48%
-0.02%
avg yoy ytd yoy mtm
Inflation Rate in Lampung Inflation Rate as of April 2018
METRO – 66*
mtm: -0,12 yoy: 2,52 ytd: 0,72
BANDAR LAMPUNG – 56*
mtm: -0,01 yoy: 3,58 ytd: 1,58
*Peringkat inflasi IHK mtm dari 82 kota
Lampung’s Disagregated Inflation
(2.00) - 2.00 4.00 6.00 8.00 10.00 12.00 14.00
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3
2015 2016 2017 2018
% yoy
Inflasi IHK (yoy) Core VF Adm. Price
3,42 2,92 5,20
2,69 0,09 Sewa Rumah 1 Beras -0,34
0,08 Bawang Merah 2 Cabai Merah -0,14
0,04 Tomat Sayur 3 Genteng -0,03
0,04 Cung Kediro 4 Udang Basah -0,01
0,04 Bawang Putih 5 Cumi-Cumi -0,01
CONTIBUTOR OF APRIL’S INFLATION IN LAMPUNG
SUMATERA NASIONAL
mtm yoy ytd 0,06% 3,83% 0,82%
mtm yoy ytd 0,10% 3,41% 1,09%
INFLASI DEFLASI
INFLATION RATE
5 years average
Monthly fluctuation remains, but over years tend to be stable... 8,34% (2014) 4,65% (2015) 2,75% (2015) 3,02% (2017)
16
LAMPUNG’S TRADE BALANCE: SURPLUS BUT IN A NARROWING TREND
1,488 861
148 271
2,000 1,000 0 1,000 2,000
4,000 3,000 2,000 1,000 0 1,000 2,000 3,000 4,000 5,000
2014 2015 2016 2017 Jan-Maret
2018 Ekspor Impor Selisih
Coffee, Tea &
Spices; 19%
Fish, Crustacea
& Molluscs4%
Fixed Vegetables Oils and Fats
40%
Coal; 10%
Rubber; 5%
Fruits &
Processed Fruits;
6%
1. Kopi, Teh, Rempah-rempah 2. Bubur Kayu / Pulp 3. Ikan dan Udang 4. Lemak & Minyak Hewan / Nabati 5. Bahan Bakar Mineral 6. Karet dan Barang dari Karet 7. Kayu, Barang dari Kayu 9. Olahan dari Buah-buahan / Sayuran 10. Ampas / Sisa Industri Makanan 11. Berbagai Makanan Olahan 13. Berbagai Produk Kimia 14. Kaca & Barang dari Kaca 16. Bahan Kimia Organik 17. Gula dan Kembang Gula 19. Buah-buahan 21. Lak, Getah dan Damar
Juta US$
Structure of Overseas Trade Balance of Lampung ->
Surplus (Eksport > Import) with narrower trend
Lampung Trade Balance
Export still dominated by primary commodities and products of peripheral industries...Low volume of manufacturing export suggest less certainty of achieving “balance” in trade
Share of Lampung Overseas Export and Import
16,7%
India
11,5%
Tiongkok 12% USA
1. Sugar and Sugar Confectionary (32,40%)
2. Live Animal for Food (16,25%) 3. Feeding Stuff for Animal (13,10%)
1. Thailand (26,4%) 2. Australia (18,9%) 3. Tiongkok (10,79%) 4. US (9,05%) Country’s Origin:
EXPORT:
IMPORT
05 - FRUITS AND VEGETABLES
12% 06 - SUGAR, SUGAR PREP. AND HONEY
1%
07 - COFFEE, TEA, COCOA, SPICES
13%
08 - FEEDING STUFF FOR ANIMALS
72%
09 - MISC. FOOD PREPARATIONS
1%
23 - CRUDE RUBBER 1%
SHARE OF LAMPUNG’S EXPORT & IMPORT TO AUSTRALIA
EXPORT TO AUSTRALIA (NETTO) IMPORT TO AUSTRALIA (NETTO)
00 - LIVE ANIMAL FOR FOOD
86%
06 - SUGAR, SUGAR PREP. AND HONEY
9%
08 - FEEDING STUFF FOR ANIMALS
4%
EXPORT:
Feeding stuff for animal
• Lampung as the 5thbiggest maize producer in Indonesia
• Establishment of big feeding industry: JAPFA, CPI, CJ, etc.
Fruits Coffe
Export of banana, canned jackfruit Export of robusta green bean
Live Animal for
Food Fattening cattle industry IMPORT:
Sugar Raw sugar, refined sugar for industry
Source: IFPRI IMPACT model result 2009
3.3% 4.3% 3.9% 2.8% 3.8% 2.0% 4.2%
CAGR (2015 – 2020)
(Annual per capita consumption in kilogram)
1) Indonesia’s consumption per capita is significantly lesser compare to the neighboring Muslim country (i.e. Malaysia) which relies mostly on poultry and beef. 2) Furthermore, it is slightly fall behind consumption per capita of neighboring Buddhist
country (i.e. Myanmar), which has restricted beef diet.
1 2
INDONESIA LOWEST CONSUMPTION PER CAPITA WITHIN ASEAN COUNTRIES FACING CHALLENGES FOR THE HIGHEST CONSUMPTION GROWTH AND POPULATION RATE
BEEF SUPPLY AND DEMAND: CHALLENGES & OPPORTUNITY
Tahun Ditjen PKH BPS Blue Print
2003 10,504 10,504
2004 10,533
2005 10,681 10,600
2006 10,875 10,900
2007 11,387 11,500
2008 11,870 12,300
2009 12,760 12,600
2010 13,581 13,100
2011 14,824 14.824 13,600
2012 15,981 14,500
2013 16,606 12,329 14,900
2014 2015
Sumber : BPS dan Ditjen PKH, 2014 GAP
2.495.000 = 16,83 %
Courtecy Kementan-BPS 2011 , (Soedjana, 2012) Copy from Pak Roechadi PPT
INDONESIAN CATTLE POPULATION PROFILE TO SUPPORT NATIONAL CONSUMPTION GROWTH
DEVELOPMENT OF SMALLHOLDER
Collaboration to upscale the transformation from smallholders to livestock farmers
EMPOWERING
BEEF CATTLE FARMERS BEEF CATTLE FARMERS, CROPS & HORTICULTURE FARMERS SELF RELIANT VILLAGE
Capital Access Local Resources
Cattle Management Stockmanship, Feed Management
Financial Management New Technology Introduction
R&D
PROFILE OF INDONESIA CATTLE FARMER
Much relates with the local culture and typical feed avaibility
• Population : 2-10 heads/farmer
• Cattle breed : Bali, Madura, Ongole, PO, Limousine, Simental
• Cattle Function : Land Drafting, Saving
• Reproduction Cycle: 2-2,5 year/cycle
• Management : traditional
• Convertion to meat : No Planning
• Location : Scattered
ECONOMIC AND INFLATION PROJECTION ECONOMIC AND INFLATION PROJECTION
Proyeksi Pertumbuhan Ekonomi 2018 Economic Growth Projection
5,1% - 5,5%
Inflation rate in Lampung is expected to move towards its national target range of 3,5±1%
by the end of 2018, with upward bias (closer to the upper range)
2018 Inflation Growth Projection
3,5%±1%
Growth of Lampung’s economic for 2018 is projected within 5,1%-5,5% range, supported by
higher investment and construction growth, in line with
acceleration of strategic infrastructure projects
5,17% 5,1%-5,5%
- 50 100 150 200 250
2 3 4 5 6 7
2013 2014 2015 2016 2017 2018p Rp Trilyun
% yoy PDRB ADHK-rhs Growth
2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 12
2016 2017 2018*
Nasional Lampung Pesimis Lampung Optimis
Inflation Projection
LAMPUNG’S ECONOMIC AND INFLATION PROJECTION 2018
11 The Growth of Lampung’s economic in 2018 still faced by several risks, coming from both domestic and external sources
UPSIDE DOWNSIDE
Regional GDP
Inflation
Improvement of connectivity -> completed construction of Trans Sumatera Highway. Transportation and Storage sector expected to have a further growth
Relatively strong external demand to push production
Higher NPI serving household consumption in accordance with election
Better investment climate supported by “Investment Acceleration Task Force”
Improved purchasing power, in line with higher consumer optimism
• Limited recovery of export commodity prices
• Limited performance of inter-regional (domestic) trade
• Non solid growth of non building investment as investor tend to ‘wait and see’ in investing as anticipation to change in political climate
• Restrained government (capital expenditure) consumption during campaign and election period
• Potential income transfer shortfall due to massive infrastructure projects financed by the central government
• Greater challenge in maintaning production and distribution of seasoned crops
• Implementation of Cap (retail) Price for several commodities still faced with problems
• Rising crude oil price prompt higher probability for non- subsidy gasoline price increase
• Probability of higher core inflation rate in periods approaching the elections
• Food prices faced corrections due to abundant supply during harvest season at various production hubs
• Government still maintained ‘no price increase’ policy (i.e for gasoline, gas and electric bill)
OPPORTUNITIES AND CHALLENGES
Anticipate deceleration of export due to weaker external demand by increasing export-oriented industry and developing downstream industry
Push improvement of inter-regional net export through increasing food security and maximising
raw material processing within Lampung borders
Strengthen fiscal performance, and enhance local labor skill
Effort to accelerate completion of Industrial Zone and making the best use of potential competitive industry as the new source of growth
Great support to increase private investment in the region, especially on potential sectors:
construction, manufacture industry, and tourism Development of labor-intensive infrastructure to gain more employee >> increase purchasing power of low-income society
