#1MINISTRY OF FINANCE REPUBLIC OF INDONESIA RECENT MACROECONOMIC AND FISCAL UPDATE MINISTRY OF FINANCE March 2023#2MINISTRY OF FINANCE REPUBLIC OF INDONESIA The Team Investor Relation Unit Abdurohman Director for Center of Macroeconomic Policy Rahadian Zulfadin Eko N Saputro Senior Analyst Senior Analyst Putri Rizki Yulianti Analyst Andi Yoga Trihartanto Staff Should you have further questions, please do not hesitate to contact us: https://fiskal.kemenkeu.go.id/informasi-publik/investor-relation-unit [email protected]#3MINISTRY OF FINANCE REPUBLIC OF INDONESIA Disclaimer This presentation was prepared by the Fiscal Policy Agency, Ministry of Finance, Republic of Indonesia. This presentation is for your information and is subject to change without notice. By accessing this presentation, you are agreeing to be bound by the restrictions set out below. Any failure to comply with these restrictions may constitute a violation of applicable securities laws. 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NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE LAW#4MINISTRY OF FINANCE REPUBLIC OF INDONESIA 01 GLOBAL UPDATE & RISKS#5THE GLOBAL ECONOMY FACED TOUGH CHALLENGES IN 2022 Major countries experienced slowed growth in 2022, and prospects for 2023 remain uncertain due to various risks, such as geopolitics, limited fiscal resources, high interest rates, and pressure on the Chinese property sector Global US Indonesia's growth was among the strongest in 2022 Realization/Outlook of Economic Growth in 2022 10.0 10.0 % yoy *) IMF Outlook 8.0 8.0 6.2 5.9 SAU* 8.7 6.0 6.0 MYS 8.7 3.4 4.0 4.0 2.1 PHL 7.6 2.8 2.9 2.0 2.0 2.3 VNM 7.0 1.4 IND* 6.8 0.0 0.0 IDN 5.3 -2.0 -2.0 -3.0 -2.8 GBR 4.0 -4.0 -4.0 2019 2020 2021 2022 2023f ITA 3.9 2019 2020 2021 2022 2023f SGP 3.6 AUS* 3.6 10.0 China 8.1 Eurozone CAN* 3.5 10.0 EUR 3.5 8.0 BRA* 3.1 8.0 5.3 6.0 CHN 3.0 3.5 6.0 6.0 4.0 2.0 0.0 -2.0 -4.0 2019 MEX 3.0 5.2 4.0 3.0 KOR 2.0 2.6 1.6 0.7 FRA 2.2 0.0 2.6 ZAF* -2.0 2.6 THA 2.6 -4.0 USA 2.1 -6.0 -6.4 DEU 1.8 -8.0 2020 2021 2022 2023f 2019 2020 2021 2022 2023f JPN 1.1 5 Source: Bloomberg & IMF#6GLOBAL GROWTH OUTLOOK HAS WEAKENED, CLOUDED BY SOME UNCERTAINTIES Global growth has weakened Global Growth IMF Jan '23 Despite moderating, inflation is still high for longer... Global % yoy 3.7 -3.0 Inflation % yoy, average 6.2 3.4 2.9 3.1 3.6 2.8 6.4 8.8 6.6 4.3 avg 2010-2019 2020 2021 2022e 2023f 2024f (pre pandemi) avg 2010- 2019 (pre pandemi) 2020 2021 2022e 2023f 2024f Downside risks ◉ Increased geopolitical tensions ■ Global inflation remains high ◉ Interest rates will be high for longer. Narrower policy space (fiscal and monetary) Sumber IMF, OECD, & World Bank Upside risks ■ Moderation of commodity prices China's opening New source of growth: green economy, digitalization, healthcare industry etc. 6#7300 600 1200 900 2 COMMODITIES PRICES HAVE BEEN DECELERATING Affected by slowing global demand J-20 A-20 A-20 N-20 F-21 M-21 A-21 N-21 F-22 M-22 A-22 D-22 M-23 Natural gas and oil prices on a declining trend, whole coal remains high due to demand shift to this commodity in many countries Natural Gas 5dma (US$/MMBtu) Coal 5dma (US$/Metric Ton) Brent 5dma (US$/barrel) 150 2022 YoY 7 500 2022 YoY 2022 YoY 18% 157% 431.1 8% 126.0 130 6 570 400 2023 YTD 2023 YTD 110 2023 YTD 5 -44.0% 300 -53.0% -12.2% 90 4 200 4.39 261.9 70 180,4 50 100 3 30 1400 2100 2022 YoY 2022 YoY 1800 -27% 1,779.7 1200 4.5% 2023 YTD 2023 YTD 1500 1000 -2.7% -16.4% J-20 A-20 A-20 N-20 F-21 M-21 A-21 N-21 F-22 M-22 A-22 D-22 M-23 902.5 800 2.21 0 J-20 A-20 A-20 N-20 N-21 F-22 M-22 S-22 D-22 M-23 Food commodity prices show volatility. CPO and wheat prices were lower than the previous period, while soybean and corn prices were still high. Wheat 5dma Soybean 5dma (US$/bu.) CPO 5dma (US$/Ton) (US$/Bushels) Corn 5dma (US$/Bushels) Sources: Bloomberg, UN, Reuters data as of 24 March 2023 400 600 J-20 1650 2022 YoY 1226.8 1500 20% 1350 2023 YTD -7.5% 1200 A-20 A-20 N-20 F-21 M-21 A-21 N-21 F-22 M-22 A-22 D-22 M-23 1050 674.3 900 750 10 J-20 1,547.7 800 2022 YoY 13.7% 700 1,447.1 2023 YTD 600 J-20 A-20 A-20 N-20 F-21 M-21 A-21 N-21 F-22 M-22 A-22 D-22 M-23 300 400 500 J-20 A-20 A-20 N-20 F-21 M-. 86.6 $74,4 M-... A-22 N-22 M-... -6,9% Мачти 617.9 F-21 M-21 A-21 N-21 F-22 M-22 A-22 D-22 M-23 7#8(3) 0 3 6 6 15 12 Source: Bloomberg, processed (1) M-20 3 7 11 15 J-20 N-20 M-21 (1) 3 M-20 7 15 USA 11 J-20 S-20 D-20 M-21 J-21 N-21 Japan F-20 M-20 A-20 N-20 F-21 M-21 A-21 N-21 F-22 M-22 A-22 N-22 F-23 J-21 S-21 INFLATION RATES IN ADVANCED ECONOMIES ARE STILL ABOVE THEIR POLICY RATES Inflation Rate (% yoy) In EMDEs, inflation levels are below the policy rates. Policy Rate (% yoy) D-21 M-22 J-22 S-22 D-22 M-23 6 6.0 6 5.0 3 0 15 Europe 8.5 11 M-22 J-22 N-22 M-23 3.3 7 3.0 3 6 (0.10) 3 0 F-20 6 12 15 J-20 0- 20 (1) F-20 12 15 J-20 0-20 F-21 China F-20 M-20 A-20 N-20 F-21 M-21 A-21 N-21 F-22 M-22 A-22 N-22 F-23 Indonesia F-22 J-22 0- 22 F-23 5.75 5.5 0 F-20 India 0-22 F-23 9 3.65 6 3 1.0 5 10 0 10 6.4 5 6.5 12 15 152 0 15 Brazil 13.75 F-20 J-20 0-20 F-21 J-21 0-21 F-22 J-22 0-22 F-23 15 South Africa M-... A-20 N-20 F-21 M-... A-21 N-21 F-22 M-... A-22 N-22 F-23 Mexico F-22 J-22 0-22 7.0 6.9 8 F-23 7.6 11.0 5.6#956 65 60 55 50 45 40 GLOBAL MANUFACTURING IMPROVED BUT IS NOT YET IN AN EXPANSIONARY ZONE Indonesia is still in the expansion zone, China and Vietnam are recovering, while most of the major economies are still contracted PMI Manufacture as of February 2023 Major Countries Jan-22 Feb-22 Mar-22 Apr-22 threshold May-22 Jun-22 Jul-22 Aug-22 Sep-22 Source: Bloomberg, IHS Markit Oct-22 Nov-22 Dec-22 China Jan-23 Global -US -Eurozone Expand - Accelerating 27.3% Feb-23 65 60 55 50 45 40 Jan-22 Feb-22 Mar-22 threshold Apr-22 Expand - Slowing 13.6% May-22 Selected Asian Countries Jun-22 Jul-22 Aug-22 -Malaysia Sep-22 Oct-22 Indonesia Recovered Nov-22 Dec-22 Jan-23 -India Feb-23 45.5% -Vietnam Contracted Distribution of February Manufacturing PMI Performance in the G20 and ASEAN-6 (minus SAU, ARG, SGP) Thailand, Australia, Russia, Italy, Canada, Turkey (PMI above the 50 threshold or in an expansionary level & higher than previous month) India, Indonesia, Philippines (PMI above the 50 threshold or in an expansionary level but lower than previous month) 13.6% China, Vietnam, Mexico (The PMI was at an expansionary level from the previous month's contractionary level) US, Eurozone, UK, Germany, France Japan, Brazil, Malaysia, South Korea, South Africa (PMI below the 50 threshold or in a contractionary level) 9#10YUNLI626 svb> SIGNATURE BANK THE MOST RECENT SHOCKS COULD ESCALATE THE RISK SVB Collapse and Closing Signature Bank in the US Illustrates Some Unintended Consequences of Fast Liquidity Tightening SVB & Signature Banks' Chain of Events 180 160 Hugh Son Rohan JONATHANVANIAN FINANCE Here's how the second-biggest bank collapse in U.S. history happened in just 48 hours PUBLISHED FRI, MAR 10 2023-3:59 PM EST I UPDATED FRI, MAR 10 2023-8:38 PM EST HUGH SON BROGOSWAMI Jonathan Vanian Finance & economics | Signature policy America's government steps in to protect depositors at Silicon Valley Bank 140 120 SHARE f in ☑ 100 лл 80 60 As SVB and a rival collapse, regulators have expanded their role as a backstop 40 MARKETS Regulators close crypto-focused Signature Bank, citing systemic risk PUBLISHED SUN, MAR 12 2023-6:24 PM EDT I UPDATED SUN, MAR 12 2023-8:01 PM EDT 20 0 Yun Li SHARE in Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Increased Client Deposits in SVB due to tech companie s boom SVB invested in low risk assets (eg UST & MBSS) Value of SVB investment fell as interest rate increases Surge of withdrawals as private fundraising becoming costly -MOVE Index -VIX Index (RHS) Global Volatility Index Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Client confidence plunged & induce panic SVB face liquidity issue & collapse Joint Responses by US Treasury, The Fed, & 90 80 The US Bond and Stock when 70 Market began 60 50 to show increased volatility after the February 40 FOMC and the 30 volatility is seemed to 20 10 0 increasingly escalated since the beginning of March Jan-23 Feb-23 Mar-23 10 FDIC RADARA DANA RAECE#11MINISTRY OF FINANCE REPUBLIC OF INDONESIA 02 INDONESIAN ECONOMIC OVERVIEW#12STRONGER ECONOMIC RECOVERY IN 2022 Economic Growth (%,yoy) Source: BPS Expense Growth (%) Source: BPS 7.1 Household consumption -2.6 5.4 5.7 5.0 5.0 share: 51,9% 2.0 4.9 3.7 5.3 3.0 (0.7) -2.1 (2.2) (3.5) (5.3) Q1 Q2 Q3 Q4 Q1 2020 3.5 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021 2022 Government 2.1 consumption 4.2 share: 7,7% -4.5 Gross Fixed Capital -5.0 Formation share: 29,1% 3.8 3.9 -8.4 Export share: 24,5% Import share: 20,9% -17.6 ■2020 ■2021 2022 18.0 16.3 24.9 14.7 • Throughout 2022, economic growth was above 5% in each quarter. • Public consumption continues to strengthen. Fiscal support in dampening price pressures was effective in maintaining purchasing power stability. •The downstream of natural resources was one of the main sources driving export performance in 2022. • Investment is relatively stable and will continue to be encouraged by the creation of a better investment climate and strengthening the downstream. 12#13THE ECONOMY RECOVERS PREVALENT IN ALL SECTORS (BROAD-BASED) The growth on production side (%) (2.9) Manufacture share: 18,3% Trade share: 12,8% 3.4 4.9 (3.8) 2020 4.6 • 5.5 2021 1.8 Agriculture 1.9 2.3 share: 12,4% 2022 (2.0) Mining 4.0 4.4 share: 12,2% (3.3) Construction 2.8 2.0 share: 9,8% (15.1) 3.2 Transportation 19.9 snare: 5,0% 10.6 ICT share: 4,1% Real Estate share: 2,5% 6.8 7.7 2.3 22 2.8 1.7 (10.3) Accommodation, F&B 3.9 12.0 share: 2,4% Source: Statistic Indonesia The manufacturing and trade sectors have regained, in line with the increasing demand for manufactured products such as steel, machinery, and electronic devices from the global market. • The accommodation & food and drink and transportation sectors grew high, in line with the relaxation of PPKM policies and the return of foreign tourists to Indonesia. 13#14ECONOMIC RECOVERY STRENGTHENS IN ALL REGIONS KALIMANTAN 2020 2021 2022 2020 SULAWESI 2021 2022 GDP Distribution 2022 (%) Economic Growth % YoY 2020 2021 SUMATERA 2022 9,2 7,0 4.9 3.2 4.7 MALUKU & PAPUA 3.2 7.1 -2.3 5.7 -1.2 0.2 22,0 2020 2021 2022 1.5 10.2 8.7 2020 2021 2022 JAVA -2.5 3.7 5.3 5.1 0.1 BALI & 2,7 56,5 -5.0 NUSA TENGGARA Source: Indonesia Statistic Agency, 2023 2020 2021 2022 2,5 The economies of Sulawesi, Java, and also Maluku & Papua grow above national economy (yoy). Downstreaming in mining industry boosted the economy in the eastern Indonesia Sulawesi, Maluku, & Papua. Java is mainly supported by trade and information & communication sectors in the three big provinces (DKI Jakarta, East Java & West Java). Bali & Nusa Tenggara continue to improve as mobility easing and tourism revival 14#152 2015 4 Source: Statistics Indonesia 6 8 2016 10 QUALITY GROWTH PERFORMANCE Creating jobs & lifting people out of poverty Unemployment Rate Unemployment (Mn People) Unemployment Rate (rhs,%) 12 2017 2018 2019 7.1 5.9 6 01 5.2 . ● ● Strengthening social safety nets program Improving human capital quality Driving productive and high-value-added economic activities, including MSMEs Poverty Rate Poor People (Million) 29 8 28 7 27 7 26 6 5 24 25 25 7.6 7.0 7.0 7.0 7.0 9.8 9.1 8.4 28.5 27.8 26.6 22 0 4 2020 2021 2022 23 5 2015 2016 2017 25.7 2018 2019 9.2 10.2 Poverty Rate (rhs,%) 12 24.8 27.6 26.5 26.4 8 2020 2021 2022 15 10 9.6 9 9 10 11 11#16INFLATION REMAINS BENIGN DESPITE INCREASING IN FEBRUARY 2023 Various policies continue to be implemented to ensure price stability INDONESIA'S INFLATIONARY RATE (%, YOY) COUNTRIES' INFLATION (%, YOY) 16.0 I CPI Core Administered Price Volatile Food 14.0 China Saudi Arabia 1.0 3.0 Japan Malaysia* 3.3 3.7 12.2 Thailand 3.8 12.0 Vietnam 4.3 South Korea 4.8 10.0 Canada 5.2 Indonesia 5.5 7.62 Brazil 5.6 8.0 US 6.0 France 6.3 6.0 5.7 6.0 5.5 Singapore 6.3 4.9 4.7 5.4 5.5 5.3 India 6.4 South Africa 7.0 4.0 3.1 Mexico 7.6 Europe 8.5 2.0 Philippines 8.6 Germany 8.7 0.0 Italy 9.1 Jan Feb Mar Apr Mei Jun Jul Ags Sep Okt Nov Des Jan Feb Mar Apr Mei Juni Juli Ags Sep Okt Nov Des Jan Feb UK 10.4 2021 2022 2023 Russia 11.6 Source: BPS, Bloomberg, & CEIC (processed) *January 2023 Inflation 16#172011 Goods 2012 2013 2014 Current Account (USD Billion) 80 60 40 2015 Secondary Income Current Account Services 2016 INDONESIA'S BALANCE OF PAYMENTS IN 2022 CONTINUES TO RECORD A SURPLUS 2017 2018 2019 2020 20 0 -20 -40 -60 -80 40 30 20 komun 10 0 -10 -20 ☑ 2021 Primary Income 2022 -30 Capital and Financial Account (USD Billion) 50 Balance of Payments (BOP) in 2022 recorded a surplus of USD 4 billion, supported by the continued strengthening of the current account, while the capital and financial account recorded a deficit. Current account surplus is supported by export performance which continues to increase. Capital and financial account experienced a deficit mainly from portfolio investment due to increased global uncertainty. Meanwhile, Foreign Direct Investment (FDI) maintained a relatively high surplus. Source: Bank Indonesia Portfolio Investment Financial Derivatives Direct Investment Financial Account Other Investment 17#18STRONGER EXTERNAL POSITION HAS BEEN BOOSTED BY DOWNSTREAMING PRODUCTS Strong export performance and commitment to developing downstream products. Current Account Balance (% of GDP) 1.50 1.00 Comparison between 2014 and 2022 Exports (USD Bn) 1.00 292.0 0.50 0.00 -0.50 -1.00 -1.50 -2.00 -2.50 -3.00 -3.50 0.29 کہا 69.6 Iron & Steel Increased by 48.96% (AAGR) 27.8 176.0 26.2 1.1 178.5 Total Manufacture 118.6 30.0 Manufacture (excl. iron &steel) Increased by 5.24% (AAGR) 2014 16.0 2022 ■ Oil & Gas ■Manufacturing Iron and Steel ■ Others ☐ The increase in export performance was driven by rising commodity prices and also natural resources downstream products ■ remain vigilant over the impact of the global economic slowdown, particularly on some manufactured products. ☐ Export diversification (markets and products) needs to be encouraged, including strengthening downstream Source: Statistics Indonesia 18#1930.00 20.00 TRADE BALANCE CONTINUES TO RECORD SURPLUS FOR 34 MONTHS Export performance at the beginning of 2023 continued its positive trend Indonesia's Export and Import Indonesia (USD Billion) Export Import TOTAL GROWTH OF EXPORTS TO MAJOR TRADING PARTNERS, AS OF February 2023 Share Feb 2023 21.40 7.5% India 15.92 4.4% Philippines ■Feb'2023 (yoy) ■2022 (yoy) ■2021 (yoy) 13% 28% 14% 76% 10.00 6.00 4.00 2.00 -10% 4.3% South Korea -2% 8.6% Japan J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F* -2% 2020 2021 2022 2023 5.0% Singapore 24% 9% 50% 46% 43% 38% 39% 31% 29% 48% 5.0% -5% Malaysia 5.48 -4% 2.7% Taiwan 25% 2.6% Vietnam 24.6% China -2.00 8.9% -20% United States 9% J F M A M J JASON DJ F M A M J JASON DJ F M A M J J A S O N D J F* 2020 2021 2022 2023 72.8% Total 10 countries Source: Statistics Indonesia (processed) 70% 30% 21% 39% 39% 23% 69% 38% 5% 26% 42% 19#20NEAR-TERM PROSPECT REMAINS PROMISING Indonesia's PMI Manufacture has been in the expansive zone for 18 months in a row Consumer Confidence Index stable at a high level, indicating economic confidence going forward that is still optimistic Consistently expands in 18 months. J F M A M J J A S O N D J F M A M J JASON DJ F 2021 2022 2023 Credit Growth (Consumption, Investment, and Working Capital still at a high level Investment Working Capital Consumer 11.4% 10.1% 9.3% 2021-J M M ר S N 2022-J M M S N 2023-J 51.2 Optimistic threshold J F M A M J J A S O N D J F M A M J J A S O N D J F 2021 2022 Vehicle sales for car and motorcycle (wholesale, % yoy) continue to show high growth 2023 Car Sales Motorcycle Sales 56.3 J F M A M J JASON DJ F M A M J JASON DJ F 2021 2022 7.4 2023 20 122.4#21INDONESIA'S FINANCIAL MARKET REMAINS STABLE DESPITE INCREASING GLOBAL VOLATILITY Global Volatility Index -VIX MOVE (rhs) GNNW & A 35 40 250 Exchange Rate 2023 (%, ytd 16 March) 200 MEX 3.8 30 25 20 15 10 www BRA 150 2.4 PHL 1.5 100 IDN 1.2 50 USA 0.9 5 0 0 THA 0.6 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 GBR 0.5 VNM 0.2 Capital Flow Indonesia (10 March 2023) Yield Spread LCY vs UST 10Y (YTD, bps) SAU | 0.1 Foreign Flow (Equity) Net Inflows/(Outflows) 60 Cummulative YTD 50 (Rp tn) 40 30 20 0.72 10 0.42 0 -0.30 -10 I Foreign Flow (Bond) 1200 Januari 2022 Desember 2022 13-Mar-23 IND 0.0 1000 942 696 CHN 0.0 881 37.22 800 33.97 600 400 304 327 312 |474 304 263 483 345 380 815 691 763 604 515 542 RUS 0.0 SGP -0.4 EUR -0.5 CAN -1.1 TUR -1.5 AUS -2.1 200 JPN -2.2 3.25 MYS -2.2 2-Jan 5-Jan 10-Jan 13-Jan 18-Jan 24-Jan 27-Jan 1-Feb 6-Feb 9-Feb 14-Feb 17-Feb 22-Feb 27-Feb 2-Mar 7-Mar 10-Mar KOR -3.1 ID PH BZ IN SA MX 21#22ROBUST NATIONAL ECONOMIC RECOVERY BECOMES A SOLID FOOTING AMID INCREASED GLOBAL RISKS IN 2023 National Economic Growth (YoY, %) Source: Statistics Indonesia, MoF's Estimate %, yoy 2020 2021 2022 2023F 6 4.9 5.0 5.1 5.2 5.3 5.3 Household Consumption (2.6) 2.0 4.9 4.9 - 5.3 5.0 5 Nonprofit Institution Cons (4.2) 1.6 5.6 7.8 - 8.2 3.7 5.0 4 Government Consumption 2.0 4.2 -4.5 0.8 - 1.2 3 Investment (5.0) 3.8 3.9 4.1 - 4.7 2 I 1 Export (8.1) 24.0 16.3 4.6-5.6 0 -1 Import GDP (16.7) 23.3 14.8 3.4 -4.5 (2.1) 3.7 5.3 5.0 5.3 -2 -3 -2.1 International Agencies' Forecasts of National Economic Growth 2015 2016 2017 2018 2019 2020 2021 2022 2023 ATION 2023 (WEO Jan-23): THE WORLD BANK 2023 (GEP Jan-23): 4.8 FUND 4.8 • The pace of economic growth in 2023 will remain resilient • Domestic household consumption will remain stable ADB • State spending is expected to stimulate and maintain economic stability 2023 (ADOU Sep-22): 5.0 OECD 2023 (EO Nov-22): 4.7 • The rate of investment is expected to improve, while export performance will normalize Bloomberg 2023 (Consensus Mar-23): 4.8 22#23A WELL MAINTAINED INDONESIA'S SCR AMIDST GLOBAL AND DOMESTIC CHALLENGES Indonesia's economic prospects have received appreciations from International Institutions INDONESIA'S SOVEREING CREDIT RATING Indonesia Rating Agency Sovereign Credit Rating Outlook Assessment Date R&I BBB+ Stable 27 May 2022 S&P BBB Stable 27 April 2022 Rating Position • JCR Agency BBB+ Stable 27 July 2022 Moody's Fitch Baa2 Stable 10 January 2022 BBB Stable 14 December 2022 S&P Global MOODY'S Fitch Ratings • . Adequate S&P upgraded Indonesia's outlook from negative to STABLE in line with rating affirmations by Moody's, Fitch, R&I and JCRA: confirm the condition of strong economic fundamentals and positive prospects The Ability to absorb shocks from the pandemic without any negative impact on the medium-term economic trajectory The impact of the pandemic on Indonesia's fiscal is better than that of its peers, with a promising fiscal consolidation scenario Significant progress in returning to a moderate fiscal deficit and improving Indonesia's external economic position Rating Action during the 2020-2021 Pandemic 161 Rating Downgrades 57 by Fitch 53 by Moody's 51 by S&P 109 Negative Outlook Revision 40 by Fitch 25 by Moody's 44 by S&P During the pandemic, major rating agencies are rampantly taking action ratings the pandemic has had a major impact, especially on fiscal conditions. More action ratings in 2020 than the 2008 GFC crisis In 2022, the three rating agencies have carried out 31 Rating Action Upgrades, 79 Rating Action Downgrades and 32 Negative Outlook Revisions Latest CRA's rating on peer country Ratings AAA Aaa AAA Extremely Strong 30 Rating Upgrades 11 by Fitch AA+ Aa1 AA+ 10 by Moody's AA Aa2 AA Very Strong 9 by S&P AA- Aa3 AA- A+ A1 A+ Investement Grade Ratings (IG) A A2 A Strong A- A3 A- BBB+ Baa1 BBB+ BBB Baa2 BBB BBB- Baa3 BBB- BB+ Bal BB+ BB Ba2 BB Less Vulnerable BB- Ba3 BB- B+ B1 B+ 0 B B2 B More Vulnerable Non-Investment Grade Rating (HY Status) B- B3 B- CCC+ Caal CCC+ CCC Caa2 CCC Currently Vulnerable CCC- Caa3 CCC- CC Ca CC Currently High Vulnerable C C C SD D RD Default D D Default S&P Fitch Moody's Malaysia A- (Stable) BBB+(Stable) A3 (Stable) Philippines BBB+Stable) Mexico BBB(Negative) BBB (stable) BBB(Stable) South Africa BB- (Positive) BB-(Stable) India BBB-(Stable) BBB-(Stable) Baa2 (Stable) Baa2(Stable) Ba2(Stable) Baa3(Stable) 23 Source: Ministry of Finance#24MINISTRY OF FINANCE REPUBLIC OF INDONESIA 03 BUDGET UPDATES#25THE PANDEMIC PUT UNPRECEDENTED PRESSURES ON FISCAL POSITION 2023 High Quality Fiscal Consolidation 2020 Extraordinary Policy 2021 2022 Pandemic Handling & Recovery Accelerate Recovery & Reform Budget Deficit (% GDP) Budget Deficit (% GDP) Budget Deficit (% GDP) Budget Deficit (% GDP) 2nd 1st Revision Revision Revision Budget (Perpres no.54) (Perpres no.72) Realization Budget Realization Budget (Perpres Preliminary no.98) Budget realization 0 -1 -2 -1.8 -3 -4 -5 -6 -7 -8 569∞ -5.1 ON 3 4 5 6 -1 -2 -3 -5 -4.6 -6 -6.3 -6.1 -5.7 -7 -8 -1 -2 -3 ON 3 4 5 6 7 ∞ -7 -8 0 -1 -2 -3 -2.4 -4 -4 -5 -5 -4.5 -4.9 -6 2345678 -6 -7 -8 -2.8 Economic Recovery Program (PEN) allocation IDR 575.9 Trillion Economic Recovery Program (PEN) allocation IDR 655.1 Trillion Reforms: Omnibus Law on Job Creation (Law No.11/2020) Source: Ministry of Finance Tax Reforms (Law No.7/2021) Central - Regional Finance Relation Reforms (Law No.1/2022) Omnibus Law on Financial Sector (Law No.4/2023) 25#26BUDGET OUTTURN UP TO FEBRUARY 2023 SHOWED PROMISING SIGN 2022 2023 Account (ID Rtn) Real. % to Revised as of Budget Real. as of Budget Growth (%) % to Budget Growth (%) 28 Feb 28 Feb A. Revenue 302.6 13.4 37.8 2,463.0 419.6 17.0 38.7 I. Tax Revenue (DG Tax & Custom-Excise) 256.2 14.4 41.0 2,021.2 333.2 16.5 30.1 1. Tax 199.5 13.4 36.5 1,718.0 280.0 16.3 40.4 2. Custom & Excise 56.7 19.0 59.3 303.2 53.3 17.6 (6.1) II. Non-Tax Revenue 46.3 9.6 22.8 414.4 86.4 19.6 86.6 B. Expenditure 282.7 9.1 (0.1) 3,061.2 287.8 9.4 1.8 I. Central Government 172.2 7.5 (4.2) 2,246.5 182.6 8.1 6.0 1. Line Ministries Spending 78.6 8.3 (19.0) 1,000.8 76.4 7.6 (2.8) 2. Non-Line Ministries 93.6 6.9 13.2 1,245.6 106.2 8.5 13.4 II. Regional Transfer & Village Funds 110.5 13.7 7.1 814.7 105.2 12.9 (4.8) C. Primary Balance 61.9 (14.2) 370.1 (156.8) 182.2 (116.2) 194.3 D. Surplus (Deficit) 19.9 (2.4) (598.2) 131.8 (22.0) 562.2 % to GDP 0.10 (2.84) 0.63 E. Financing 84.0 10.0 598.2 182.2 30.5 Source: Ministry of Finance. 26#27GOVERNMENT MAINTAINS FOCUS ON PRIORITY SPENDING Central Government Spending Health Spending Food Security Spending IDR Trillion, Growth % IDR Trillion, Growth % 71.2% 1.7% 19.2% -24.8% -34.0% 69.6 % 39.5 % 0.0 % 1.8% 19.9 % 20.1 3.3 15.1 2.7 11.9 10.0 2.0 1.1 1.2 14.2 11.0 11.1 (4.2) 6.0 11.7 179.7 182.6 172.2 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 161.7 145.7 Social Protection Spending Subsidy Spending 82.7 106.2 93.6 77.8 IDR Trillion, Growth % IDR Trillion, Growth % 74.5 23.9% 24.9% 24.1% -8.0% -29.9% 75.3 19.7 2.3 12.7 12.1 48.9 42.9 39.4 34.3 34.3 97.0 83.9 78.6 71.2 76.4 21.7 24.3 10.7 11.0 12.4 2019 2020 Column1 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Non-Line Ministries Spending (IDR T) -•-Growth (%) Source: Ministry of Finance 27#28BUDGET OUTTURN UP TO FEBRUARY 2023 SHOWED PROMISING SIGN Positive Growth in Main Sector Tax Revenue Tax Performance (cumulative growth y-o-y) Jan-Feb 23 Jan-Feb 22 Share 30.4% ■Feb-23 Manufacturing Jan-23 ■Sem2-22 ■Sem1-22 18.9% 42.7% 65.1% Manufacturing 3.4% 38.4% 51.6% 14.8% Trade 33.3% 23.6% 24.5% Trade 15.4% 51.3% 67.2% 30.5% 11.1% 41.5% Financial Services Financial Services 53.1% -2.6% 13.4% 16.1% 30.5% 7.5% 51.8% Mining 69.3% Mining 25.1% 191.5% 293.2% 22.7% Construction & Real 37.5% 5.2% Construction & Real Estate 50.2% -31.4% Estate 9.3% 15.5% 58.2% 60.5% Transportation 62.5% 4.7% 32.1% Transportation 2.8% 17.0% 32.7% 69.7% 54.0% Business Services 15.2% 3.8% Busines Services 18.1% 14.4% | 2.9% 3.3% Information & Communication 5.2% Information & Communication 6.9% 0.4% 12.3% 70.1% Source: Ministry of Finance 28#29CUSTOMS AND EXCISE REVENUES ARE SLIGHTLY SLOW BUT ON-TRACK Due to decreased export duty receipts, but import duty and excise revenues still showed positive performance. Excise Revenue Import Duty Revenue 93.23% 50.69% 54.08% 37.10% -0.01% 15.64% 42.28 42.27 -5.43% -9.67% 7.88 6.82 18.22 27.46 5.51 4.97 Jan Feb Jan-Feb 2020 2021 Jan-Feb 2022 Jan-Feb 2023 Jan-Feb 2020 Jan-Feb 2021 Jan-Feb 2022 Jan-Feb 2023 Growth Growth -21.68% 0.49 Export Duty Revenue 6.57 380.42% 176.80% -69.01% 2.37 2.04 Jan Feb 2020 Jan-Feb 2021 Jan Feb 2022 Jan-Feb 2023 Excise (IDR Trillion) Influenced by tariff policies, the overflow effect of repayment of tobacco products produced in December 2022, and the effectiveness of supervision I Import Duty (IDR Trillion) Driven by extra effort in January, the dollar exchange rate increased compared to last year and Vehicle Import Duty Export Duty (IDR Trillion) Growth Affected by the moderated price of CPO and the decline in the export volume of mineral commodities Source: Ministry of Finance 29#30REALIZATION OF NON TAX REVENUE CONTINUES TO INCREASE Mainly Driven by from Natural Resource Revenue, SOE's profit, and Public Service Agency Revenue, and Other Non-Tax Revenue Non-Tax Revenue 2.1% -3.6% -2.8% 22.8% 126.8 (1.6) 5.3 19.5 (59.2) O Oil & Gas 15.9 T 16.8 T 18.6 T 15.5 T 86.6% 6.8 T Revenue 2019 2020 2021 2022 2023 Gas Oil -Growth (%) 269.3 28.2 50.7 (0.7) (24.5) 29.6 T 86.4 Non-Oil & Gas 5.5 T 8.0 T 4.1 T 5.3 T Revenue 2019 2020 Non-Mineral&Coal 2021 2022 Mineral& Coal 2023 --Growth (%) 4,562.3 (94.3) 840.1 (96.0) 46.3 40.3 38.8 37.7 SOE's Revenue 4.6 T 0.0 T 0.0 T 0.0 T 0.0 T 2019 2020 2021 2022 2023 SOE's Profit Bl's Surplus Growth (%) 49.6 49.0 Other Non- Tax Revenues 12.1 (0.4) 16.92T 16.91 T 24.IT (23.0) 186 T 2707 T Jan Feb 2019 Jan Feb 2020 Jan Feb 2021 Jan Feb 2022 Jan Feb 2023 Non Tax Revenue (IDR Trillion) Growth Source: Ministry of Finance, YTD 28 February 2023 2019 2020 2021 2022 2023 Mining Product DMO Line Ministries Revenues Growth (%) Public Services 200.1 61.5 43.1 (24.5) (19.7) O 2.3 T 1.9T T&T 4.2 T 6.8 T Agency (BLU) Revenue 2019 2020 2021 2022 2023 Public Service Agency -Growth (%) 26#31THE PERFORMANCE OF TRANSFERS TO THE REGION REQUIRES IMPROVEMENT 2023 2022 (January-February) Revenue Sharing (DBH) ■General Allocation (DAU) Physical Special Allocation (DAK Fisik) Non-Physical Special Allocation (DAK Non Fisik) Incentive for Local Gov't (DID) ■Special Autonomy & Privilege Allocation for Yogyakarta ■Village Fund Transfer to Region Fund IDR 105.2T (12.9% from budget) IDR110.5 T (13.7% from budget) . The distribution of transfers to regions in the Indonesian government budget decreased by 4.8% in nominal terms as of February 28, 2023. The total disbursement was IDR 105.2 T (12.9%), slightly lower than the disbursement in FY 2022 of IDR 110.5 T (13.7%). Some of the Transfer to Region funds have not been disbursed yet due to waiting for the submission of disbursement requirements from the Regional Government. Local Government Performance REVENUE Regional Tax performance in 8.33 5.09 0.72 0.82 0.66 6.58 5.90 1.16 1.41 10.07 10.20 February 2023 grew SPENDING 9.7% (y.o.y), driven by Up to Feb, local Gov't 23.57 25.85 growth in the realization spending grew by 4.0% of consumptive taxes, indicating that the (yoy) contributed by 25.95 27.36 Personnel and Other Spending. 2022 ■Local Tax 2023 ■Retribution 2022 2023 economic activities of the people in the regions are continuing to improve. Source: Ministry of Finance, YTD 28 February 2023 Return of Local Gov't Other Revenue Personnel Spending Material Spending Other Spendings Capital Spending 31#32BUDGET FINANCING APPLY PRUDENT, FLEXIBLE, AND OPPORTUNISTIC PRINCIPLE Source: Ministry of Finance Financing Realization Up To 28 February 92.9 67.7 186.9 • 177.7 -12.8 9.2 2022 2023 Loan (nett) Securities (nett) PLAN & REALIZATION OF INVESTMENT FINANCING AS OF 28 FEB 2023 FLPP Housing Financing Liquidity Facility IDR 85.8T* • Domestic Loan (Nett) IDR (0.18 T) Foreign Loan (Nett) IDR 9.35 T Domestic Loan Withdrawal (Gross) IDR 0.02T Domestic loan principal installment financing IDR (0.2T) Foreign Loan Withdrawal (Gross) IDR 16.91T Foreign loan principal installment financing IDR (7.56T) IDR 6T disbursement for The Low Income People's Housing Financing 16,647 Housing under FLPP financing valued at IDR 1,85T Education Fund Management Agency (LPDP) IDR 134.1T* Financing LPDB by IDR 15T LDKPI International Development Cooperation Fund (LDKPI) IDR 8T* • Financing LDKPI by IDR 2T 32#33MINISTRY OF FINANCE REPUBLIC OF INDONESIA THANK YOU FISCAL POLICY AGENCY, MINISTRY OF FINANCE, REPUBLIC OF INDONESIA Gd. Notohamiprodjo Dr Wahidin no 1, Jakarta Pusat 10710 email: [email protected] 33 Pict source: unsplash.com