#1MINISTRY OF FINANCE REPUBLIC OF INDONESIA RECENT MACROECONOMIC AND FISCAL UPDATE MINISTRY OF FINANCE January 2023#2MINISTRY OF FINANCE REPUBLIC OF INDONESIA The Team Investor Relation Unit Abdurohman Director for Center of Macroeconomic Policy Rahadian Zulfadin Senior Analyst Putri Rizki Yulianti Analyst Andi Yoga Trihartanto Staff Eko N Saputro Senior Analyst 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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DIRECTLY OR NOT FOR PUBLICATION OR DISTRIBUTION, INDIRECTLY, IN ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE LAW#4MINISTRY OF FINANCE REPUBLIC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#5ASIDE PANDEMIC, VARIOUS DOWNSIDE RISK OVERSHADOW GLOBAL ECONOMY PROSPECT K-STREAK 2700 COVID-19 Cases Increase Geopolitical Tension Supply Chain Disruption Persistent High Inflationary Pressures 2.38 ▼ 8./ 11.02 ▼ 9.25 9.225.237 Financial Contagion / Stress Food Insecurity GHANA Fragmentation of Global Trade, Investment, and Financial Networks Climate and Weather Related Disasters Monetary Policy and Liquidity Tightening Dimmer Global Medium- term Growth Prospect 5#610 6 GLOBAL COMMODITY PRICES REMAIN VOLATILE, WITH MANY HAVE BEEN IN DECLINING TREND Supply improvement and the sentiment of slower economic activity have led to moderation trend in many commodities 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$/MMBtu) YTD 8 -16.9% 7 6 5 4 3 2 J-20 M-20 M-20 J-20 S-20 N-20 J-21 M-21 M-21 J-21 S-21 N-21 Coal 5dma (US$/Metric Ton) 150 9.05 500 440.5 YTD 411.7 400 -1.6% 300 الله 130 YTD 398.7 110 -8.9% 90 5.91 4.17 100 264.6 200 50 22 30 10 70 J-22 M-22 M-22 J-22 S-22 N-22 J-23 J-20 M-20 M-20 J-20 S-20 N-20 J-21 M-21 M-21 J-21 S-21 N-21 J-22 M-22 M-22 J-22 S-22 N-22 J-23 Brent 5dma (US$/barrel) 125.5 126.0 J-20 M-20 M-20 J-20 S-20 N-20 J-21 M-21 M-21 J-21 S-21 N-21 J-22 M-22 M-22 J-22 S-22 N-22 J-23 2100 1800 YTD 0.8% 1500 1200 900 600 Increasing demand during the festive season and weather condition still hold up food prices, particularly soybean and corn Soybean 5dma (US$/bu.) CPO 5dma (US$/Ton) Wheat 5dma Corn 5dma (US$/Bushels) 756.8 1400 1,779.7 YTD 1200 -5.7% 1000 921.8 800 727.8 600 (US$/Bushels) 1650 800 1307.0 1,551.2 1,514.2 1500 YTD 1350 -3.5% ساله 700 YTD -3.8% 600 1,339.7 1200 770.4 1050 300 22 M-20 J-20 S-20 N-20 J-21 M-21 M-21 J-21 S-21 N-21 J-22 M-22 M-22 J-22 S-22 N-22 J-23 400 J-20 M-20 M-20 J-20 S-20 N-20 J-21 M-21 M-21 J-21 S-21 N-21 J-22 M-22 M-22 J-22 S-22 N-22 J-23 Sources: Bloomberg, UN, Reuters data as of Thursday, 5 Jan 2023 900 750 J-20 M-20 M-20 J-20 S-20 N-20 J-21 M-21 M-21 M-21 1 Z-IN J-21 IZ-C S-21 IZ-S N-21 J-22 M-22 M-22 J-22 S-22 N-22 J-23 500 400 300 589.2 W J-20 M-20 M-20 J-20 S-20 N-20 J-21 M-21 M-21 J-21 S-21 N-21 J-22 M-22 M-22 J-22 S-22 N-22 J-23 678.8 83.9#715 10 10 5 0 (5) (10) 15 10 5 0 (5) CONTINUOUS MONETARY TIGHTENING REMAINS TO BE MINDFUL IN SEVERAL MAJOR ECONOMIES While inflationary pressures have been trending down in many emerging economies USA Inflation Policy Rate ▲ Real Int. Rate LLLLLLLLLL 7.1 4.50 (2.60) J-22 F-22 M-22 A-22 M-22 J-22 J-22 A-22 S-22 O-22 N-22 D-22 Indonesia Inflation Policy Rate ▲ Real Int. Rate 0.00 5.5 5.50 15 10 S 0 (5) (10) 15 10 5 (5) Eurozone Inflation Policy Rate ▲ Real Int. Rate UK Inflation Policy Rate ▲ Real Int. Rate (7.50) 2.50 10.0 I II I LLLLLL 15 10 5 (7.20) 10.7 LLLLLLLLLLLE J-22 F-22 M-22 A-22 M-22 J-22 J-22 A-22 S-22 O-22 N-22 D-22 (10) J-22 F-22 M-22 A-22 M-22 J-22 J-22 A-22 S-22 O-22 N-22 D-22 India Brazil Inflation Policy Rate Real Int. Rate Inflation Policy Rate Real Int. Rate 15 5.9 5.9 0.02 10 5 0 (5) (10) (10) (10) J-22 F-22 M-22 A-22 M-22 J-22 J-22 A-22 S-22 O-22 N-22 D-22 J-22 F-22 M-22 A-22 M-22 J-22 J-22 A-22 S-22 O-22 N-22 Source: Bloomberg 5.9 13.8 7.85 J-22 F-22 M-22 A-22 M-22 J-22 J-22 A-22 S-22 0-22 N-22 7#8GLOBAL MANUFACTURE ACTIVITIES HAVE CONTRACTED TO THE LOWEST LEVEL IN 30 MONTHS Indonesia PMI Manufacture continues to expand amid contractions in major economies such as US, Europe, China, and Japan PMI MANUFAKTUR AS OF DECEMBER 2022 G20 & ASEAN-6 PMI Manufacture Global ASEAN-5 Major Economies 65 65 65 IND 57.8 SAU 56.9 Agt India 57.8 PHIL 53.1 50.3 55 Dec 55 RUS 53.0 Philippines 53.1 Indonesia 50.9 55 48.6 THA 52.5 Thailand 52.5 Vietnam 46.4 MEX 51.3 45 45 45 Malaysia 47.8 45 55 IDN 50.9 Russia 53.0 Japan 48,9 US 46.2 CHina49.0 S Korea 48.2 Europe 47.8 AUS | 50.2 CAN 49.2 35 35 35 FRA 49.2 CHN 49.0 JPN 48.9 25 25 ITA 48.5 Dec-20 Aug-21 Apr-22 Dec-22 Dec-20 Jun-21 Dec-21 Jun-22 KOR 48.2 TUR 48.1 EUR 47.8 MYS 47.8 GER 47.1 VIE 46.4 USA 46.2 GBR 45.3 BRA 44.2 = 50 expansionary threshold G20 and ASEAN-6 PMI Manufacture performance distribution in December 2022 (minus ZAF, ARG, Expand - Accelerate (PMI above the 50 threshold or in an expansionary level & higher than previous month) 22.7% Indonesia, Mexico, Thailand, Filipina, India 25 Dec-20 Jun-21 Dec-21 Jun-22 Expand - Slowing (PMI above the 50 threshold or in an expansionary level but lower than previous month) 13.6% Australia, Russia, Saudi Arabia Dec-22 Contracted (PMI below the 50 threshold or in a contractionary level) 63.6% US, Europe, UK, Germany, Italia, France, S Korea, Japan, China, Brazil, Malaysia, Vietnam, Turkey, etc. Dec-22 Source: Bloomberg, IHS Markit#92019 Source: IMF 2020 2021 2022F 2.8% 3.0% 2019 2020 2021 2023F USA 4.4% 3.6% 3.2% 3.2% 3.8% 3.6% 2.9% 2.7% GLOBAL ECONOMIC PROSPECT HAS WEAKENED WITH HIGH UNCERTAINTY Global growth projection has been significantly revised down, while India and ASEAN-5 prospects are still relatively buoyant Global Growth Projection (% yoy) 6.0% WEO Jan WEO Apr WEO Jul WEO Oct Global Inflation Projection(% vov) 8.8 · 4.7 3.5 3.2 2022f 2023f 2019 2020 2021 2022F 2023F Euro Zone 6.5 Economic Growth Projections in Several Major Economies (% YoY) China Upside risks: • Commodity prices moderation China's Covid-19 restriction relaxation Strong recovery momentum in several Asian countries (i.e. India & ASEAN-5) Downside risks: • • · Increasing geopolitical tension Persistently high inflation in several major countries Slow economic activities in China, US, and Europ Narrower policy spaces (fiscal and monetary) • Strong US Dollar 2.3 5.7 1.6 1.6 2.2 8.1 8.7 1.0 5.2 6.8 6.0 6.1 3.1 0.5 3.2 4.4 3.7 4.9 5.3 4.9 3.4 3.4 -6.1 -3.4 -6.6 India ASEAN-5#10MINISTRY OF FINANCE REPUBLIC OF INDONESIA 02 INDONESIAN ECONOMIC OVERVIEW#11INDONESIA'S RECOVERY IS ONE OF THE STRONGEST AMONGST G-20 DAN ASEAN-6 COUNTRIES 10.9 4.5 4.4 1.71.8 2.3 2.5 2.4 0.6 6.4 4.9 4.7 4.2 2.6 1.0 Economic Growth 2022 (%, yoy) Q1-22 Q2-22 Q3-22 14.2 8.2 7.5 7.6 8.9 5.5 4.3 5.0 3.7 5.0 5.45.7 2.1 1.81.8 3.0 2.9 3.1 3.9 4.54.1 5.0 7.7 13.7 4.8 3.9 0.4 JPN THA GBR ITA FRA PHL EUR USA MYS KOR IDN SGP VNM CHN -2.6 -2.6 JPN THA Comparison Cumulative Real GDP Q1-Q3 2022 to Pre-Pandemic Level 2019 (%) 6.6 6.6 6.8 5.1 5.4 1.7 1.9 0.1 0.4 0.7 GBR Sources: Bloomberg, CEIC, and Trading Economics, processed 13.7 12.9 ITA FRA PHL EUR USA MYS KOR IDN SGP VNM CHN 11#12NATIONAL ECONOMIC RECOVERY CONTINUES IN QUARTER III 2022 Indonesia's economic expansion accelerates amidst increasing global economic uncertainty 3.0 7.1 5.7 5.4 5.0 5.0 3.5 ☐ ☐ ☐ Household consumption grew relatively high in line with the strong purchasing power of the people, supported by the government's social protection program and maintained inflation rates. Government consumption in the third quarter normalized due to decreasing COVID-19 related spending needs. Investment grew stronger leads to the economic transformation towards a higher value-added economy, as evidenced by the high growth in investment in machinery and commercial vehicles. Exports continued hit double-digit growth amidst global turmoil, supported by strong both non-oil & gas and oil & gas exports, such as palm oil, coal and natural gas. From the production side, economic growth underpinned by the performance of almost all sectors that recorded grew positively in Q3-2022, except the Health Services sector. (0.7) (2.2) (3.5) (5.3) 10 Q1 Q2 Q3 Q4 2020 Source: Indonesia Statistics 10 Q1 Q2 22 83 Q3 2021 2020 2021 2022 Share (% GDP) Expenditure- Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 50.4 HH Cons. 2.8 -5.5 -4.0 -3.6 -2.6 -2.2 6.0 1.0 3.6 2.0 4.3 5.5 5.4 7.6 Gov. Cons. 3.8 -6.9 9.8 1.8 2.0 2.5 8.1 0.6 5.2 4.2 -6.9 -4.9 -2.9 28.6 Investment 1.7 -8.6 -6.5 -6.2 -5.0 -0.2 7.5 3.8 4.5 3.8 4.1 3.1 5.0 26.2 Export 0.2 -12.4 -13.0 -6.9 -8.1 6.9 31.5 29.2 29.8 24.0 16.7 20.0 21.6 84 Q4 Q1 10 Q2 Q3 63 (21.7) Import -5.4 -20.7 -24.5 -15.8 -16.7 4.4 31.8 29.9 29.6 23.3 15.9 12.4 23.0 2022 GDP 3.0 -5.3 -3.5 -2.2 -2.1 -0.7 7.1 3.5 5.0 3.7 5.0 5.4 5.72#13SECTORAL WISE, THE RECOVERY HAS BEEN RELATIVELY BROAD-BASED Leading sectors are already growing above pre-pandemic levels; the accommodation and restaurant, and transportation sectors experienced double-digit growth RECOVERY TREND: THE PRODUCTION SIDE (%, YOY) Q1 2022 Q2 2022 Q3 2022 GDP 5.7 Agriculture 1.6 Mining 3.2 Manufacturing 4.8 Construction 0.6 Trade 5.3 Transportation Hotel & Restaurant ICT Real Estate 0.6 Source: Indonesia Statistics, processed 6.9 17.8 REAL GDP LEVELS COMPARING TO 2019 REAL GDP LEVELS 2020 and 2021 (Annually), 2022 Q1-Q3 (cumulatively) 2020 2021 YTD Q3 2022* GDP Agriculture Mining Manufacturing Construction Trade 25.8 Transportation Hotel & Restaurant ICT Real Estate -12.3 1.6 6.6 3.6 4.7 2.0 5.1 0.4 4.6 -0.5 2.1 0.7 5.5 3.7 -6.8 2.8 18.1 26.9 *Cumulative Real GDP Q1-Q3 2022 Vs Q1-Q3 2019 5.2 7.4 13#14DOMESTIC INFLATION PRESSURE DECREASED BACK IN OCTOBER, DRIVEN BY DECREASING VOLATILE FOOD Domestic fuel price adjustment has not induced inflation to surge sharply INFLATION DYNAMIC BY COMPONENTS percentage, yoy INFLATION BY COUNTRIES (NOV/DEC,% YOY) China Saudi Arabia 1.6 2.9 13.3 13.3 13.3 13.0 9.0 Japan Vietnam* Malaysia S Korea* Indonesia Thailand Brazil 3.8 4.6 4.0 Argentina Inflation: 92.4% Turkey Inflation: 84.4% 5.0 5.5 5.6 5.9 7.2 India 6.0 5.7 5.7 France 5.6 5.4 Canada 5.5 US 5.9 6.2 6.8 7.1 3.2 3.3 3.3 3.4 Australia Singapore South Africa Mexico Phillipines Germany Europe 7.3 6.7 7.4 7.8 8.0 10.0 10.1 UK Italy Russia *) December Inflation 10.7 11.8 12.0 CPI Volatile Food Administered Price Core Source: Statistics Indonesia, Bloomberg 14#15Source: Statistics Indonesia -10 -20 -30 Jan-20 Feb-20 Mar-20 Apr-20 40 30 20 10 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 EXTERNAL POSITION CONTINUED TO STRENGTHEN Export continued to grow strongly amid global economic pressures, while trade surplus has recorded surplus in 31 months in a row Trade Balance (Billion USD) Growth of Export & Import (% yoy) Export Import Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 Trade Balance May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 -18.96 5.17 Jan-20 Feb-20 Mar-20 24.12 In November 2022, exports reached USD24.12 billion and imports reached USD18.96 billion. Exports still recorded a solid performance, increased by 5.6%, meanwhile, imports contracted by 1.9% (yoy) The trade balance in November 2022 recorded a surplus of USD5.17 billion, continued the surplus trend for 31 consecutive months. Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 - Export Apr-21 May-21 Jun-21 Jul-21 Aug-21 -Import 15 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 -1.9 5.6#16Source: Bank Indonesia -4.0 2010 2011 2012 2013 2014 Balance of Payment (% of GDP) 60 Current Account Balance (Billion USD) 60 6.0 40 4.0 2.0 0.0 A 20 0.90 -2.0 -0.07 -20 -0.93 -40 2015 2016 2017 2018 2019 2020 2021 3Q2022 THE CURRENT ACCOUNT SURPLUS IN THE Q3-2022 INCREASED, EXTERNAL RESILIENCE MAINTAINED -60 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 50 40 30 08.97 20 10 0 -10 Net Error & Omissions Current Account Capital & Financial Account Overall Balance Balance of Payments (BOP) in the Q3-2022 remained solid, thereby reinforcing external resilience. Services Primary Income Current Account Goods Secondary Income Current account performance was solid in the Q3-2022, with the surplus continuing an upward trend on the back of stronger non-oil & gas export performance Portfolio Investment Other Investment Financial Transaction Financial Derivatives Direct Investment Despite increasing global financial market uncertainty, capital & financial account performance in the Q3-2022 was bolstered by direct investment 3Q2022 -20 2010 2011 2012 2013 2014 2015 2016 16 2017 2018 2019 2020 2021 Q2022 Financial Account Balance (Billion USD) -9.22#17UNEMPLOYMENT AND POVERTY RATE DECLINED WITH ROBUST ECONOMIC RECOVERY Social Safety Net and other recovery program during pandemic have effectively reduced poverty and employment rates The labor market is gradually recovering driven by a quality economic recovery Labor Market Source: Statistic Indonesia 12.00 Poverty rate continues a downward trend to Poverty Source: Statistic Indonesia 12 single digits Protection towards the improvement of public welfare is always maintained through various social protection programs 10.00 8.00 6.00 4.00 2.00 0.00 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 | Unemployment (Million People) Unemployment Rate (RHS,%) 10 9.10 8.42 8 6.49 5.86 6 0 2 27.54 Social Security Budget 26.42 2021 IDR468,2 Trillion 26.16 2022 IDR502,6 Trillion 10.14 2023 IDR479,1 Trillion 9.78 4 9.54 Micro Credit Program (Kredit Usaha Rakyat - KUR) 2021 IDR285 Trillion 2022 IDR316 Trillion Poverty (Million People) Poverty Rate (RHS, %) 2023 IDR450 Trillion 17#18100 200 300 THE SHORT-TERM ECONOMIC GROWTH PROSPECTS ARE RELATIVELY STRONG Several leading indicators of economic activity are still quite robust The Retail Sales Index continues to grow strongly in line with increased domestic economic activity The PMI Manufacturing Index is still in the expansion zone, continuing its expansion trend for 15 consecutive months The Consumer Confidence Index remains in the optimistic zone RSI Growth RSI (%yoy) 0 JM MJ S N J M M J S N J M MJS N 2020 2021 Sources: Statistics Indonesia, Bank Indonesia, IHS Markit, 2022 2022 1.6% 40 0 60 10 70 140 50 30 20 10 m 50.3 120 119.1 batas optimis = 100 Impro 100 80 Jan-20 Mar-20 May-20 Jul-20 2020 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 2021 Jan-22 Mar-22 NMay-22 2022 Jul-22 Sep-22 Nov-22 60 60 J FMAMJ JASONDJ FMAMJ JASOND J FMAMJ JASON 2020 2021 2022 18#19GROWTH IS EXPECTED TO REMAIN STRONG IN 2023 Global Uncertainties needs to be anticipated and the impact to the domestic economy needs to be mitigated. Annual Economic Growth Outlook (%, yoy) Sources: BPS, forecast 5 5.2 5.0 Economic Growth Outlook (%, yoy) 2022 2023 IMF (WEO Oct) 5.3 5.0 5.3 World Bank (IEP Dec) 5.2 4.8 5.1 ADB (ADO Update Sept) 5.4 5.0 Bloomberg Consensus (Nov) 5.3 4.9 5.3 4.7 3 3.7 2018 2019 2020 2021 2022F -1 -2 -3 -2.1 Source: IMF WEO October; World Bank Indonesia Economic Prospects Dec 2022; OECD Economic Forecast Summary Nov 2022; ADB Asian Development Outlook Sept 2022; Bloomberg, and Ministry of Finance . • • • OECD (Nov) Pandemic situation is getting more manageable and the gradual easing of social restrictions potentially encourage public consumption Although faced with high global uncertainties, Indonesia's exposure to the external is relatively moderate, given the high domestic demand Banking liquidity is relatively ample to support consumption and investment activities However, the risk of global economic slow down along with global monetary tightening still need to be anticipated • The government will continue to coordinate closely with relevant institutions and authorities to maintain domestic economic stability 19#20MINISTRY OF FINANCE REPUBLIC OF INDONESIA 03 BUDGET UPDATES#21STRONG BUDGET PERFORMANCE IN 2022 Fiscal deficit recorded at 2.38% of GDP, faster fiscal consolidation under 3% of GDP in 2023 2021 2022 Account (IDRtn) 2019 2020 Audited Growth (%) Revised Budget Budget Realization (Preliminary) % to Revised Budget Growth (%) A. Revenue I. Tax Revenue 1,960.6 1,647.8 2,011.3 22.1 1,846.1 2,266.2 2,626.4 115.9 30.6 1,546.1 1,285.1 1,547.8 20.4 1,510.0 1,784.0 2,034.5 114.0 31.4 1. Tax 1,332.7 1,072.1 1,278.6 19.3 1,265.0 1,485.0 1,716.8 115.6 34.3 2. Custom & Excise 213.5 213.0 269.2 26.4 245.0 299.0 317.8 106.3 18.0 II. Non-Tax Revenue B. Expenditure 409.0 343.8 458.5 33.4 335.6 481.6 588.3 122.2 28.3 2,309.3 2,595.5 2,786.4 7.4 2,714.2 3,106.4 3,090.8 99.5 I. Central Government 1,496.3 1,833.0 2,000.7 9.1 1,944.5 2,301.6 2,274.5 98.8 10.9 13.7 II. Regional Transfer & Village Funds 813.0 762.5 785.7 3.0 769.6 804.8 816.2 101.4 3.9 C. Primary Balance (73.1) (633.6) (431.6) (31.9) (462.2) (434.4) (78.0) 18.0 (81.9) D. Surplus (Deficit) (348.7) (947.7) (775.1) (18.2) (868.0) (840.2) (464.3) 55.3 (40.1) % to GDP (2.20) (6.14) (4.57) (4.85) (4.50) (2.38) E. Financing 402.1 1,193.2 871.7 (27.0) 868.0 840.2 583.5 69.5 (33.1) Source: Ministry of Finance The Government revenues booked at 115.9% from its target grew significantly at 30.6%, supported by increased economic activity, the impact of the implementation of the tax reform (HPP law), and rising commodity prices. The government expenditures is optimized at 99.5% from its target, to achieve development targets as well as to function as a shock absorber. The government expenditures are directed towards the distribution of various social assistance & subsidies, funding for national strategic projects, as well as economic recovery programs, including Transfers to Regions. The deficit and Primary Balance have fallen significantly to pre- pandemic levels accompanied by more efficient budget financing. 21#222022 BUDGET HAS EFFECTIVELY MITIGATED THE ECONOMIC TURMOIL AND ADVANCED FASTER ECONOMIC RECOVERY WHILE MAINTAINED THE RISK BETTER 1 Government expenditures grew by 10,9% (yoy) to stimulate the economy) 2 Faster recovery lead to significant growth in revenue (30,5% yoy) Expenditures (Rp Trillion) +Rp 304,3T 3,090.7 2,786.4 2021 Note: Preliminary figures of 2022 119 APBN Pendapatan Negara (Rp Trillion) +Rp 615,0T 2,011.3 2,626.4 3 Stronger risk mitigation and management (lower deficit) → foundation for fiscal consolidation Deficit (%GDP) 2021 2022 -2.38 2022 2021 2022 -4.50 -Rp 310,7T RP APBN E Кр 2 STABILIZATION FUNCTION: Inflation rate is maintained in moderate level ✓ Strong economic growth High increase of new workers (4,2 million) DISTRIBUTIVE FUNCTION Poverty rate continues a downward trend to single digits (March 2022 9,54%) ✓ Maintained gini ratio amidst Covid-19 pandemic (gini ratio: 2019:0,380 vs 2020:0,381) APBN ALLOCATIVE FUNCTION ✓ Maintained HDI (2018:0,710 vs 2021:0,705) Lower stunting prevalence 2019: 27,7% vs 2021: 24,4% Higher Farmers' Terms of Trade (2020: 101,7 vs 2021:104,6) 22#23REVENUE COLLECTION CONTINUED TO STRENGTHEN Supported By High Commodity Prices, Stronger Economic Activity And Gain From The Recent Tax Reforms Strong Recovery in Revenue Collection Tax Revenue for January - December (IDR Tn) 1.5% 19.3% 34.3% -19.6% 1,716.8 1,332.7 1,278.6 1,072.1 2019 2020 2021 2022 Realization Growth (y-o-y) Performance (cumulative growth y-o-y) L The strong tax revenue collection in January-Dec 14th 2022 was largely contributed by: ■ The trend of increasing commodity prices; Expansive economic growth; Low base in 2021 due to fiscal incentives; Impact of the implementation of the HPP Law. ■ The best performing sectors in the economy (i.e. manufacturing, trade, and mining) are also translated into the tax revenue and recorded the highest growth among sectors. ■ Much improved economic recovery and activities are also reflected in all sectors of tax receipts, which significantly grew higher compared to the same period last year. Strong Performance In Tax Collection Across Sectors Jan- Dec 2021 Jan-Dec 2022 113.6% 60.5% 24.6% 31.8% 37.3% 18.2% 7.1% 2.1% 24.7% 10.4% 14.6% 6.0% 16.6% 3.4% -0.1% Manufacturing Trade Finance Mining -13.5% Construction Transportation Information & Communication Business Services Share 28.7% 23.8% 10.6% 8.3% 4.1% 3.9% 3.6% 3.0% Source: Ministry of Finance 23#24TAX REFORM WILL RAISE TAX RATIO AND MAINTAIN FISCAL SUSTAINABILITY Tax reform will improve tax collection; anticipate social, economic, and demographic dynamics and implement best practices Tax Administration Reform Tax Policy Reform Tax Reform Details Progress Update on Tax Reform I Healthy and Fair Taxation System 1 Voluntary Disclosure Program (Jan-June 2022) 247,918 IDR61.01T IDR594.82T I I I I Taxpayers Tax Collected Total Net Assets I I 308,059 IDR512.57T Report IDR59.91T IDR22.34T Domestic Declaration Declaration from Investment and Repatriation I I overseas I I . GENERAL PROVISIONS AND PROCEDURES • Integration of the ID Number with the Taxpayer Number, Appointment of third parties as withholding, collecting, depositing and/or reporting tax (including e-commerce) CARBON TAX Introduction of the carbon tax in 2022 in steps according to a roadmap taking into account the development of a carbon market, achievement of NDC targets, sector readiness, and economic conditions. Source: Ministry of Finance INCOME TAX • • New bracket for income >IDR 5 billion at 35% tax rate, Corporate Income Tax in 2022 remains at 22%, Income Tax rate at 0.5% for MSME (threshold IDR 500million), Employee fringe benefits become tax object. EXCISE Strengthening the mechanism for determining excisable goods; and applying criminal sanctions as a last resort in excise crime. VALUE ADDED TAX VAT rate hike from 10% to 11% from 1 April 2022, and to 12% by 2025, Reducing the VAT exemptions and facilities. VOLUNTARY DISCLOSURE PROGRAM Improve taxpayers' compliance through voluntary disclosure program for unreported tax obligations at a final income tax rate. I I T 2 Tax on digital economy VAT on Ecommerce (2020-2022) Tax on Fintech - P2P Lending Starting May 2022 I I I IDR10.11 T I I I I I IDR210.04B Total I I I I I Tax on Crypto T Starting May 2022 IDR246.45B Total I I I I 3 VAT Rate Hike (Starting April 2022) I I I (IDR Trillion) Total IDR 60.76 T I 9.77 6.25 5.74 7.28 7.15 7.62 6.87 7.57 I I T I 1.96 I I I April May June July Aug Sept Oct Nov Dec I I L 24'#25CUSTOM & EXCISE REVENUE REALIZATION SIGNIFICANTLY GREW Driven by the trend of improving national import performance, high commodity prices, increasing export volume, and the effectiveness of tariff policies Excise Revenue 16.0 10.9 8.0 226.9 2.3 195.5 176.3 172.4 Import Duty Revenue Export Duty Revenue 30.6 708.2 20.6 -47.9 21.3 15.2 39.8 51.1 34.6 -4.1 39.1 37.5 -13.5 32.4 3.5 4.3 2019 2020 Excise (IDR Trillion) 2021 2022 -Growth (%) Influenced by the effectiveness of the tariff policy, the surge in production in March (the effect of the increase in VAT rates) and the effectiveness of supervision. Source: Ministry of Finance Note: Realization up to YTD 31 December 2022 (Preliminary) 2019 2020 2021 2022 2019 2020 2021 2022 Growth (%) I Export Duty (IDR Trillion) -Growth (%) I Import Duty (IDR Trillion) Affected by the improved import performance and underpinned by trade and manufacturing sectors. Driven by high commodity prices, the increase in export duty tariffs for palm oil products, and the Flush Out policy. 25#26Non-tax Revenue Grew Strongly From An Increase In Almost In All Components Driven By Increase In Commodity Prices, Good Performance Soe's and Improvement Of Public Services Oil & Gas Revenue -0.1 -15.9 409.0 343.8 33.4 458.5 39.9% 53.7% -15.2% -43.0% 148.5 121.1 96.6 69.1 A 2019 A 2020 A 2021 A 2022 87.9% 127.2% 28.3 120.1 588.3 Oil & Gas Revenue -10.6% -16.7% 52.9 33.8 28.1 2019 2020 2021 2022 I Non Tax Revenue (IDR T) -Growth (yoy,%) Source: Ministry of Finance A 2019 79.2% A 2020 A 2021 A 2022 33.1% -18.1% -53.8% 80.7 SOE'S Revenue 66.1 40.6 30.5 A 2019 A 2020 A 2021 37.1% A 2022 28.7% -3.2% -10.7% 196.3 Other Non- 152.5 124.5 111.2 Tax Revenues Public Services Agency Revenue A 2019 A 2020 41.8% A 2021 81.8% A 2022 -11.3% -34.3% 126.0 69.3 48.9 82.8 A 2019 A 2020 A 2021 A 2022 26#27THE NATIONAL ECONOMIC RECOVERY PROGRAM (PEN) HAS EFFECTIVELY CUSHIONED THE IMPACT OF THE PANDEMIC The program continues to offer support for communities during hard times and accelerate the economic recovery NATIONAL 2020 2021 ECONOMIC RECOVERY PROGRAM (PEN) 2020: 575.9 T 2021: 658.6 T 62.7 198.5 216.6 171 62.5 105.4 Health Sector Social Protection 173 116.2 58.4 67.7 Priority Programmes Corporation & MSMEs Support Business Incentives National Economic Recovery Program (PEN) was enacted in response to the Covid-19 pandemic handling and was aimed at saving lives and supporting the economy. In 2021, the initial figures were lower than 2020, however, due to delta variant outbreak in July, PEN was strengthened for social protection expansion and hospital costs. ALLOCATION IN 2022: 455.6 T (Realization up to end Dec IDR 396.7 T) IDR 154.76 T Amidst elevating global uncertainty, the Government optimally carried out the budget as "shock absorber", through responsive and anticipative PEN program Health Sector Social Protection • Economic Recovery IDR 178.32 T Realization: IDR 183.4 T Labor intensive program IDR 21.2T Food Security IDR 36.1 T MSMEs Supports IDR 26.1 T IDR 122.54 T Realization: IDR 61.3 T Patient treatment IDR 28.8 T Research IDR 20.7 B Health worker incentives IDR 3.5 T Vaccination IDR 3.4T Tax incentives IDR 1.8T Covid-19 Handling through village fund IDR 18.3 T Realization: IDR 152.0 T PKH IDR 28.7 T, Sembako IDR 44.1 T Cash Transfer- cooking oil IDR 7.0 T Cash Transfer- village fund IDR 26.9 T Cash Transfer-street vendor IDR 1.3T Preemployment card IDR 18.8 T Assistance for Elderly and disable people IDR 224.7 B • Tax incentives IDR 19.7 T Source: Ministry of Finance 27#28MAINTAINED ACCELERATION OF GOVERNMENT SPENDING The success of controlling Covid-19 has reduced overall costs and increases capacity for other government spending Personal Spending¹ Capital Spending¹ (in IDRtn¹) Material Spending¹ (in IDRtn¹) (in IDRtn¹) Growth (yoy) 2022 257.3 3.5% 2022 269.5 152.6 (20.2)% 2022 238.8 2021 248.6 Social Protection Spending¹ Transfer to Region; IDR 30.9 T Line Ministries; IDR 461.6 IDR 173.6T Non-Line Trillion Ministries; IDR 257.1T PEN IDR 152.0 T Non-PEN IDR 309.6 T Source: Ministry of Finance Note: 1. Temporary/Unaudited Realization up to YTD December 2022 2021 260.2 268.7 ■Material Spending PEN Program Health Spending¹ Transfer to Region; IDR 35.8 T IDR 176.7 Trillion Non-Line Ministries; IDR 10.6T Line Ministries; IDR 130.3T PEN IDR 47.0 T Non-PEN IDR 129.7 T 2021 221.2 (0.3)% 18.5 239.7 ■Capital Spending 2020 Project Carry Over Education Spending¹ Financing; IDR 20.0 T Transfer to Region; IDR 281.1 T IDR 472.6 Trillion Line Ministries; IDR 155.2T Non-Line Ministries; IDR 16.4T 28#29INCREASED SUBSIDIES AND COMPENSATION SPENDING TO MAINTAIN PEOPLE'S PURCHASING POWER AND SUPPORT ECONOMIC RECOVERY Source: Ministry of Finance (IDR Trillion) 2021 Budget I. Energy Subsidy 140.4 134.0 208.9 2022 Revised Realization Budget (Unaudited) 171.9 Difference to The Revised Budget -37.1 a. Fuel & LPG 83.8 77.5 149.4 115.6 -38.8 -BBM 16.2 11.3 14.6 15.2 0.6 -LPG 67.6 66.3 134.8 100.4 -34.4 b. Electricity 56.6 56.5 59.6 56.2 -3.3 II. Compensation 47.9 18.5 293.5 379.3 85.8 a. Fuel 30.0 18.5 252.5 307.2 54.7 b. Electricity 17.9 41.0 72.1 31.1 Subsidy + Compensation 188.3 152.5 502.4 551.2 48.7 ICP (USD/Barrel) 68.5 63.0 100.0 97.0 Exchange Rate (IDR/USD) 14,312.0 14,350.0 14,450.0 14,871.0 Volume (Million KL) 14.6 15.6 15.6 16.5 29#30TRANSFER TO REGION PERFORMANCE WAS IMPROVED Transfer to Region Fund (January December) 2022 2021 Profit Sharing Funds (DBH) Physical Special Allocation Fund (DAK Fisik) Regional Incentive Fund (DID) IDR 816.2tn (101.4% from budget) IDR 785.7tn (98.8% from budget) ■General Allocation Funds (DAU) Non-Physical Special Allocation Fund (DAK Non Fisik) ■Special Autonomy Fund (OTSUS) 3.9% Local government compliance on meeting administrative requirements have improved, driving higher realization on various items of transfer Several items of transfer realization, such as DID was lower compared to previous year, mainly due to lower budget allocation Village Fund distribution is higher because many local governments have submitted submissions for Village Fund distribution requirements compared to 2021. I Village Fund (Dana Desa) Source: Ministry of Finance, Temporary/Unaudited Realization up to YTD December 2022 30#31BUDGET FINANCING APPLY PRUDENT, FLEXIBLE, AND OPPORTUNISTIC PRINCIPLE Financing anticipating the ongoing volatility Financing Realization January - December Investment Financing Investment Receipt International Cooperation 870.5 Lembaga Manajemen Aset Negara LDKPI Garuda Indonesia PTPN 3 Pinjaman PEN Daerah 27,1 688.5 (20.9%) 16.05 7.5 1.2 2.31 1.0 Social Protection 11,2 Infrastructure 877.5 658.8 IDR 106.8 T bpdlh Ingungen hidup 3.0 20,0 Others IK Lembaga Manajemen Aset Negara 97,6 (net) PT. HUTAMA KARYA (PERSERO) -7.0 (24.9%) 29.7 (526.4%) 2021 2022 BP TAPERA PLN 31.4 28.8 19.1 5.0 Garuda Indonesia BTN PTPN 3 7.5 2.5 1.2 Loan (nett) Securities (nett) KERETA API WASKITA PEKERETA A INDONESIA (PERICHO 3.2 3.0 PT PII perumnas 1.6 1.1 Source: Ministry of Finance, Temporary/Unaudited Realization up to YTD December 2022 adhi beyond construction PT ADHI KARYA 2.0 SMF 2.0 BT Badan Bank Tanah Indonesia Land Bank Authority 0.5 Education lpdp 20.0 31#32MINISTRY OF FINANCE REPUBLIC OF INDONESIA FISCAL POLICY DIRECTION 2023 04#332023 BUDGET IS AIMED TO BOOST PRODUCTIVITY FOR INCLUSIVE AND SUSTAINABLE ECONOMIC TRANSFORMATION Fiscal Policy Focus In 2023 QUALITY OF HUMAN CAPITAL INFRASTRUCTURE BUREAUCRACY REFORM INDUSTRY REVITALIZATION GREEN ECONOMY Strengthening Budget Role For Quality Fiscal Consolidation Allocatio Distributio n Stabilizati on Strengthening the Role of the Government Budget in accordance with its Basic Functions REVENUE MOBILIZATION Maintaining the effectiveness of the implementation of tax reform law Strengthening tax base and increasing taxpayer compliance Anticipating economic downturn and commodity prices moderation in 2023 Source: Ministry of Finance SPENDING BETTER Efficient, effective, priority, transparent, and accountable Focus on human capital, physical capital, and institutional reform Anticipating uncertainty INOVATIF & SUSTAINABLE FINANCING Well-managed debt risk Increasing the involvement of private sector, SOEs, public service agency, innovative financing agency 33#342023 GOVERNMENT BUDGET TO INCREASE PRODUCTIVITY AND RESPOND TO RISKS OF GLOBAL ECONOMIC UNCERTAINTY 2020 2021 2022 2023 5.0 5.1 5.0 5.2 5.3 3.7 Account (IDR T) Audited Audited Budget Perpres Realization 98/2022 (Preliminary) Budget Growth* (%) State Revenue* -1.8 -2.2 Tax Revenue -2.5 о -2.8 O -2.4 (269.4) -4.6 O Non Tax Revenue 1,647.8 1,285.1 343.8 -2.1 (341.0) (348.7) State Expenditure 2,595.5 2,011.4 1,846.1 2,266.2 1,547.9 1,510.0 1,784.0 458.5 335.6 481.6 2,786.4 2,714.2 3,106.4 2,626.4 2,034.5 588.3 2,463.6 (6.2) 2,021.2 441.4 (0.7) (25.4) 3,090.8 3,061.2 (1.0) (464.3) (598.2) -6.1 Central Government Expenditure 1,833.0 2,000.7 1,944.5 2,301.6 2,274.5 2,246.5 (1.2) (775.1) Regional Transfer & 762.5 785.7 769.6 804.8 816.2 814.7 (947.7) Village Funds (0.2) 2017 2018 2019 2020 2021 2022 2023 Budget (Preliminary Primary Balance (633.6) (431.6) (462.2) (434.4) (78.0) (156.8) (81.9) Realization) Surplus (Deficit) (947.7) (775.1) (868.0) (840.8) (464.3) (598.2) (18.3) Deficit (IDR Triliun) Economic Growth (%) --Deficit to GDP (%) % to GDP (6.14) (4.57) (4.85) (4.50) (2.38) (2.84) Financing 1,193.3 871.7 868.0 840.2 583.5 598.2 (33.1) 髮 Economic Growth 5.3% Inflation 3.6% Exchange Rate IDR 14,800/USD 10Y T-Bonds Rate 7.9 % ICP 90 Oil Lifting Gas Lifting USD/Barrel 660 Thousand bpd 1,100 million bpd Source: Ministry of Finance Note: *% Growth of 2022 Budget Realization (Preliminary) 34#35MINISTRY 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] 35 Pict source: unsplash.com