Macroscope

Macroscope
Economic | 30 November
Research 2018 2018
| 30 November

Inflation Preview: Tame November

Inflation is likely to remain soft. This year’s November is likely to print inflation at 0.28%
Economic Forecasts MoM or 3.24% YoY in annual terms, higher compared to the previous month’s of 3.16%
YoY. Raw food and housing are expected to print upsides, which are justifiable nearing the
2016 2017 2018F
year end. Other components are predicted to print manageable contribution, especially
Real GDP (%) 5.0 5.1 5.16 with the currently appreciating currency and low oil price. In addition, core inflation is
GDP/capita (US$) 3,589 3,827 3,984 expected to rise to 3.01% YoY from 2.94% YoY in the prior month. Statistics Indonesia is set
Inflation (%) 3.00 3.61 3.59 to disclose the inflation data on Monday (03/12).
7-DRRR 4.75 4.25 6.00
CAD/GDP (%) -1.8 -1.7 -2.5 Raw food prices have started to climb, housing to still print upsides. Our observation
Exc. Rate (Rp/US) 13,492 13,588 14,635 on raw food as of 29 Nov18 points to its 0.05ppt contribution to the monthly inflation, with
the risk of higher contribution considering its increasing trend entering the fourth week of
the month (see exhibit 2). Red onion and broiler chicken egg have turned its back from
deflation last month to each printing 0.04ppt and 0.01ppt contribution respectively.
Meanwhile, downsides came mostly from red chili and broiler chicken meat. As stated in
our previous reports, we see raw food prices to be closely monitored by the government,
especially nearing year end. The State Logistics Agency (Bulog) has also conducted market
operations to stabilize the price of medium rice in the market. Hence, raw food inflationary
contribution should be manageable until year-end.

Furthermore, we see housing to still print upsides amid rising prices of cements, concretes,
and housing rent continuing last month’s trend. Based on our equity analyst’s price
tracking, cement bag sales price still picked up, partly due to cost pressure as coal price
rose in 3Q18 (usually the impact lags by one quarter) (see exhibit 3 and 4). We assign a
0.10ppt contribution to housing component (vs. 0.10ppt in Oct18 and 0.07ppt in
November 2010 – 2017).

Subtle inflation for the year. If indeed the Nov18 inflation is in-line with our forecast, it
would reach around 3.4% YoY in YE18, lower than our estimate at 3.59% (we use
December 2010-2017 average of 0.87% MoM for next month’s preliminary estimate). On
the policy rate front, we believe that the movement will largely depend on
macroeconomic data (less likely inflation) for this year. BI is likely to maintain its policy rate
at 6.0% until year-end, in our opinion. However, a bigger risk for inflation year might occur
Leo Putera Rinaldy
next year considering the government’s potential plan to adjust retail fuel prices, therefore
Chief Economist
we maintain our policy rate forecast at 6.50% for FY19.
+6221 5296 9406
leo.rinaldy@mandirisek.co.id
EXHIBIT 1. INFLATION SUMMARY

Aziza Nabila Amani Oct-18 Nov-18

Research Assistant
+6221 5296 9651 MS Forecast Market Consensus
aziza.amani@mandirisek.co.id Headline inflation (%, YoY) 3.16 3.17 3.19
Headline inflation (%, MoM) 0.28 0.21 0.19
Headline inflation (%, YtD) 2.23 2.44 -
Core inflation (%, YoY) 2.94 3.01 2.97

Sources: CEIC, Mandiri Sekuritas estimate

Page 1 Please see important disclosures at the back of this report

 Macroscope | 30 November 2018

EXHIBIT 2. RAW FOOD PRICES OBSERVATION IN NOV18

Nov-18
Commodity CPI Weight (%) Contribution
% MoM
(ppt)
Rice 3.8 0.27 0.01
Broiler chicken meat 1.2 (0.02) (0.00)
Beef 0.6 0.08 0.00
Broiler chicken egg 0.7 2.02 0.01
Red onion 0.3 12.48 0.04
Garlic 0.2 0.82 0.00
Red chili 0.4 (1.40) (0.01)
Chili pepper (Rawit) 0.1 1.86 0.00
Cooking oil 1.0 (0.54) (0.01)
Total 8.22 0.05

Source: National Strategic Food Information Center (PIHPS), Mandiri Sekuritas estimate (as of 29Nov18)

EXHIBIT 3. CEMENT BAG SALES PRICE INCREASED.. EXHIBIT 4. ..MAINLY DUE TO RISING COAL PRICE IN 3Q18
Cement bag sales price (%YoY) Coal Price (% YoY, 3mma)
15.0% 90%
80%
10.0%
70%
5.0% 60%
0.0% 50%
50 kg 40% 40.3%
‐5.0% 34.0%
30%
‐10.0% 40 kg 25.2%
20%
‐15.0% 10%
‐20.0% 0%
Jan‐17

Sep‐17

Nov‐17

Jan‐18

Sep‐18

Nov‐18
May‐17

May‐18
Mar‐17

Jul‐17

Mar‐18

Jul‐18
Apr‐18
Feb‐18

Sep‐18
Mar‐18

Jun‐18

Jul‐18

Aug‐18

Oct‐18
Jan‐18

Nov‐18
May‐18

Source: Mandiri Sekuritas Research Source: Bloomberg

Page 2 Please see important disclosures at the back of this report

Macroscope | 30 November 2018

MACROECONOMIC INDICATORS AND FORECAST

2014 2015 2016 2017 2018F 2019F

National Account
Real GDP (% yoy) 5.0 4.9 5.0 5.1 5.3 5.5
Real Consumption: Private (% yoy) 5.1 5.0 5.0 4.9 5.1 5.1
Real Consumption: Government (% yoy) 2.0 5.4 (0.1) 2.1 6.0 4.0
Real Gross Fixed Capital Formation (% yoy) 4.1 5.1 4.5 6.2 5.5 6.8
Real Exports (% yoy) 1.0 (2.0) (1.7) 9.1 6.0 6.0
Real Imports (% yoy) 2.2 (5.8) (2.3) 8.1 5.0 6.0
GDP (Rp tn) - nominal 10,543 11,541 12,407.0 13,588.80 14,709.21 16,087.42
GDP (US$ bn) - nominal 888 861.9 932 1,016 1,066 1,170
GDP per capita (US$) - nominal 3,520 3,377 3,589 3,876 3,984 4,308

External Sector
Exports (% yoy) - Merchandise (3.7) (15.4) (3.2) 16.9 2.6 3.1
Imports (% yoy) - Merchandise (4.5) (19.7) (4.6) 16.1 6.1 8.4
Trade Balance (US$ bn) 6.9 13.3 15.4 18.9 17.8 10.4
Current Account (% of GDP) (3.0) (2.0) (1.8) -1.7 -2.2 -2.2
Current Account (US$ bn) (26.2) (17.6) (16.3) -17.3 -19.9 -26.4
External Debt (% of GDP) 29.9 35 35 31 29 28
International Reserves (US$ bn) 111.9 106 116 130 124 129
Rp/US$ (period average) 11,864 13,397 13,300 13,380 13,799 13,751
Rp/US$ (year end) 12,435 13,856 13,492 13,588 13,779 13,754

Other
BI rate (% year end) 7.75 7.50
BI 7 days reverse repo rate (% year end) 4.75 4.25 5.50 6.00
Headline Inflation (% yoy, period average) 6.4 6.4 3.5 3.8 3.3 3.9
Headline Inflation (% yoy, year end) 8.36 3.35 3.00 3.61 3.59 3.9
Fiscal Balance (% of GDP) (2.2) (2.3) (2.5) (2.5) -2.7 -2.6
S&P's Rating - FCY BB+ BB+ BB+ BBB- BBB- BBB-
S&P's Rating - LCY BBB- BBB- BBB- BBB- BBB- BBB-

Sources: CEIC, Mandiri Sekuritas estimate

Page 3 Please see important disclosures at the back of this report

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ECONOMIC AND FIXED INCOME RESEARCH TEAM

Handy Yunianto Leo Putera Rinaldy

Head of Fixed Income Research Chief Economist
handy.yunianto@mandirisek.co.id leo.rinaldy@mandirisek.co.id
+62 21 5296 9568 +62 21 5296 9406

Ali Hasanudin Aziza Nabila Amani

Credit Analyst Research Assistant
ali.hasanudin@mandirisek.co.id aziza.amani@mandirisek.co.id
+6221 5296 9629 +6221 5296 9651

Teddy Hariyanto
Credit Analyst
teddy.hariyanto@mandirisek.co.id
+62 21 5296 9408

Yudistira Yudadisastra
Credit Analyst
yudistira@mandirisek.co.id
+62 21 5296 9698

Ariestya Putri Adhzani

Research Assistant
ariestya.adhzani@mandirisek.co.id
+62 21 5296 9522

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