Abstract
Indonesia' s economy is outperforming most other Asian countries, whose
economies have been hit hard
by falling global trade. With domestic demand
being the main driver of growth, the authorities have
already pursued an
expansionary fiscal policy and will likely implement more initiatives to
maintain
employment. We expect Indonesia to continue outperforming the
region and project GDP growth of 3.6%
in 2009.
Global economic
conditions have continued to going into 2009, as reflected by the plunging
equity prices
across the world. Q408 data were hardly encouraging and we
have as a consequence become even more
bearish about the global economy as
a whole. We are now projecting Japan' s economy to shrink by 4.9%
(previously 3.1%) in 2009 and we are also more bearish on the US, forecasting
a contraction of 2.8%
(previously 2.3%) for the current year.
We
expect deleveraging to continue in 2009, with rising unemployment adding
downside pressure on
global demand. Relative to other countries in the
region, Indonesia is less dependent on external demand.
We therefore
believe that Indonesia stands a good chance of outperforming most other Asian
nations in
its GDP growth for 2009, likely falling behind just China and
India. We are currently anticipating
Indonesia' s real GDP growth to come
in at 3.6% in 2009, which can be compared to 0.5% for Malaysia
and -3.9%
for Singapore.
Indonesia' s real GDP grew by 5.2% y-o-y in Q408, bringing
full-year growth in 2008 to 6.1% only
slightly weaker than the 6.3%
expansion registered in 2007 and significantly outperforming most other
Asian economies. As the world' s fourth-most populous country, Indonesia is
able to rely on domestic
demand to fuel growth, unlike economies such as
Taiwan, South Korea, Hong Kong, and Singapore,
which are all heavily
dependent on exports. Nonetheless, Indonesia has not escaped unscathed in
the
global economic downturn, as recent trade figures indicate sharply
falling exports.
Notably, exports rose by a paltry 1.8% y-o-y in Q408, and
actually shrank by a larger 5.5% quarter-onquarter
(q-o-q). Likewise,
imports contracted by 3.5% year-on-year (y-o-y) in Q408. The collapse in
global trade has been captured in the figures and Indonesia' s trade numbers
are directionally similar to
other Asian countries, which have seen
double-digit declines in exports in recent months. Given the
current
weakness in commodities and manufactured goods (two key export products), the
outlook for
Indonesia' s exports appears challenging. Significantly, Japan
(the main destination for Indonesia' s
exports) registered its worst GDP
performance in 35 years in Q408, when it fell by an annualised 12.7%.
Our
bearish projections for these economies suggest that Indonesia' s exports will
perform poorly and not
be able to drive economic growth in 2009.
In
the Asia Pacific, we profile 23 companies. These are AEGON, AIG, Allianz,
Aviva, AXA, Cardif,
Fortis, Generali, Groupama, HDI-Gerling, HSBC
Insurance, ING Group, Liberty Mutual,
Manulife, MetLife, Prudential
Financial, Prudential plc, QBE, RSA, Sun Life Financial, The
Hartford,
Principal Financial Group and Zurich Financial Services.
Over the course
of 2008, actual total premiums in Indonesia rose by 43% to IDR78,267,000mn.
Non-life
premiums rose by 6% to IDR23,867,000mn, while life premiums rose
by 56% to IDR54,400,000mn.
Between now and the end of the forecast period,
we expect that annual non-life premiums will rise by
IDR36,788,575mn,
while annual life premiums should rise by IDR131,473,826mn.
Growth in
non-life premiums should be driven by the general growth in nominal GDP; we
are assuming
that non-life penetration remains constant at the current
level of between 0.45% and 0.75%.
Growth in life premiums should be driven
by the change in the overall population and a rise in life density
from
US$21.28 to US$90.00 per capita.
BMI' s Insurance Business Environment
Rating is 53.3.
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