Abstract
For Indonesia, 2009 will be dominated by parliamentary and presidential
elections in April and July,
respectively, and the impact of the global
economic recession. On the political front, we expect broad
stability,
with President Susilo Bambang Yudhoyono likely to be re-elected. Economy-wise,
we see real
GDP growth slowing from 6.1% in 2008 to around 5.0%, although
Indonesia should be better insulated
than its regional peers due to strong
domestic consumption. Financial instability remains a risk, but
Indonesia
is in a stronger position than at the time of the 1998 crisis.
President
Yudhoyono is likely to be re-elected in 2009 as he remains more popular than
his most
formidable rival, former president Megawati Sukarnoputri. A
bigger question on the political scene is the
outcome of April’s
parliamentary elections, which will determine the next president’s
ability to govern
and pass legislation. Indonesia has a multitude of
parties and Yudhoyono’s own Partai Demokrat (PD) is
small, meaning
that he will continue to rely on the powerful Golkar party. Overall, we expect
Indonesia’s
secular-nationalist parties to retain the upper hand
against overtly Islamic parties such as the Prosperous
Justice Party
(PKS). Nonetheless, there is some evidence that religious political forces are
punching
above their weight, as evidenced by the passage of the
anti-pornography bill which critics fear is too
broad in definition.
With domestic consumption a key driver for the economy, we believe that that
Indonesia will be more
sheltered from the ongoing global economic slowdown
than most of its regional counterparts and as such
is likely to be one of
the year’s outperformers. However, we still highlight that its economy
will not
survive 2009 totally unscathed. Although our growth forecast for
the year matches that of the Indonesian
government, we view its
unemployment projections to be too optimistic, even in view of
Jakarta’s
expansionary fiscal plans. Moreover, we stress that risks
to our 5.0% growth forecast for 2009 are
weighted firmly to the
downside
This report is being written at a time when the global financial
crisis, which arose as a result of the
evaporation of inter-bank
liquidity, has moved into a new phase. Stock market participants appear,
reasonably, to have taken the view that the policy responses taken by
governments, central banks and
multi-lateral institutions will be
sufficient to prevent a total collapse of the global financial system.
Instead, stock market participants are focusing on the impact of a near-global
recession on the earnings of
non-financial companies.
The number and
size of stand-by facilities agreed by the IMF since early October supports our
view that,
of the emerging markets whose commercial banking sectors are
surveyed by BMI, the countries of
Central and Eastern Europe are those
whose economies are most at risk of suffering adverse affects as a
result
of the global financial crisis. This is partly because the macroeconomic
imbalances are relatively
severe and partly because the Central and
Eastern European countries are more directly affected by the
brutal
recession that is unfolding in wealthier member states of the EU.
As yet,
it has not been possible to collate hard numbers, for most of the countries
whose commercial
banking sectors are surveyed by BMI, that clearly
quantify the impact of the global financial crisis on the
banks. As we
explain in the section that discusses changes that we are making to the
report, we again
include a lengthy essay which attempts to identify the
key issues. In essence, in the emerging markets –
and, indeed, the
developed countries – of the Asia-Pacific, commercial banks appear well
placed to deal
with the crisis. The same is, broadly, true of commercial
banks in the various countries of the Middle East
and North Africa. Latin
America, Chile, Brazil, Mexico and Colombia appear better placed than
Argentina, Venezuela, Bolivia and Ecuador. South Africa’s situation
appears to have much in common
with that of Brazil. In contrast, Nigeria
faces some of the same challenges as those that confront
Venezuela. The
positions of most countries in Central and Eastern Europe, however, are
alarming.
From Q209, we will include data that pertains to late 2008 and
extend forecasts out to 2013. We will also
incorporate much greater
discussion of the various protagonists in each country’s commercial
banking
sector and a number of new features. We believe that the figures
we compiled in mid-2008 provide
insights as to how the various commercial
banking sectors will fare in the current, extremely uncertain,
climate. We
have, therefore, left them essentially unchanged.
The figures on the
tables above provide a snapshot of the banking sector in Indonesia prior to
the onset of
the global financial crisis. To place the figures in context,
it may be useful to bear in mind certain aspects
of the 59 countries whose
banking sectors are currently surveyed by BMI. Across this sample, the
median
growth in assets in local currency terms was 21.3% (in Colombia),
the median loan growth was 21.6% (in
India) and the median growth in
deposits was 17.9% (in Brazil).
On their own, the ratios of loans to
deposits, assets, and GDP mean little. However, they can provide
useful
hints when combined with other data. Across the 59 countries, the median
loan/deposit ratio is
92.3% (in Greece), the median loan/asset ratio is
56.0% (in Poland) and the median loan/GDP ratio was
63.9% in India.
As
in previous reports, we include a SWOT analysis for Indonesia. Our assessment
confirms that a
number of major factors remain in place. The overall
business environment in Indonesia remains
challenging, even if the economy
is achieving good growth. The banking system is growing quite rapidly
from
a low base. As is the case in other countries in South East Asia, there does
not seem to be any reason
why this cannot continue to be the case for some
time.
Since Q108, we have calculated, on a consistent basis, a Commercial
Bank Business Environment Rating
(CBBER) for each of the 59 countries
surveyed. The CBBER includes an assessment of the limits of
potential
returns. It does this by taking into account the size, growth potential and
bancassurance potential
of the banking sector, as well as aspects of the
economy in 2007. The CBBER also depends on an
assessment of the risks to
the realisation of potential returns. This reflects BMI’s assessments of
overall
country risk, together with the regulatory and competitive
environment.
Indonesia’s overall CBBER is 59.1. Within the limits to
potential return, banking and country structure
scores are almost evenly
rated, on 56.3 and 54.6, respectively. Within the risks to the realisation
of
potential returns, the banking and country risks are also fairly evenly
rated, with respective scores of 76.7
and 61.4.
This report also
includes a detailed examination of the factors that will drive Islamic banking
through
2009.
|
Related Report
|
View Cart
