Not felt in 2013 will soon be over . Indonesian economy is still volatile during 2013 , overshadowed by external and internal factors .
Entering the year 2014 , global economic uncertainty and slowing the rate of growth of the national economy will still haunt .
After the global financial crisis in 2008 , the world economy has not shown significant growth rate . In fact , its latest World Economic Outlook report released in October 2013 , the International Monetary Fund ( IMF ) revised down world economic growth in 2013 to 2.9 % for 2013 and 3.6 % for 2014 from a previous forecast in month July 2013 amounted to respectively 3.2 % and 3.8 % .
In general, global economic growth was recorded at an average of 2.5 % during the first half of 2013, approximately equal to the average during the second half of 2012 .
Developed countries began to show an acceleration in economic growth while developing countries are likely to experience a slowdown ; however overall developing countries still provide a greater contribution to global economic growth
Table 1 : Projected global economic growth in 2013 and 2014 from the IMF
USA
Entering 2014 , the United States is expected to start growing , though not aggressively . Recent data suggests that the U.S. economy grew 2.8 % yoy in the third quarter of this year .
Chart 1 : Growth in U.S. GDP Quarterly , 2008-2013
Some U.S. macroeconomic indicators have also shown improvement , although not all powerful .
Table 2 : U.S. macroeconomic indicators
Source: tradingeconomics.com
Although there is the possibility of the U.S. central bank , the Federal Reserve , will reduce the stimulus package ( quantitative easing ) in the beginning of next year , but the central bank governor Ben Bernanke reiterated that this was not going to change the policy of low interest rates ( the target Fed Funds rate by 0-0.25 % ) to achieve the target maximum unemployment rate of 6.5 % ( the most recent data as of October 2013 were at 7.3 % ) and a maximum inflation rate of 2 % ( Data current as of October 2013 were by 1.0 % ) .
An article in TIME magazine dated June 25, 2013 , entitled "No , the Fed 's Buying Spress Does not Have to End in Tears " suggests that the reduction of the stimulus by the Federal Reserve is not to be destructive to the economy . The article covered a report from Capital Economics which compares the current recession in the United States is the recession that occurred in the period 1942-1951 and in 1994. By analyzing how the impact of changes in monetary policy over the period of 1994 ( in which the U.S. bond market collapse ) vs. . 1942-1951 ( in which the bond market does not collapse ) , Capital Economics analysts estimate that the current condition is more similar to the 1942-1951 period . 1994 period may have a lot in common with today : economic recovery dar usually lasts longer and is exacerbated by the deterioration of the housing sector as well as the savings and loan crisis of the later climate with low interest rates for a long period .
But there are also some differences between the two periods . First , in the period of 1994 the U.S. economy began to strengthen in late 1993 , where the GDP growth reached 5 % so as to encourage the Fed to raise interest rates sharply . But the Fed 's actions do not communicate clearly ; Fed simply stated that the Fed plans to take actions that will lead to " a small increase " over the interest rates of short -term money market . In fact , drastically tightened monetary policy in 1994, with the increase in interest rate of 3% . As a result, the bond market collapsed , with the yield on 2 -year U.S. Treasury tenured doubled to 8 % in a year .
In contrast , the current governor of the Fed , Ben Bernanke , communicate clearly and frequently , notify the unemployment targets investors with certainty that the reference action by the Fed . Related reduction plan quantitative easing , Bernanke expressed that he will not raise interest rates for a while, but it will only reduce the asset purchases . Furthermore , the Fed is most likely not going to sell the bond holdings in the market for the next few years ; instead the Fed is willing to buy back if the market becomes " chaotic " .
These conditions more like what happened during the period 1942-1951 , at which time the United States faced a situation worse than the 2008 financial crisis : World War II and post- war conditions . The Fed's bond-buying program when it was almost as big as the current - by the Fed's bond holdings reach 11 % of GDP in 1945 vs . currently 12 % ) - and of the sense of urgency is also approximately the same . 1940s version of Quantitative Easing program is also intended to keep the cost of borrowing ( borrowing costs ) low to finance the war .
However , despite the Fed's balance sheet massively drained , but the situation did not end badly . Reduction ( unwinding ) runs incrementally and in small increments , not in real time . The Fed clearly convey that the Fed will do anything to maintain order in the securities market ( similar to the Fed's communication style at this time ) . In addition , low interest rates are also maintained after unwinding , does not rise above 2 % until 1955 . Of course , there are many differences between the current market conditions in the post- war period , as well as more market participants and the countries involved . But the lessons learned from the 1942-1951 period is that large-scale asset purchases by the Fed does not have to end up bitter . And reduction of the stimulus does not have to mean massive increase in borrowing costs .
Issues that may need to be aware of is the risk of default (default ) U.S. debt , which can disrupt the level of confidence in the global bond market , given the United States has one of the best in the world 's credit rating . However, in its report dated 20 November 2013 , the U.S. Congressional Budget Office estimates that the United States still can hold off raising the debt ceiling until June 2014 . Although the U.S. Congress delays raising the debt ceiling until February 2014 , but the U.S. Treasury ( U.S. Treasury Department ) still can use some ways to prevent default , for example, by delaying the payment of retirement benefits . In addition , the increase in tax revenue around April 15, along with the annual tax filing time may be able to provide enough revenue for the U.S. government to meet the payment obligations until June .
Euro Zone
In the report of the World Economic Report in October 2013 , the IMF stated that the policy measures in the Euro has managed to reduce some of the risk in the Euro zone and stabilize financial markets . Economic growth has begun to appear , but still very weak . After 18 months of contraction , recent data showed that the euro zone economy grew 0.1 % during the third quarter of 2013 ( July-September 2013) , lower than the growth in the second quarter ( April-June 2013) of 0.3 % . Economic growth in most countries in the euro zone is still disappointing :
German economy - the largest country in the euro zone - 0.3 % in the third quarter of 2013, down from 0.7 % in the second quarter . French is the second largest country in the euro zone , contracted 0.1 % in the third quarter , once in the second quarter made it out of the recession with record growth of 0.5 % . Third largest country , Italy , is still recorded contraction , respectively, 0.1 % and 0.3 % in the third quarter and the second this year . Spain managed to come out of recession with record growth of 0.1 % while Portuguese 0.2 % in the third quarter of this year .
Figure 2 : Growth in Eurozone GDP Quarterly , 2008-2013
The unemployment rate is also very high and the socio- political tensions still hamper the momentum of reform in the Euro zone . Recent data from Eurostat (as of September 2013 ) showed that the unemployment rate in the Euro zone was 12.2% , while the unemployment rate among the population aged 25 years was 24.1 % .
Figure 1 : Unemployment rate in the Euro Zone Countries
Sources : Thomson Reuters . Eurostat data as of August 2013.
Interestingly , in his paper entitled " Fiscal Brag " , Dario Perkins from Lombard Street Research declared that the U.S. actually run fiscal tightening ( austerity measures) is more drastic than the Euro zone and managed to achieve better economic growth . By using the data released by the International Monetary Fund ( IMF ) and the Organization for Economic Cooperation and Development ( OECD ) , Perkins suggests that the United States tightened the budget of 4.9 % of GDP during the period 2010-2013 , while the UK 3.7 % , Italy 2.8 % and Spanish 4.2 % . However, the U.S. economy recorded an average growth of 2.1 % per year during 2010-2012 while the euro zone is still in recession - economies of Spain and Italy still contracting while the UK only grew an average of 0.1 % in this period . In addition to demonstrating that the United States has a trend of higher GDP growth , it also shows that the United States has a lower fiscal multipliers . Fiscal multiplieradalah scale that shows the effect of changes in taxes and / or government spending to GDP , so that the fiscal multiplier smaller means that the austerity programs cause less damage to the economy . Last year the IMF's chief economist Olivier Blanchard has stated that the fiscal multiplier Europe were higher than the assumptions of policy makers , so that government budget cuts gives greater influence on the economy in the region .
Perkins suggests further reasons behind the differences between the effects of austerity measures in the United States and Europe :
1 . ( 1 ) European austerity measures run - by cutting government spending and raising taxes - by the time their economies are still fragile . This put pressure on households and the business sector so that they are forced to reduce their spending cause a vicious cycle of austerity - recession . While the United States chose to wait until the economy begins to recover before they tighten fiscal policy . Thus when tightening begins , the banking sector has been stronger and deleveraging ( debt reduction ) in the private sector have also been eased .
2 . ( 2 ) Austerity cause economic damage is more severe in Europe because the countries in the Euro zone depend on each other in terms of trade and they do austerity measures simultaneously. Thus export in European countries equally and all fell into recession .
3 . ( 3 ) the European Central Bank - the European Central Bank ( ECB ) chose to maintain a relatively tight monetary policy - in contrast with the U.S. and the UK are doing quantitative easing ( quantitative easing ) as an economic stimulus .
Looking ahead , the IMF considers that measures to restore the health of the financial sector and strengthen financial infrastructure is essential for financial stability and to support the economic recovery . Furthermore , support for raising the level of demand in the short term as well as more in-depth structural reforms needed to improve the competitiveness and potential output growth and to job creation .
Japan
Almost a year ago the Japanese government unveiled an economic stimulus package in order to melt the impasse that has plagued the economy for two decades . Known as the " Abenomics " , this stimulus package is divided into three " darts " are:
1 . ( 1 ) The Bank of Japan Bank of Japan ( BoJ ) has launched an aggressive monetary easing and set an inflation target of 2% in order to sustain real GDP growth target of 2% ( 4 % nominal ) .
2 . ( 2 ) The Government of Japan boost government spending through projects for public interest
3 . ( 3 ) reforms to stimulate private investment
Figure 2 : The three " darts " Abenomics
Sources : The Wall Street Journal March 14, 2013
Although the stimulus program has helped weaken the yen exchange rate thereby increasing the competitiveness of Japan for export , but there are still many structural problems that can not be fully addressed : the opening of the economic sectors that have been protected , rigid labor market , the cartel financing and distribution lines narrow consumer goods - most of which will be affected by trade agreements Trans - Pacific Partnership that was originally to be achieved by the Japanese Prime Minister Shinzo Abe to the United States , but this is not enough . Then immigration as a solution to the demographic profile of the majority of Japanese old age have not show signs will be facilitated . Thus , many people considered that the three arrows - structural reforms - not yet released from the bow . In addition , efforts to stimulate household spending could be damped as the increase in the sales tax ( sales tax ) of 5 % to 8 % from April 2014.
Japanese Back Launch Stimulus
The Japanese government on Thursday unveiled a budget package of 5.5 trillion yen . Budget set to anticipate the increase in sales tax next April . This package also includes a boost for corporate investment and job market , plus subsidies for poor families .
Prime Minister ( PM) of Japan Shinzo Abe has instructed his government to design this package since October . At that time , Abe set a sales tax increase from 5 % to 8 % , with effect from April next year . According to the government , this stimulus will have an impact on the economic sector to 18.6 trillion yen . In addition , the package also would increase gross domestic product by 1.0 percentage points .
" Through this package and other supporting devices , we are sure to be on the path out of deflation , " Abe said Thursday .
Latest package is the second set the Abe administration . Injections previous stimulus launched in January , worth 10.3 trillion yen . Fiscal budget " flexible " is one of the three economic policy to fight deflation Abe .
" The amount we pack enough to anticipate spending due to tax increases , which economists predicted about 2 trillion yen , " said Economy Minister Akira Amari in October . " We're not one to make [ the amount ] is too high . "
The main elements of this package include the promotion of capital investment by corporations worth 1.4 trillion yen , ahead of the 2020 Tokyo Olympics . In addition , the package also includes 300 billion yen to expand job opportunities for the younger generation , as well as post-earthquake reconstruction funds in March 2011 at 3.1 trillion yen . The government did not forget to set aside 600 billion yen to subsidize low-income residents .
Observer welcomes scale package . According to analysts , this package will support the Japanese economy , at least partially , when the first tax increase in 17 years it came into force . The government predicts that a tax increase will raise overall household loads up to 6 trillion yen . Analysts expect Japan was unable to prevent the contraction in the quarter April to June.
Over the past two years , many are worried that China's economy will experience a hard landing in 2014, given China's economic growth slowed during the last 2 years , from its previous average of 10 % during the period 1990-2008 to 7.8 % in 2012 . However, this seems unlikely given China has the largest reserves in the world - based on the latest data per September 2013 was U.S. $ 3.66 trillion ) so that it has strong economic resilience . Besides the interest rate in China is still at the level of 6 % so there is still enough space for China's central bank , the People's Bank of China ( PBOC ) to cut rates if needed . Next year, the Chinese government seems to deliberately put the brakes on economic growth behavior to prevent overheating which creates an asset bubble ( asset bubble ) , especially in the property sector . Furthermore, the new Communist Party Congress ends on November 15 and set a series of economic and social reform programs are arguably the most daring in the last 3 decades and to set 2020 as the time in which major breakthroughs in a wide range of reforms will be achieved . In summary , this reform program series consists of reforms to ( 1 ) the registration of land and shelter to boost China's urban population and facilitate the transition to a Western-style economy is driven by services and consumption , (2 ) the determination of the price of fuel , electricity and resources another important market mechanism , (3 ) acceleration of the opening of the capital account and further liberalization of financial markets , and ( 4 ) easing one-child policy (one- child policy) in order to anticipate potential problems in the future population .
Figure 3 : Annual GDP growth of China from 1989 to 2012 ( % )
Sources : World Bank
Indonesian Economy
Indonesian economy recorded the lowest growth in four years in the third quarter of this year along with weakening exports and sluggish domestic demand . GDP third quarter ( July-September ) in 2013 grew 5.62 % , down from 5.8 % in the second quarter . Attenuation occurs due to falling export demand from major export destinations as well as a decline in commodity prices . While the level of domestic demand affected by rising fuel prices and interest rates . The increase in prices of premium gasoline by 44 % and diesel by 22 % in the middle of this year resulted in the increase in transportation costs and electricity tariffs . In September , Bank Indonesia lowered its growth forecast Indonesia's GDP from the previous 5.8 to 6.2 % to 5.5 to 5.9 % .
Figure 4 : Growth of Indonesia's GDP per Quarter 2008-2012
As with other developing countries , Indonesia was also hit due to the release of funds investors along with rising expectations that the U.S. Federal Reserve will begin to reduce its quantitative easing and may raise interest rates sooner than had been expected . Especially with regard to Indonesia , the flow of foreign funds exit triggered by slowing economic growth in Indonesia as well as the widening current account deficit ( current account deficit ) , which in turn has made the Rupiah depreciated sharply this year . Data Bank Indonesia middle rate , the exchange rate of USD against Euro per December 31, 2012 was 9,670 while per 22 November 2013 reached 11,706 , thereby YTD 2013 rupiah has depreciated by about 21 % .
Bank Indonesia's actions to aggressively raise interest rates is expected to dampen import and maintain the rupiah . Since May 2013 recorded by Bank Indonesia has raised interest rates five times with a total increase of 175 basis points :
Table 3 : Interest Rate Reference Bank Indonesia Has Been Up 175 bps Since May 2013
Source: Bank Indonesia
This year, Bank Indonesia also has signed bilateral swap ( Bilateral Currency Swap Arrangement / BCSA ) with 3 central banks totaling U.S. $ 37 billion : PBOC China ( U.S. $ 15 billion ) , the Bank of Korea ( U.S. $ 10 billion ) and the Bank of Japan ( U.S. $ 12 billion ) . In a press release , Bank Indonesia has stated that this cooperation is expected to help stabilize financial markets and strengthening bilateral economic and financial cooperation in the face of global economic uncertainty .
Currently the authors considered that the most important macroeconomic issue is about the current account deficit . Indonesia has experienced a current account deficit for 8 consecutive quarters , starting from the fourth quarter of 2011. Although the current account deficit in the second quarter of 2013 amounted to 4.4 % of GDP has narrowed to 3.8 % of GDP in the third quarter of 2013, but the amount is still not able to fix the market sentiment towards Indonesia . Ideally , the current account deficit can be maintained at a maximum level of 3 % of GDP . Finance Minister Chatib Basri early November 2013 said that the current account deficit can be reduced to 3.3 to 3.5 % of GDP , in line with the reduced imports due to weakening consumer demand .
If you view the components , the oil and gas sector is still the largest contributor to the current account deficit . Trade balance data showed that the trade deficit in the third quarter migass 2013 was U.S. $ 5.856 billion , compared to the deficit widened in the second quarter amounted to U.S. $ 5.294 billion . For that we need the government's policy response to overcome the dependence on imported oil and gas . Unfortunately, as of this writing , the government's policy by August 22, 2013 - which include conversion to biodiesel - is still not realized.
Table 4 : Indonesia's trade balance ( U.S. $ bn )
* Until September 2013
A positive number indicates a surplus ** , a negative number indicates a deficit
Source: Central Bureau of Statistics ( BPS ) , published on 2 November 2013 Compass
Related reduction in fuel subsidies that led to the rise in fuel prices in mid -year , Indonesia's inflation rate rose significantly this year in the amount of 7.66% since the beginning of the year . However, the peak of inflation has been seen , where the impact of fuel price hike is already reflected in inflation in June 2013 - Aug. 2013, and food prices began to fall , economists expect inflation to return to normal in the next few months , back to the target range Bank Indonesia's inflation at 3.5-5.5 % .
Table 5 : Monthly Inflation in Indonesia in 2013
Source: Central Bureau of Statistics ( BPS ) , published on 2 November 2013 Compass
Figure 5 : Annual Indonesian Inflation ( % )
* Government targets
Source: Central Bureau of Statistics and the State Budget 2014 , published in November 2013 Cash Special Edition .
Although next year is the year for Indonesian political will in relation to the holding of legislative and presidential elections , but a lot of people assessing its contribution to the Indonesian economy will not be significant . Bank Indonesia predicts the 2014 elections that the contribution to economic growth is only from 0.13 to 0.19 % (vs. 0.23-0.26 % in the 2009 election ) . This is because the number of political parties and the number of candidates in the 2014 elections would be less than in the 2009 election . In the 2014 election the number of candidates is 100 % the number of seats in Parliament , while in the 2009 election by 120 % . The number of political parties contesting the election was reduced drastically from 38 in 2009 to 12 in election 2014 elections .
conclusion
• After the global financial crisis in 2008 , the world economy has not shown significant growth rate . In fact , its latest World Economic Outlook report released in October 2013 , the International Monetary Fund ( IMF ) revised down world economic growth in 2013 to 2.9 % for 2013 and 3.6 % for 2014 from a previous forecast in month July 2013 amounted to respectively 3.2 % and 3.8 % .
• Entering the year 2014 , the United States is expected to start growing , though not aggressively . Some U.S. macroeconomic indicators have also shown improvement , although not all powerful
.
• Economic growth has begun to appear in the Euro zone , but still very weak . The unemployment rate is also very high and the socio- political tensions still hamper the momentum of reform there . Going forward , the steps to restore the health of the financial sector and strengthen financial infrastructure is essential for financial stability and to support the economic recovery . Furthermore , support for raising the level of demand in the short term as well as more in-depth structural reforms needed to improve the competitiveness and potential output growth and to job creation .
• Although the stimulus program Abenomics in Japan have helped weaken the yen exchange rate thereby increasing the competitiveness of Japan for export , but there are still many structural problems that can not be fully resolved .
• Although many people these days worry about China's economy will experience a hard landing in the next year , but less likely to happen given that China has strong economic resilience . Even next year, the Chinese government seems to deliberately put the brakes on economic growth behavior to prevent overheating which creates an asset bubble ( asset bubble ) , especially in the property sector . Furthermore, the new Communist Party Congress ends on November 15 and set a series of economic and social reform programs are arguably the most daring in the last 3 decades .
• Although the Indonesian macroeconomic data recently recorded weak , expected improvements in the future . Trade deficit is expected to decline in the next few months is considered weaker currency , as well as fuel prices and interest rates higher .
• Inflation in Indonesia is expected to be stable due to the decline in the price of raw foodstuffs which will keep inflation to remain low over the next few months .
• Even though next year is the year for Indonesian political will in relation to the holding of legislative and presidential elections , but a lot of people assessing its contribution to the Indonesian economy will not be significant . This is because the number of political parties and the number of candidates in the 2014 elections would be less than in the 2009 election . ( WSJ sources and various sources )
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