Econmark February 2021 Edition-Outlook 2021-A Shot of Hope

ECONMARK
Mandiri Group Research | February 2021
ECONMARK ECONOMIC OUTLOOK 2021

Research Team Contributors A Shot of Hope
Andry Asmoro
Dian Ayu Yustina
Dendi Ramdani
Executive Summary
Teguh Yudo Wicaksono Reiterating our global economic view: U-shaped and uneven recovery. The global
Handy Yunianto economy is on its way to recovery, and some economic data have improved. The start of
Adrian Joezer the vaccine roll-out in many countries also supports the optimism. However, these risks
still linger on the outlook: (i) The recovery speed will vary among countries due to
Rully Arya Wisnubroto
imbalances in vaccination pace. (ii) Policy responses will differ among countries,
Reny Eka Putri
depending on their recovery pace. This situation needs global coordination to avoid
Faisal Rachman
downturn cycles post-pandemic.
Nadia Kusuma Dewi
Mamay Sukaesih It is also important to note several downside risks that are recently brewing in the
Andrian Bagus Santoso financial market. As mentioned earlier, UST yields have continued to increase quite
Adjie Harisandi rapidly in the past few days due to the sentiments of a sooner than expected ‘reflation’,
Astari Adityawati which was followed by the fear of early QE tapering. Nonetheless, Federal Reserve
Haris Eko Faruddin Chairman Jerome Powell has reassured that policy would continue to be supportive and
Andhi Prasetyo Hadi look beyond a temporary pick-up in inflation. At this juncture, we believe the rising global
interest rate trend will start at the earliest in 2022.
In-line with the global trajectory, Indonesia’s economy is also estimated to recover
gradually this year along with the vaccination program’s roll-out. These positive on-
the-ground indicators signify the economy should be on a recovery path by the end of
4Q20 and by 2021: (i) spending indices on several retail, hotel, and FMCG products have
passed their rock bottom; (ii) people have started traveling, as indicated by higher hotel
and resort booking numbers; (iii) lower impact from the Large-Scale Social Restriction
(PSBB) with less severe restriction, unlike in 1H20, and; (iv) some lagging government
stimulus impact on consumption might have kicked-in as of 4Q20. Note that the recovery
acceleration may occur in the second half when vaccinations are expected to be
distributed more widely.
Throughout 2020, it was clear that COVID-19 has rapidly changed the picture of
Indonesian household spending. BMRI’s high-frequency data shows that Indonesian
household spending has been shaped by three things: the PSBB, COVID-19 infection fear,
and risk normalization. But people have adapted to restrictions, making the adverse
impact of social restriction less severe. Our other finding is the tendency of higher-
income consumers to cautiously withhold spending. The spending data suggests that
lower- and middle-income consumers’ spending rates have already reached their pre-
Please see important disclosure at the back of this report

ECONMARK : Economic Outlook 2021-A Shot of Hope
Mandiri Group Research | February 2021 Edition
pandemic levels by the end of 2020, although in recent days, they showed declining
Mandiri Group Research | May 2017ig
trends. Meanwhile, the upper-income households remain cautious, and their spending has
not touched its pre-pandemic level yet.
The government still focuses on rebalancing spending between fiscal stimulus and
continued structural reform. The budget allocated for the National Economic Recovery
(PEN) Program for this year has been increased multiple times and is now at IDR 688tn.
The amount is only slightly below the allocated IDR 695tn in 2020, which clearly underlines
the necessity to keep cushioning consumers and businesses in their transition from
contraction to recovery. The additional PEN Program may be financed partly from last
year’s excess budget and some possible reallocations from other posts. There may be a
refocusing or reprioritizing from other programs, including from infrastructure, which was
initially slated for acceleration this year. Nonetheless, the non-physical reform is well on
track, with the government recently announcing that 49 implementing regulations of the
omnibus law have been promulgated. This creates more certainty in business regulation,
which, along with the establishment of the Indonesia Investment Agency (INA) and the
brighter prospect of capital inflows, should be positive for investment prospects ahead.
We may see that the sectoral recovery will gradually improve following the spending
behavior. The first stage, which is approximately found in early years 2021, is recovery in
basic needs related sectors such as, food and drink, and FMCG (fast moving consumer
goods), followed by the transportation and logistics that relate to these basic needs. The
second stage is recovery in durable goods sector, followed by the increase of automotive
(i.e., car and motorcycle). We presume that vaccination program is succeeded, and its
efficacy is high, which will improve consumer confidence useful to stimulate spending. We
expect this recovery acceleration occurs in the second half of 2020. The last stage is
recovery in airline, tourism and property sectors which need high consumer confidence to
speed up. In addition, commodity sector is key to recover in 2021 particularly in
commodity-based regions such as, Sumatera and Kalimantan, as the commodity prices
are relatively high in 2021.
Other macroeconomic variables are relatively stable and conducive for economic
recovery. The inflation rate reached a record-low in 2020 as domestic demand declined.
Higher commodity prices due to improved demand during the global recovery have hiked
input prices. Since Nov-2020, Indonesia’s wholesale price index inflation has been above
the consumer price index inflation, indicating a risk of cost-push inflation. We expect the
inflation to edge higher to 2.92% by year-end. Expectation of demand recovery may also
push imports to accelerate, which may cause the trade surplus to narrow and the current
account deficit (CAD) to widen. However, a brighter prospect of capital flows should lead
to a larger surplus of the balance of payment (BoP) this year and will support the rupiah to
strengthen. On this backdrop, we think Bank Indonesia (BI) will still keep a low interest
rate for longer to support economic recovery.
Please see important disclosure at the back of this report Page 2 of 69


The Year 2021: A Shot of Hope
The ‘game-changer’ vaccination: Light at the end of the tunnel? The Global vaccination
has been accelerated in the last three months. Bloomberg mentioned that more than
202mn doses have been administered across 88 countries, equal to around 6.35mn
doses/day. They also revealed that the vaccination number (61.3mn doses have been
given as per 21-Jan or around 1.3mn/day) in the US outpaced the number of people who
tested positive. Other countries, i.e., Italy, Spain, and Portugal, have started vaccination
since January and are expected to reach herd immunity by the end of 2021.
FIGURE 1. WORLD VACCINATION PROGRESS
1+ dose 2 doses
Doses Doses per (% of (% of Daily rate of doses
Country
Administered 100 people population population administered
given) given)
Global
Total 202.4 - - - 6.3
U.S. 61.3 18.46 12.9 5.4 1.3
China 40.5 2.89 - - 1.6
EU 26.2 5.91 3.7 2 0.7
U.K. 17.9 26.73 25.8 0.9 0.4
India 10.8 0.79 0.7 0.1 0.4
Israel 7.1 78.8 47 31.8 0.1
Brazil 6.6 3.15 2.7 0.5 0.3
Turkey 6.6 7.89 6.6 1.3 0.4
UAE 5.6 51.66 - - 0.1
Germany 4.9 5.86 3.8 2 0.1
France 3.7 5.66 3.9 1.7 0.1
Italy 3.4 5.7 3.5 2.2 0.1
Spain 2.9 6.32 3.8 2.5 0.1
Chile 2.9 15.09 14.8 0.3 0.1
Poland 2.7 7.01 4.6 2.4 0.1
Morocco 2.5 6.92 6.9 0 0.2
Russia 2.2 1.5 1.5 - 0.0
Indonesia 2.0 0.73 0.5 0.3 0.1
Bangladesh 1.8 1.11 1.1 - 0.3

Sources: Bloomberg

This progress brings great hope that recovery is underway in 2021, flipping the 2020
contraction due to the pandemic’s adverse impact. However, these risks still linger on the
outlook: (i) The recovery speed will vary among countries due to imbalances in vaccination
pace. Advanced countries and some emerging ones like China will be categorized as the
fastest recovering post-pandemic, while others will lad. Some “lagging countries” will still
implement strict health protocols that limit mobility and economic recovery. (ii) Policy
responses will differ among countries, depending on their recovery pace. This situation
needs global coordination to avoid downturn cycles post-pandemic. At this juncture, we
still see that the adjustments on global interest rates and the quantitative easing will
continue beyond 2020 after most countries have fully recovered.
Reiterating our global economic view: U-shaped and uneven recovery. We believe that
signs of global economic recovery have been evident in the last quarter of 2020. In the US,
its GDP expanded by 4.0% qoq in 4Q20, both business and housing investments remained
robust, and exports grew at a double-digit pace, while personal consumption slowed and
public expenditure edged down. For the 2020 full year, the US GDP contracted by -3.5%
(vs. 2.2% in 2019) and is expected to recover by 5.1% this year. China had different figures
as it continued to stay at positive growth last year. This year, China is projected to
accelerate further at 8-9%, according to the IMF and World Bank estimations.
Escaping from a great recession. The global economic growth, by far, posted a
contraction due to the adverse impact of COVID-19. The pandemic had an unprecedented
and prolonged impact on global growth as well as people’s welfare. By far, the significant
change in our assumption about the pandemic is that it is longer than most predictions.
The silver lining of the current progress, we see that most countries that have relaxed their
lockdown are really improving in several on-the-ground numbers. This means that both
retail and manufacturing industries can quickly rebound after the lockdown. In this case,
the global stimulus had a significant impact on the short-term recovery.
U-shaped recovery on the card. 2020 will most likely end with a U-shaped recovery,
rather than V-shaped in our view, except in China and Vietnam. The keys for fast recovery
will be on an acceleration of COVID-19 containment and a proven COVID-19 vaccine.
China’s and Vietnam’s positive growth will lean toward an uneven recovery, in which
countries with positive growth will be the main targets for capital inflows (both direct and
portfolio inflows) instead of countries with late COVID-19 recovery. In the short run, the
link between fast pandemic recovery and capital flows has a significant relationship. But
in the medium term (1-5 years), these indicators will be the main reasons for investors in
coming to certain countries: (i) regulation clarity; (ii) infrastructure sufficiency, and (iii)
link to the global value chain.

FIGURE 2. IMF GLOBAL ECONOMY PROJECTION FIGURE 3. IMF GLOBAL ECONOMY PROJECTION
8,0 6,3
6,0 4,8 5,0
4,3 4,5 4,5 5,5
3,6
GDP growth (%)
4,0
3,4 3,8 4,2
3,3 3,5 2,8 4,3
2,0 3,1
2,4 2,5 2,2
0,0 1,8 1,6 -2,4
-2,0
-4,0 -3,5
-6,0 -4,9
2015 2016 2017 2018 2019 2020F 2021F 2022F
World
Advanced Economies
EM and Developing Economies
Source: IMF, Jan-2021 WEO Source: IMF, Jan-2021 WEO
Growth trajectory: Significant rebound next year; moderate afterward. We see a

significant global economic rebound in 2021 before moderating the years after. The main
factors for 2021’s significant rebound are mainly from (i) the low-base effect from 2020’s
contraction, except in China and Vietnam; (ii) some rebound in demand (in retail, FMCG,
and healthcare-related sectors) improves the supply side; (iii) the significant progress
regarding the COVID-19 vaccine, and; (iv) flattening positive COVID-19 cases or fewer
cases in other COVID-19 waves. With these assumptions, we believe moderate growth will
come after 2021, with much lower growth in many advanced countries. Some emerging
markets will experience a better growth trajectory due to the expected direct investment
inflows from manufacturing industries’ reallocation from China to lower risk
concentration. However, the direct investment reset will heavily depend on infrastructure
and human resource readiness.
Flush global liquidity due to massive stimulus injection amid low interest rates should
lure investors into seeking investment outlets with higher yields once confidence
improves. This means there would be potential capital inflows coming to riskier asset
classes, including emerging-market assets. The risk-on behavior is already reflected in the
recent shift of funds from safe-haven assets (gold, UST yields) to the stock market,
causing the US stock index and the UST yields to rise. This “reflation trade” phenomenon
happens on the back of growing expectations for economic recovery and extraordinary
fiscal stimulus in the US.
Yet, it is important to note several downside risks that are recently brewing in the
financial market. As mentioned earlier, UST yields have continued to increase quite
rapidly in the past few days. This triggers sentiments of a sooner than expected ‘reflation’,
which was followed by the fear of early QE tapering. The sentiments have caused capital
outflows from the Emerging Market and pressure to the domestic bond market. This
reminds us of the taper tantrum in 2013 when foreign investors pulled out from EM equity

and bond markets and cause most central banks increased their benchmark rates and
ended the low-interest-rate period. However, this time we believe, the volatility will be
temporary as market are adjusting to the transitional period to recovery. Furthermore,
Federal Reserve Chairman Jerome Powell has reassured that policy would continue to be
supportive and look beyond a temporary pick-up in inflation, especially from a low base.
We believe the risk of changing direction of monetary and fiscal policies in advanced
countries, especially in the US, will be worth noting beyond 2021 and can create currency
pressure on countries with a high CAD or countries that are lagging behind the recovery
trend. At this juncture, we believe the rising global interest rate trend will start at the
earliest in 2022.
Geopolitical risks should be relatively milder with Joe Biden taking the helm of the US
government. Joe Biden’s approach on foreign policy is expected to be more subtle,
aiming to restore America's global image and push for more democracy against the recent
rising tide of authoritarianism. Yet, foreign policy may not be a priority, as Biden seems to
focus on rebuilding the domestic economy. Biden may likely reverse some of Trump’s
trade policy, especially with its close allies, i.e., Europe, but toward China, the trade policy
may not change much. Domestic sentiments against China seem to be growing, and it
would be unpopular for Biden to reverse the course of the US-China policies. Therefore, it
is fair to note that the risk of volatility in the financial market caused by the US-China trade
tension may still exist.
FIGURE 4. INDOGB POSTED NET LOSS IN THE FIRST MONTH OF FIGURE 5. INCREASING US TREASURY YIELD AND US DOLLAR
THIS YEAR RECOVERY
4,0% US 10yr DXY Index (RHS)

3,0% 2,8%
3,0% 2,2% 2,6% 1,40 102
1,8% 1,9% 1,8% 1,8%
2,0% 1,3% 100
1,20
1,0% 98
0,1%
1,00 96
0,0%
-0,1% 0,80 94
-1,0%
-0,7% 92
-2,0% 0,60 90
-3,0%
0,40 88
-4,0%
86
-5,0% 0,20
84
-6,0% -5,2% 0,00 82
Aug-20
Nov-20
Jan-20
Mar-20
May-20
Jun-20
Apr-20
Dec-20
Jan-21
Feb-20
Oct-20
Jul-20
Sep-20
Aug-20
Nov-20
May-20
Apr-20
Jun-20
Jul-20
Sep-20
Oct-20
Dec-20
Jan-21
Source: Bloomberg and Mandiri Sekuritas Source: Bloomberg as of Jan 21
Commodity prices: Passed the rock bottom, but limited upside ahead. The commodity
prices have rebounded from the lowest level in the first half of this year, mainly driven by
higher demand from China. The country’s fast recovery from the pandemic has outpaced
most other countries’ growth. The recovery was seen from the persistently higher PMI
post GDP contraction of 6.8% YoY in 1Q20 due to strict lockdown policies. The IMF
expects China to grow by 1.9% in 2020 and 8.2% in 2021, while the World Bank predicts it
to grow by 2% in 2020 and 7.9% in 2021. If there were no black swan event in 2021, China
would have had the highest growth in the world, beating India, which previously posted

higher growth in pre-COVID years. The implication of China’s V-shaped recovery is the
rebound in Indonesia’s prime commodity prices, such as rubber, CPO, nickel, and copper.
CPO, rubber, and copper prices have recovered by 1.8%, 16.9%, and 11.2% YTD,
respectively, but a different pattern still occurs for coal, as it dropped by 14.3% YTD.
China’s import of Indonesia’s coal still dropped by -12% YTD, and it was surprising since
China supposedly entered the winter period and had rising demand for energy. It seems
their domestic coal stock and supply were still abundant; hence, they preferred to
optimize their domestic supply.
Going forward, we expect most of Indonesia’s main commodity prices will have limited
upside in 2021 due to global recovery. In 2021, we expect the average CPO price will touch
USD 639/ton (8.5% vs. average of USD 589/ton in 2020), while copper and nickel will touch
USD 5,979/ton (1% vs. USD 5,918/ton in 2020) and USD 15,215/ton (9% vs. USD
13,919/ton). However, we expect coal prices to stay flat at USD 59.2/ton in 2021 (2.2% vs.
USD 57.9/ton) as demand recovers and China’s coal supply decreases. We still see China’s
plan to increase its domestic supply as the major risk of rising coal prices.

Indonesia 2021: Recovery and Reform

Indonesia’s growth: rebalancing between survival and recovery mode. These positive
on-the-ground indicators signify the economy should be on a recovery path by the end of
4Q20 and by 2021: (i) spending indices on several retail, hotel, and FMCG products have
passed their rock bottom; (ii) people have started traveling, as indicated by higher hotel
and resort booking numbers; (iii) lower impact from the PSBB, as the government has
been less strict on the implementation, unlike in 1H20, and; (iv) some lagging government
stimulus impact on consumption might have kicked-in as of 4Q20.
However, we may need to stay conservative, considering the uncertainties are still high.
Thus, the 2021 economic figure will be very tricky because a proven COVID-19 vaccine
discovery will be the game-changer for the overall data: either a fast rebound or stay flat.
We believe, until the vaccine has been successfully distributed, the economy will run at a
maximum of 60-70% capacity. This rate will limit some businesses from reaching their
break-even point when they reopen. At this juncture, they will still need fiscal stimulus
from the central and local governments.
We see that the government has put much thought into allocating the right amount for
multiple scenarios, as depicted in the 2021 budget. The government stays conservative by
putting a 5% economic growth assumption and rebalancing the budget allocation for
more reform. At the same time, they still allocate some stimulus in case the economy’s
recovery got delayed.
FIGURE 6. DOSES OF VACCINES ADMINISTERED FIGURE 7. INDONESIA VACCINATION SCHEDULE

Jan - April 2021 April 2021 - March 2022
77,4
63,9
21,5
17,4
1,3
Health Public Elderly Vulnerable Others

Personnel Services Communities
Source: Our World in Data as of 2-Feb-2021 Source: Ministry of Health

Fiscal policy remains accommodative, with most of the COVID-19 stimulus extended
to this year. The government will continue the PEN Program, which provides social
assistance, supports, and incentives for MSMEs and businesses. The budget allocated for
the PEN Program this year has been increased multiple times, from previously IDR 403.9tn
to IDR 688tn. The number is only slightly smaller than the allocated IDR 695tn in 2020,
which clearly underlines the necessity to keep cushioning consumers and businesses in
their transition from contraction to recovery. Nonetheless, the higher PEN Program
allocation this year may not necessarily translate into a higher fiscal deficit. Instead, the
government will use some of the large excess balance that reached IDR 234.7tn in 2020
and reallocate the budget from less-priority posts, i.e., business travel and other
administrative posts.
The government sets a higher allocation for the health sector from IDR 63tn in 2020 to
IDR 173tn for free access to vaccinations; the procurement, distribution, and socialization
of the vaccination plan, and; widening health facilities (isolation and hospital beds). The
allocations for social safety net and SME and corporate support are also still big, at IDR
150.2tn and IDR 187.2tn, respectively. The government also sets aside a large allocation
for priority programs (food estate, tourism support, labor-intensive programs, ICT
development, and industrial area development) at IDR 123.8tn.
Despite some potential budget reallocations, in general, the fiscal strategy this year is
aimed to balance between extending the COVID-19 stimulus and continuing the long
impending structural reform. The budget allocation for infrastructure is at IDR 418tn
initially, notably higher than last year, to continue the delayed projects in 2020. Yet, with
the increased allocation for the PEN Program, we may see some refocusing on
infrastructure projects, prioritizing more on the labor-intensive so they can also function
as a stimulus for the economy by absorbing unemployment. The government will also
focus on developing the ICT. The programs will include increasing the satellite capacity,
developing the national data center, developing the social welfare database, and
digitalizing education. Developing the ICT sector is crucial to increase online access
throughout the country, especially during the pandemic, with the growing need for the
new-normal way of life.
Other stimuli aimed at reviving the consumption of the middle-upper income class have
also been issued. The reduction in luxury tax for purchasing cars below 1,500 cc will be
implemented in stages this year, starting in March. In its last Monetary Policy Meeting, BI
has also introduced expansive macro-prudential policies, i.e., loosening the provisions for
down payment for motor vehicle financing to at least 0%, effective from 1-Mar-2021 to
31-Dec-2021; loosening the LTV/FTV for property loans/financing to a maximum of 100%
for all property types for banks meeting certain NPL/NPF criteria, and; removing the
provisions for gradual disbursement of indent property, effective from 1-Mar-2021 to 31-
Dec-2021.

FIGURE 8. STATE BUDGET 2020-2012 FIGURE 9. NATIONAL ECONOMICS RECOVERY BUDGET (IDR
TN)
Description 2020 2020R 2021
% 124
APBN APBN Growth
Realization Priority Program 67
(IDR tn) APBN
Perpres 66
(%yoy)
72/2020
Government Revenue
A and Grant
1,699.9 1,633.6 96.1% -16.7% 1,743.6
SME Support & Corporate 187
173
Financing
I. Domestic Revenues 1,698.6 1,621.3 95.4% -17.1% 1,742.7 177
Tax Revenue 1,404.5 1,282.8 91.3% -17.0% 1,444.5

54
Business Incentives 56
Non-tax Revenue 294.1 338.5 115.1% -17.2% 298.2
120
II. Grants 1.3 12.3 946.2% 123.6% 0.9
150
B
Government Spending 2,739.2 2,589.9 94.5% 12.2% 2,750.0 Social Safety 220
234
I. Central Government 1,975.2 1,827.4 92.5% 22.1% 1,954.5
II. Transfer to Region

763.9 762.5 99.8% -6.2% 795.5 173
and Village Fund
Health 64
Primary Balance -700.4 -642.2 91.7% 778.5% -633.1
97
C
-
Budget Surplus/Deficit -1,039.2 -956.3 92.0% 174.2%
D 1,006.4 688
PEN 580
Deficit (% of GDP) -6.3 -6.1 96.1% 176.8% -5.7
695
Budget Financing 1,039.2 1,190.9 114.6% 196.2% 1,006.4
E
2021 2020R 2020
SILPA 234.7
Source: MoF Source: MoF

FIGURE 10. NATIONAL ECONOMIC RECOVERY PROGRAM

IDR IDR IDR

173.3 T SOCIAL PROTECTION
HEALTH 150.2 T 123.8 T PRIORITY PROGRAMS
1. The COVID-19 vaccine 1. PKH 10 million beneficiaries (KPM) 1. Tourism Supports

2. Medical Facilities and 2. Basic Food/ SEMBAKO Card 2. Food Security/Food Estate
Infrastructure 3. Pre-Employment Card 3. ICT Development
3. Health Care Claim Costs 4. Cash Transfer–Village Fund 4. Loan to Regions
4. Medical Personnel Incentives and 5. Cash Social Assistance 10 Million KPM 5. Labor Intensive Program
death 6. Internet Quota Subsidy 6. Industrial Area
compensation 7. Electricity Discount 7. Other Priority Programs
5. Reserve BPJS Contribution
Assistance for PBPU / BP
IDR IDR BUSINESS INCENTIVES

187.17 T 53.9 T
SUPPORT FOR MSMEs & CORPORATE FINANCE 1. PPh 21 DTP
1. KUR and non-KUR interest 4. Others PEN Programs 2. PPh Final DTP UMKM
3. PPnBM DTP Motor Vehicle
subsidy 5. Placement of Funds
4. Import Duty and Tax Incentives
2. Loss Limit Guarantee for 6. PMN to SOEs carrying 5. Early VAT Restitution
MSMEs & Corporation out assignments (HK, 6. Reduction in PPh25 Installment
3. Guarantee services (IJP) of ITDJ, Pelindo III, KIW) 7. Corporate Tax Reduction
MSMEs and cooperatives 8. Uncollected PPn for KB/KITE
Sources: MoF
Establishment of the INA will be positive for investment prospects. Before the
pandemic, the growth of fixed investment has been in a flattening trend since 2018.
However, these positive developments may encourage the recovery of investment this
year: (i) the dissemination of the implementing regulations of the Omnibus Law on Job
Creation, and; (ii) the establishment of Indonesia’s sovereign wealth fund, called the
Indonesia Investment Authority (INA). The INA is an investment management institution
intended to provide financing, mainly for strategic national projects. Its initial capital
investment is set at a minimum of IDR 15tn. Government regulation mandates that the
INA’s capital should gradually reach IDR 75tn by the end of 2021.
This institution will be supervised by the State-Owned Enterprise (SOE) Minister, Finance
Minister, and some professionals, and directly reports to the President. It will play a key
role in financing projects, including infrastructure, healthcare, tourism, and technology.
The main function of Indonesia’s SWF is to attract foreign capital as a co-investor in
financing domestic projects. Several financing schemes have been prepared, wherein
investors can decide how much to invest and see which projects interest them. Several
foreign investors are already committed to investing through the INA. It is important to
note that the governance aspect of this institution is very crucial for investors. The
Minister of Finance, as the chairperson of the Board of Supervisors, has stated that in the
recruitment of the Board of Supervisors, the government had chosen promising talents
with good reputation and professionalism to avoid risky governance.

Meanwhile, to revive household consumption as the other dominant source of

growth, the main challenge is to restore confidence by managing the pandemic
better. The pandemic’s worst impact was in 2Q20 when economic growth reached its
deepest contraction since the 1998 Asian Financial Crisis. The economic contraction
gradually eased in the next two quarters and is expected to continue toward the path of
recovery this year. However, it turns out the virus is harder to contain than initially
expected, and we have entered another tight social restriction since the start of the year.
We have gone through four stages of restrictions since the pandemic’s onset. The first,
PSBB 1 (10-Apr to 4-Jun), was the tightest and had the deepest impact on the economy,
especially on consumer spending. Spending generally improved when PSBB 1 relaxed into
PSBB Transitional I (5-Jun to 13-Sep). However, as cases continued rising, especially in
Jakarta, the local government tightened the restriction again for two weeks (PSBB 2, 14-
Sep to 11-Oct). This year, as of 11-Jan, the government will impose a tighter and wider
restriction (PPKM). We expect the impact on consumer spending may not be as significant
as in the first and second restrictions (PSBB 1 and PSBB 2). This is because consumers have
had time to adjust, and some can shift their spending through online platforms. However,
the restriction’s wider scope throughout Java and Bali may amplify the impact.
Economic growth in the first quarter this year may be below our initial forecast (1% YoY),
though the magnitude will depend on how long the current restriction (PPKM) goes on.
Nonetheless, there are still positive catalysts in Q1 that may cushion the impact of the
PPKM: (i) people have adjusted better to a life with restrictions, and; (ii) government
spending has been front-loaded with budget disbursement for vaccines, health facilities,
and social support.
Recovery acceleration may be more evident in the second half. The economy should
accelerate in Q2 due to (i) the base-year effect (deep contraction in 2Q20), and; (ii) Ied
festive season in Apr-May. We should anticipate a growing number of people visiting their
hometowns, which would be positive for growth, but negative for the pandemic if health
protocols were not implemented properly. Furthermore, we may expect stronger
recovery in the second half if the vaccination plan goes smoothly according to schedule.
Overall, this year, we expect the economy to recover and grow by 4.4%. Nonetheless, we
note the risk of a delayed growth acceleration due to the ongoing social restriction at the
start of the year.

Econ-Box
Mandiri Group 1. Household
Research Spending Amid COVID-19
| May 2017ig
The COVID-19 cycle is still a risk against recovery. Throughout 2020, it was clear that COVID-19 has rapidly changed the picture
of Indonesian household spending. BMRI’s high-frequency data shows that Indonesian household spending has been shaped by
three things: the Large-Scale Social Restriction (PSBB), COVID-19 infection fear, and risk normalization. Regarding the last one,
as people accustomed themselves to the COVID-19 infection risk associated with certain activities, they have a strong tendency
to undermine the risk, which in turn contributed to the rise of COVID-19 transmission.
The Large-Scale Social Restriction has restrained spending, but it is typically followed by a spending recovery, though not
sustainable. Tightened social restrictions (PSBB/ Pembatasan Sosial Berskala Besar/Large-Scale Social Restriction) have
caused short-term economic pressures on both business owners and households. However, the post-PSBB has led to a sudden
jump in economic activities. Relaxed health and safety protocols often lead to an increase in COVID-19 cases, which creates the
fear of virus transmission; thus, people restrain their activities again. This condition obviously pressures spending and flattens
the recovery rate. Restrictions and restraints tend to trigger a strong desire to quit and be free. As the transmission quickly
becomes unmanageable, the government reintroduces containment measures. At the end of the day, we are left with stop-and-
go economic activities. The recovery thus is not on a sustainable path.
FIGURE 11. SPENDING PATTERN AMID COVID-19 PANDEMIC
1) Large-scale social restriction

pushes spending
2) Relaxed social restriction

5) Increased COVID-19 cases, the
policy (PSBB Transisi) lead to
Government take stringent measures
normal economic activities.
with PSBB
Spending begins to pick up.
4) risk normalization period in

3) Normal activities lead to increased
which people undermine risk of
COVID-19. Fear of infection leads to
COVID-19. activities resume to
precaution behavior.
normal.
Sources: Bank Mandiri
The 2020 cycle appears to continue and would be a major barrier against the recovery of spending and consumption in 2021.
Based on high-frequency data, the spending pattern shows ups and downs, depending on social restriction. This creates a W-
shaped recovery, although the overall pattern suggests an upward trend. During the first weeks of PSBB 1, i.e., the first week of
January 2020, the spending value declined by almost 40% from the pre-pandemic level (see Figure 12). Afterward, spending
showed an upward trend, stemming from the risk-normalization period. As resuming normal activities increases the COVID-19
transmission, the government pulled an “emergency brake” and reintroduced another restriction: PSBB 2. Interestingly, we saw
that spending declined by only 15% during PSBB 2 relative to the pre-pandemic period, suggesting the adjustment of household
behavior.

Following PSBB 3, spending slowed down, but it managed to reach the pre-pandemic level. By early Feb-2021, the spending
frequency index reached 110.7, which was 10.7% higher than in Jan-2020. On the other hand, the spending value index slipped
to 99.1, suggesting a small decline of 0.9% from the pre-pandemic. Despite showing a declining trend in early 2021, both indices
remained in positive territory compared to PSBB 1.
FIGURE 12. THE SPENDING VALUE AND FREQUENCY INDICES
Sources: Bank Mandiri Big Data Analytics
Stricter social distancing policies tend to create more volatile spending. Spending in provinces implementing stringent
PSBB—i.e., all provinces in Java and Bali—tends to be volatile (see Figure 13). Between 11-Jan-2021 to 22-Feb-2021, all provinces
in Java and Bali implemented public activity restrictions (PPKM). The data suggests that in the normalization after PSBB 1, the
spending in the provinces increased substantially. This can be seen from the steeper spending slope. On the other hand, as PSBB
was reintroduced, the spending in these provinces declined dramatically. With the ongoing PPKM, we notice the spending index
of provinces implementing PPKM dropped by 5.3%. Meanwhile, the non-PPKM provinces still have >100, suggesting higher than
the pre-pandemic.
FIGURE 13. THE SPENDING INDEX BY PPKM STATUS
People have adapted to restrictions, making the adverse impact of social restriction less severe. Figure 14 shows that it took
around eight weeks for spending to reemerge to a level before PSBB 1. PSBB 1 also corrected the spending rather deeply. On

the other hand, most people seemed to have anticipated PSBB 2. It cut spending by only 4 ppt at the bottom, and spending
recovered in less than 7 weeks. However, this does not necessarily imply a sustainable economic recovery. Social restriction is
still an option when the infection rate becomes unmanageable. On the other hand, this stop-and-go economic activity would
not be good for businesses, particularly small ones. Business owners would internalize the possibility of PSBB, and they would
operate below normal capacity. They may hire fewer workers or cut operational hours to stay afloat. This condition would create
dire consequences for the economic recovery in the medium and long terms.
FIGURE 14. WEEKS NEEDED TO RECOVER TO THE PRE-PSBB
13 Sep 2020
86,4
85,4
84,0 83,4 1 Nov 2020
82,8
81,8 81,6 81,4
PSBB II
started
PSBB II transitional
period began
7 Jun 2020
67,8 68,0
66,0 66,6
64,3 PSBB I transitional
PSBB I period began
started 61,1
60,2
59,1
58,0
0 1 2 3 4 5 6 7 8 9
Weeks
PSBB I PSBB II
Cautious higher-income consumers hold spending. The spending data suggests that lower- and middle-income consumers’
spending rates have already reached their pre-pandemic levels by the end of 2020, although recently, they are showing declining
trends. Meanwhile, the upper-income households remain cautious, and their spending has not touched the pre-pandemic level
yet. By 7-Feb, their spending reached 89.3, or 10.7 ppt lower than the pre-pandemic level. Cautious higher-income households
would be concerned about the economic recovery, considering their spending size is generally bigger. Fear of virus transmission
combined with high uncertainties appears to be the major reason for this group holding back their spending.

FIGURE 15. THE RICH HOUSEHOLDS REMAIN CAUTIOUS

100,4
97.6
89.3
PSBB I PSBB II PSBB III
Uneven recovery has been apparent in business activities with high person-to-person interaction, though supermarkets
are left unaffected. Supermarkets appear to be unaffected by social restrictions. On the other hand, PSBB 2 hit restaurants
hard. But the spending on restaurants by the end of January appeared to have returned to the pre-pandemic level. Two other
sectors, namely department stores and entertainment, have not returned to their Jan-2020 level. By the end of Jan-2021,
spending rates on department stores and entertainment were at 66.3% and 51.3% of their pre-pandemic levels, respectively.
FIGURE 16. SPENDING INDICES ON SELECTED MERCHANTS
180
160
130,1
140
120 105,1
100
80
66,3
60
51,3
40
20
0
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21
Department Stores Entertainment Supermarkets Restaurants
Spending on personal products, such as sports and hobbies, has grown significantly. By 31-Jan-2021, spending on sports was
70.5% higher than in Jan-2020. At the same time, spending on hobbies was 34.3% higher. These numbers underscore how the

pandemic has changed the pattern of household spending. Anecdotal evidence from the media reveals that people found new
hobbies, sports, and activities during the pandemic. Many urban people started gardening at home amid the pandemic.1
Afterward, as people started “work-from-office”, mobility picked up. We observed that spending on gasoline by the end of Jan-
2021 was 42.1% higher than in Jan-2020.
FIGURE 17. SPENDING INDICES ON PERSONAL HOBBIES, SPORT, AND OTHERS
200
180 170,5
160
140 142,1
120 134,3
100 122,4
80
60
40
20
0
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21
Gasolines Electronics Hobbies Sports
Sources: Bank Mandiri big data analytics
Trends in shopping centers and restaurant visits
Spending has improved, and store visit rates have picked up as well. Mandiri Institute conducted live-monitoring activities in
the two most affected sectors: retail and restaurants, from Jul-2020 to Jan-2021.2 The average store visit rate continued to pick
up, and by early Jan-2021, it reached 79% of its pre-pandemic level. Despite the PPKM, the store visit rate seems unaffected. A
more relaxed approach to the ongoing PPKM explains why the visit rate did not suddenly drop. That is, the restriction is on
operating hours, limited to 19.00 in the early period of PPKM.
Jakarta leads the store visit rate among cities. By Jan-2021, DKI Jakarta ranked first in the store visit rate (116%), followed by
Makassar (77.7%) and Bogor (73.9%). The visit rate in DKI Jakarta suggests relatively normal store activities amid PSBB 3 (or
PPKM). It may reflect that a significant number of employees have already returned to work-from-office. Additionally, a new
PPKM implemented as of 11-Jan-2021 creates precautionary spending among Jakarta’s urbanites.
FIGURE 18. STORE VISIT RATES, JUL-2020 TO JAN-2021

Mandiri Group Research

100%| May 2017ig
80% 79%
57% 70%
60% 57% 66%
55%
47%
40%
20%
0%
3-7 July 6-11 August 9-13 9-17 9-17 8-16 8-16 January
September October November December 2021
2020 2020
Notes: The percentages above describe the relative visit rates relative to normal visits
Sources: Google Maps estimated by Mandiri Institute
FIGURE 19. STORE VISIT RATES BY CITY, NOV-2020 TO JAN-2021
140%
116,0%
120%
100% 78%
74%
64,4%
63,6% 65% 75% 77,7%
72% 74% 73,9% 75%
80% 69%
73%
69,7% 70% 71%
64% 65% 66,6% 66% 67,3%
60%
60% 50%
40%
20%
0%
Medan Tangerang Denpasar Bekasi Surabaya Bogor Makassar Jakarta
9-17 November 2020 8-16 December 2020 8-16 January 2021
Store visit rates dominated by shopping malls. The disaggregated data shows that in Jan-2021, the visit rate to shopping malls
suggests a solid recovery (107%). In comparison, supermarkets and other shops were relatively leveled-off at 69% and 64%,
respectively. As malls offer various extensive experiences for consumers, including marketplaces, entertainment, and
restaurants, this explains their relatively high visit rate. On the other hand, supermarkets are more oriented toward daily
household needs. Better visit rate to malls is also driven by relaxing work-from-office policy, as workers are also consumers that
frequently visit malls.
FIGURE 20. STORE VISIT RATES BY CATEGORY, NOV-2020 TO JAN-2021

Mandiri Group Research120%

| May 2017ig
107%
100%
78% 77%
80% 69% 69%
63% 64%
60% 58%
60%
40%
20%
0%
Shopping Mall Supermarket Other Stores
Social restrictions strongly affected the restaurant visit rate. Data collected from Google Maps showed that the restaurant
visit rate declined to 66% in Jan-2021 from its peak of 83% in Nov-2020. By city, the highest restaurant visit rate in Jan-2021 was
in Surabaya (79%). Concurrently, the recovery in restaurant visit rate appears to be rather slow in Denpasar, Bali. By Jan-2021,
the restaurant visit rate in Denpasar was at 55% relative to the period before COVID-19.
FIGURE 21. RESTAURANT VISIT RATES, JUL-2020 TO JAN-2021
100%
87%
80% 74%
66%
60% 52% 53%
47%
40% 38%
20%
0%
3-7 July 6-11 August 9-13 9-17 October 9-17 8-16 8-16 January
September November December 2021
2020 2020
FIGURE 22. RESTAURANT VISIT RATE BY CITY, NOV-2020 TO JAN-2021

Mandiri120%
Group Research | May 2017ig
96% 97%
100%
81% 83%
78% 79% 78% 79%
75% 75% 78% 77%
80% 69% 69%
72% 70% 72%
68% 66%
65% 65%
59% 59%
55%
60%
40%
20%
0%
Denpasar Bogor Tangerang Makassar Bekasi Medan Jakarta Surabaya
Fast food restaurants will recover faster. By food category, fast-food restaurant visit rates have been consistently higher than
those of other restaurant types. By Jan-2021, the fast-food restaurant visit rate reached 82%, increasing from 78% in Dec-2020.
On the other hand, the specialty-restaurant visit rate has shown a declining trend since Nov-2020, and by Jan-2021, it reached
64%. Specialty restaurants are those offering specific menus, such as Japanese restaurants, steakhouses, and others. These
restaurants’ menus generally attract the upper-middle class in Indonesia.
FIGURE 23. RESTAURANT VISIT RATES BY TYPE, NOV-2020 TO JAN-2021
100% 90% 88%

84% 85% 86%
78% 82% 75%
80% 74% 72% 74% 74%
64% 64%
56%
60%
40%
20%
0%
Fast food General Local Other Specialty
The growth rates of all other goods have slumped drastically. We believe the spending pattern in 2Q21 will worsen from
the latest data in 1Q21, as many cities have applied PSBB, which has significantly reduced people’s mobility, hence also
economic activities. For 3Q21, we think the spending pattern will likely be very similar. For 3Q21 and 4Q21, we think the
spending pattern will highly depend on the trend of daily positive cases, whether it will still increas e or decrease. If the
trend is declining, we may expect spending allocation on non-food to increase.
Inflation Expected to Pick-Up in 2021 as the Economy

Recovers

The 2020 consumer price index (CPI) inflation was at 1.68%. The realization was below
the 2019 inflation of 2.72% and BI’s 2020 target range of 3±1% as the COVID-19 pandemic
severely hit both the demand and supply sides of the domestic economy. The trend,
however, has gradually picked up since Aug-2020. The government managed to ease the
volatile price to 3.62% (vs. 4.30% in 2019). Administered price eased to 0.25% (vs. 0.51%
in 2019), following the PSBB that limited public mobility to prevent the pandemic's
spread. Core inflation significantly weakened to 1.60% (vs. 3.02% in 2019) due to lagging
domestic demand and declining money velocity amid the pandemic.
FIGURE 24. INFLATION IS EXPECTED TO HIKE GRADUALLY IN 2021

20 9
CPI - rhs Core - lhs
8
Administered - lhs Volatile - lhs
15 7
4,30 6
10 1,60
3,02 5
% yoy
% yoy
0,51
3,62
4
5 0,25
3
0 2
1
8,36 3,35 3,02 3,61 3,13 2,72 2,68 2,98 2,96 2,67 2,19 1,96 1,54 1,32 1,42 1,44 1,59 1,68 2,92
-5 0
Jun-20
Nov-20
Dec-20
Jul-20
Oct-20
2014
Feb-20
Apr-20
Sep-20
2015
2016
2017
2018
2019
May-20
Aug-20
2021F
Jan-20
Mar-20
Sources: BPS & OCE BMRI
As the domestic economy recovers and demand improves, we forecast the 2021 headline
inflation to hike to 2.92% or return within BI’s target range of 3±1%. This suggests the
possibility of demand-pull inflation in 2021. We believe the increased money supply (M2)
from the COVID-19 economic stimulus carried out since 2020 will cause inflationary
pressure. The impact will mostly occur in the second half of 2021 when public mobility and
business activities are expected to accelerate, assuming COVID-19 daily cases are
declining, restrictions on community activities have been notably relaxed, and the COVID-
19 vaccination program is smoothly executed.
Core inflation is projected to strengthen due to higher money velocity or more economic
transactions, following improved demand amid hiking consumer confidence index (CCI),
boosted by this year’s vaccination program. Administered prices will be slightly higher
simply because transportation fees will start to normalize. The government will most
likely not translate higher commodity prices to higher public good prices, as this could
jeopardize the economic recovery momentum. The government and BI have been proven
capable of controlling the volatile prices, particularly food prices in recent years. Hence,
there will be no serious issue of inflationary pressure due to price volatility.
FIGURE 25. INFLATION, MONEY VELOCITY, AND CONSUMER CONFIDENCE INDEX

WEAKENED DUE TO THE PANDEMIC, WHILE MONEY SUPPLY INCREASED FOLLOWING
THE ECONOMIC STIMULUS

20 2,7
Mandiri Group Research | May 2017ig 15
2,6
10
5 2,5
0 2,4
% yoy
-5
-10 2,3
-15 2,2
-20
2,1
-25
-30 2,0
3Q14
1Q18
1Q14
2Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
CCI (4Q MA) - lhs M2 (4Q MA) - lhs
Inflation - lhs Money Velocity (4Q MA) - rhs
Sources: Bank Indonesia, BPS & OCE BMRI
Another upside risk comes from wholesale price index (WPI) inflation, which has been
catching up with CPI inflation in the past few months, leading to a potentially higher cost-
push inflation. This is mainly driven by higher commodity and input prices amid the
economic recovery trend. We believe businesses will not fully pass-through the higher
cost to consumers, as domestic demand has not yet returned to the pre-pandemic level.
On the flip side, downside risk still comes from uncertainty surrounding the economic
recovery, including the daily case trajectory and the success of vaccination programs.
Therefore, this risk may hamper the economic recovery progress and further weaken
domestic demand, hence worsening the inflation.
FIGURE 26. WHOLESALE PRICE INDEX & CONSUMER PRICE INDEX
3,5
3,0
1,82
2,5
2,0
1,5
% yoy
1,0
0,5 1,68
0,0
-0,5
CPI WPI
-1,0
-1,5
Jun-19
Nov-19
Dec-19
Jun-20
Nov-20
Dec-20
Jul-19
Jul-20
Feb-19
Sep-19
Oct-19
Feb-20
Sep-20
Oct-20
Apr-19
Apr-20
Mar-19
Aug-19
Aug-20
Jan-19
May-19
Jan-20
Mar-20
May-20
Sources: BPS

External Balance Remained in Check: BoP to Record Surplus in 2021

Foreign reserves increased by USD 6.7bn from USD 129.2bn in 2019 to USD 135.9bn in
2020. BoP in 2020 posted a USD 2.60 surplus. The surplus was mostly due to shrinking
CAD as import plummeted amid the pandemic. The trade balance had a USD 21.74bn
surplus in 2020, significantly higher than the USD3.59bn deficit in 2019. The surplus was
the second highest within the last decade, during which the trade balance posted a USD
26.06bn surplus in 2011.
FIGURE 27. BOP RECORDED SURPLUS IN 9M20 FIGURE 28. FOREIGN RESERVES WELL ABOVE ADEQUACY
STANDARD
20 9,2 12
10 140 Foreign Reserves - lhs 10,2 12
135,9
15 Import Cover - rhs
8 135 129,2 10
10 6
2,1 130 6,7 7,6
4
5 8
USD bn
USD bn
2 125 120,7
0
USD bn
Month
0
-2 120 6
-5
-0,2 -4 115
-6 4
-10
-8 110
-8,5 2
-15 -10
105
4Q18
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
100 0
Nov-18
Nov-19
Nov-20
Jul-19
Sep-19
Jul-18
Jul-20
Sep-18
Sep-20
May-18
May-19
May-20
Jan-18
Mar-18
Jan-19
Mar-19
Jan-20
Mar-20
Current Account - lhs Capital Account - lhs
Financial Account - lhs Overall Balance - rhs
Source: Bank Indonesia Source: Bank Indonesia
FIGURE 29. MONTHLY TRADE BALANCE POSTED SURPLUS IN FIGURE 30. ANNUAL TRADE BALANCE POSTED HIGH SURPLUS
THE LAST 8 MONTHS IN 2020
40 2,10 4 50 30
14,6 40 21,74 25
30
3
30 20
20 -2,61
2 20 15
USD bn
10
% yoy
10
10
1 5
USD bn
0
% yoy
0 0
-10 0 -10 -5
-20 -20
-1 -10
-30 -30 -17,34 -15
-0,5 -2
-40
-50 -3
Nov-18
Nov-19
Nov-20
Jul-18
Jul-19
Jul-20
Sep-18
Sep-19
Sep-20
May-18
May-19
May-20
Jan-18
Mar-18
Jan-19
Mar-19
Mar-20
Jan-20
Trade Balance - rhs Import - lhs Export - lhs
Trade Balance - rhs Export Growth - lhs Import Growth - lhs
Source: BPS Source: BPS

The pandemic causes havoc in both export and import activities as the global demand
& supply chain was seriously disrupted. Following the bottomed-out global economy in
2Q20, Indonesia’s export has recovered faster than its import, supported by the economic
recovery in its main export destination countries, particularly China. Import, meanwhile,
indicates a gradual recovery, as some businesses still postpone their investment and
production activities amid uncertainties surrounding the ongoing pandemic, and
consumption remains weak amid a prolonged PSBB. Consequently, the trade balance has
been recording a series of surpluses since May-2020. After posting a current account
surplus of 0.38% of GDP in 3Q20 (the first quarterly surplus since 3Q11), Indonesia booked
another current account surplus of 0.29% of GDP in 4Q20. For the full 2020, CAD was
around -0.45%, notably shrinking from -2.72% of GDP in 2019.
FIGURE 31. QUARTERLY CAD NARROWED FIGURE 32. ANNUAL CAD IS PROJECTED TO WIDEN
15 0,38 1,0 50 0,19 Goods - lhs 0,5
0,29
Services - lhs
0,5 40
-1,19 Primary Income - lhs 0,0
10 Secondary Income - lhs
0,0 30
CA - rhs -0,45
-1,31 -0,5
-0,5
5 20
-1,0 -1,0
% of GDP
USD bn
10 -1,60
% of GDP
0 -1,5
USD bn
0 -1,5
-2,0 -1,82
-5 -10
-2,5 -2,0
-2,04 -1,88
-3,0 -20
-10 -2,5
-3,5 -30
-2,66 -2,72 -3,0
-15 -4,0 -40
-2,94
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
-3,18 -3,09
-50 -3,5
Goods - lhs Services - lhs

Primary Income - lhs Secondary Income - lhs
CA - rhs
Source: Bank Indonesia Source: Bank Indonesia & OCE BMRI
Moving forward, we see Indonesia will record a higher BoP surplus in 2021 on the back of
manageable CAD and massive capital and financial account inflows. Therefore, this
surplus will support foreign reserves, as well as the rupiah exchange rate.

Widening CAD in 2021

The 2021 CAD is expected to widen following improving demand amid the domestic
economic recovery. As the recovery progresses, boosted by the COVID-19 vaccination
program, we project the CAD to widen to -1.88% of GDP in 2021. Yet, this figure is still
narrower than its pre-pandemic 5-year average of -2.22% of GDP.
FIGURE 33. SENSITIVITY ANALYSIS OF COMMODITY PRICES ON CURRENT ACCOUNT

BALANCE
Impact on
Changes Commodity Current Account

GDP growth (ppt) Balance
(ppt of GDP)
CPO +0.08 +0.13
Every 10%
Coal +0.07 +0.10
increase
Oil -0.01 -0.10
Sources: OCE BMRI
The large trade surplus will most likely persist in 1H21, thanks to solid export performance,
supported by demand recovery in main trading partners (manufacturing PMI of >50 or
expansion zone) and by higher major commodity prices. Currently, commodity prices,
particularly CPO and coal prices, have rebounded to their pre-pandemic levels. During the
2020 pandemic, the average CPO price plummeted from USD 727.1/ton in Jan-2020 to
USD 496.77/ton in May-2020 (lowest in the year) and then rebounded to USD 911.84/ton
in Dec-2020 (highest since Aug-2012). In the case of average coal price, it plunged from
69.0 in Jan-2020 to 50.5 in Aug-2020 and bounced back to 78.3 in Dec-2020.
FIGURE 34. MANUFACTURING PMI’S OF MAIN TRADING FIGURE 35. COMMODITY PRICES SHOW UPWARD TREND
PARTNERS SUGGEST IMPROVING DEMAND
60 56,5 160 1.400
140 1.200
55 911,8
53,0
120
1.000
50 100 78,3
800
80
45 50,0 600
60
40 400
40
40,3
38,4 20 200
35 50,3
37,6 0 0
Jul-12
Jun-15
Jul-19
May-11
Apr-14
Nov-14
May-18
Feb-20
Mar-10
Dec-11
Oct-10
Feb-13
Sep-13
Jan-16
Mar-17
Aug-16
Dec-18
Sep-20
Oct-17
30
Oil (USD/bbl) - lhs Coal (USD/Ton) - lhs

China Japan US CPO (USD/Ton) - rhs
Source: Bloomberg Source: Bloomberg

Moreover, copper and iron & steel exports are expected to increase. The former on the
back of higher production in Freeport’s mining, which is estimated to operate at around
80% capacity in 2021. The latter due to China’s big investment in Indonesia’s stainless-
steel sector, following the ore export ban. China’s investment in basic metal accounts for
50.2% of its total investment in 2020, higher than 34.4% in 2019. Consequently, the export
structure to China has shifted from mostly coal (29.7% of total export to China) and CPO
(13.0%) in 2019—leaving iron & steel at around 11.2%—to mostly iron & steel (23.7%) in
2020. Coal and CPO exports to China correspondingly shrank to 21.5% and 10.6% in 2020.
The latest trade report shows that despite the pandemic, Indonesia’s global iron & steel
export recorded the highest growth among other commodities. It soared by 46.37%,
strengthening from 28.85% in 2019. CPO export rose by 18.12%, while coal export
dropped by -22.29% (vs. -13.78% and -9.70% in 2019, correspondingly).
FIGURE 36. CHINA’S FOREIGN DIRECT INVESTMENT FIGURE 37. INDONESIA’S EXPORT STRUCTURE TO CHINA HAS
STRUCTURE IN INDONESIA HAS SHIFTED ALSO SHIFTED
75,01%
65,65%
50,2% 49,84% 46,0% 46,2% 44,2%
34,4% 9,6% 11,2%

23,7%
25,0%
32,4% 29,7%
21,5%
12,0% 13,0% 10,6%

2018 2019 2020
2018 2019 2020 CPO Coal Iron & Steel Others
Basic Metal Others
Source: BKPM Source: BPS
In 2H21, assuming restrictions on community activities have been relaxed, import will start
to catch up as economic growth accelerates, driven by strengthening domestic
consumption and considerably increasing fixed capital investment activities. Higher
investment activities will lead to higher import growth of raw materials and capital goods.
Those input goods account for a huge chunk of imports or around 90% of the total import.
COVID-19 vaccine procurements and relatively higher oil price will also contribute to the
higher imports in 2021.

FIGURE 38. 2020 IMPORT STILL DOMINATED BY INPUT GOODS FIGURE 39. INPUT GOODS IMPORT STARTS TO RECOVER
GRADUALLY
80 Consumer Goods
Raw Materials
10,35% 60 Capital Goods
16,74%
40
3,9
20
% yoy
Consumption 3,2
Goods 0
Raw Materials
-20
Capital Goods -2,0
-40
-60
Jul-18
Jul-19
Jul-20
Nov-19
May-18
Nov-18
Mar-19
May-19
May-20
Nov-20
Jan-18
Mar-18
Sep-18
Jan-19
Sep-19
Jan-20
Mar-20
Sep-20
72,90%
Source: BPS Source: BPS
The 2021 trade surplus will maintain a surplus of goods balance in the BoP. On a different
note, the deficit in service balance will widen following higher imports and the increasing
freight transportation deficit. The service deficit is also driven by the travel balance deficit,
as the tourism sector will keep lagging amid the temporary prohibitions of entry (travel
ban) into Indonesia for foreign travelers. For the income balance, the primary income
deficit is expected to narrow, and the secondary income surplus will be lower. The former
is due to the declining dividend or interest payment of direct and portfolio investments for
non-residents caused by the relatively poor performance of the private sectors during the
2020 pandemic. The latter is related to the declining number of Indonesian migrant
workers amid the pandemic.

Higher Financial Account Surplus in 2021

In 2020, portfolio investments in both the bond and stock markets recorded an outflow of
approximately USD 8.28bn amid the pandemic (USD 5.06bn and USD 3.22bn net
outflows, respectively), which was the first outflow since at least 2014. Foreign investors
massively gave up their ownership of government bonds. Their ownership share dropped
from an averagely of 39–40% to 25%. However, on a monthly basis, the portfolio
investment indicated re-inflows after 1Q20 (USD 1.47bn net inflow in May–Dec-2020).
Meanwhile, direct investment still posted a surplus, yet the amount declined from quarter
to quarter. As a result, the financial account balance still managed to book a surplus,
although much lower than in 2019.
In our view, despite the widening CAD in 2021, the financial account balance will post a
higher surplus, resulting in the BoP booking a larger surplus than in the previous year.
Foreign inflows into the portfolio market (both bond and stock markets) are expected to
normalize. The government will most likely issue more global bonds, as BI will not
continue last year’s one-off debt monetization. Key factors for the re-inflow are good
fiscal risk management, a still-attractive interest rate differential during the global
monetary easing, a maintained-low inflation rate leading to a lucrative real interest yield,
and a stable rupiah exchange rate amid the global liquidity flush (global quantitative
easing).
FIGURE 40. COVID-19 PANDEMIC CAUSED HIGH VOLATILITY IN FIGURE 41. PORTFOLIO INVESTMENT RECORDED OUTFLOW IN
FINANCIAL ACCOUNT FLOW 2021
20 7 20 15,50
15,33
4,43 6
15 15
5 9,13 9,79
3,75 3,36
10 0,36 4 6,38
10
% of GDP
3 1,25
USD bn
USD bn
5 12,74 11,97
11,75
2 5
8,00 7,88
0 1 4,10
-
0 (1,62)
(2,95) (3,62)
-5 (5,06)
-1
-1,12 (5)
-10 -0,34 -2 (3,22)
0,48
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
(8,28)
(10)
2014 2015 2016 2017 2018 2019 2020
Direct Investment - lhs Portfolio Investment - lhs
Other Investment - lhs FA - rhs Govt. Bond Stock Total
Source: Bank Indonesia Source: Bloomberg

FIGURE 42. MONTHLY PORTFOLIO INVESTMENT IS BACK TO FIGURE 43. FOREIGN OWNERSHIP OF GOVERNMENT BONDS
INFLOW AFTER 1Q20 DECREASED
4 45%
38,6%
40%
2
35%
- 41,3%
30%
USD bn
(2)
25%
(4) 20% 25,2%
(6) 15%
Jul-18
Jul-19
Jul-20
May-18
Sep-18
Nov-18
May-19
Nov-19
May-20
Nov-20
Jan-18
Mar-18
Jan-19
Mar-19
Sep-19
Jan-20
Mar-20
Sep-20
(8)
Jul-17
Jul-18
Jul-19
Jul-20
May-17
May-18
May-19
May-20
Mar-17
Sep-17
Nov-17
Mar-18
Sep-18
Nov-18
Mar-19
Sep-19
Nov-19
Mar-20
Sep-20
Nov-20
Jan-17
Jan-18
Jan-19
Jan-20
Foreign Ownership on Government Bond
Govt. Bond Stock
Source: Bank Indonesia Source: Ministry of Finance
The Omnibus Law’s implementation, including the Sovereign Wealth Fund (SWF), and the
Regional Comprehensive Economic Partnership (RCEP) may strengthen foreign direct
investment (FDI) inflow. Specifically, the SWF is meant to pool local and overseas funding
and distribute the funds to national strategic investment projects. Therefore, it may
finance the CAD more sustainably by shifting the dominance of portfolio investment to
FDI. This will help Indonesia cope with the chronic trade-off between economic growth
and macro stability, leading to a stable rupiah exchange rate. The government plans to
bulk its funding for the SWF to up to USD 5bn and targets to obtain USD 15mn–20mn from
domestic and foreign investors in 2021. Furthermore, the government plans to reduce the
negative investment list from 20 to 6 sectors, thus opening more FDI inflow opportunities.


Policy Rate Lingers in the Low
To support the economy during the COVID-19 pandemic, BI in 2020 cut the BI 7-Day
Reverse Repo Rate (BI-7DRRR) by 125 bps from 5.00% to 3.75%, the lowest ever. The
deposit and lending facilities were also cut to 3.00% and 4.50%, respectively. The decision
was mainly taken on the back of the low-inflation environment, the maintained external
stability (shrinking CAD and stable rupiah exchange rate), and the need to accelerate
economic recovery. Moreover, liquidity has been loosened to prompt lower interest rates
and stimulate economic financing. The reserve requirement ratio was cut by 200 bps from
5.50% to 3.50%. BI has injected around IDR 694.87tn of additional liquidity through
quantitative easing (QE) into the banking system, primarily in the forms of lower reserve
requirement (totaling IDR 155tn) and monetary expansion (IDR 524.07tn).
FIGURE 44. BANK INDONESIA MAINTAINED ACCOMMODATIVE MONETARY POLICY
8 3,0
Inflation (yoy) - lhs
7 BI7DRRR - lhs
FFR - rhs 2,5
6
2,0
5
3,75
4 1,5
%
%
3
1,0
1,68
2
0,5
1
0,25
0 0,0
Jun-20
Jul-18
Jul-19
Jul-20
Jun-18
Jun-19
Apr-18
May-18
Nov-18
Jan-19
Apr-19
May-19
Nov-19
Apr-20
May-20
Nov-20
Jan-18
Feb-18
Mar-18
Aug-18
Sep-18
Dec-18
Feb-19
Mar-19
Aug-19
Sep-19
Dec-19
Jan-20
Feb-20
Mar-20
Aug-20
Sep-20
Dec-20
Oct-18
Oct-19
Oct-20
Sources: BPS, Bank Indonesia, the Fed
BI has helped finance the PEN Program by purchasing government securities (SBN) in the
primary market through private placements and market mechanisms, and via the burden
sharing approach with the government. In 2020, BI purchased SBN amounting to IDR
75.86tn in the primary market through various market mechanisms, including auction
scheme, greenshoe option (GSO), and private placement. In this case, BI acted as a
standby buyer, and the program has been scheduled to continue until 2022. Meanwhile,
SBN purchases in the primary market through direct purchase (private placement) to fund
the Public Goods program (health, social assistance, and spending to support regional and
sectoral recovery) amounted to IDR 397.56tn. The interest expense will be fully borne by
BI, and this is a one-off policy in 2020 only. The realization of burden-sharing with the
government to fund the non-public-goods-MSME program reached IDR114.81tn, and to
fund the non-public-goods-corporation program reached IDR 62.22tn.
FIGURE 45. GLOBAL MONETARY EASED IN 2020

Japan 0
Mandiri Group Research | May 2017ig 0
UK -65
-25
Canada -150
-30
Vietnam -200
-125
Thailand -75
-75
USA -150
-200
New Zealand -75
-65
Hong Kong -114
-125
India -115
-200
Brazil -250
Policy Rate Change (bps)
Sources: Bloomberg
We see that the synergy between Indonesia’s monetary and fiscal policy expansions will
continue in order to ensure and accelerate economic recovery in 2021. The external and
internal economic projections for years to come still support BI to keep its accommodative
monetary and macroprudential policy mix. We see that BI most likely will cut the BI-7DRRR
by 25 bps to 3.50% in 2021, specifically in 1Q21. Room for a benchmark rate hike in 2021 is
almost none, while for a rate cut, the room tends to narrow. A relatively low policy rate is
still required to assist the economic recovery, especially for Indonesia, which is projected
to have a gradual economic improvement due to the prolonged restrictions on community
activities amid the ongoing pandemic. Yet, we estimate next year’s inflation to increase
to 2.92%, and the CAD to widen to -1.88% of GDP following the improved economic
condition. An attractive interest rate differential should also be maintained to invite more
capital inflows. These, in consequence, may limit the room for further aggressive policy
rate cuts.
FIGURE 46. INDONESIA’S REAL RATE WAS ONE OF THE MOST ATTRACTIVE IN 2020
Japan 0,80
0,30
UK -0,20
1,07
Canada -0,75
3,65
Vietnam 3,81
3,45
Thailand 0,77
0,00
USA -1,15
-1,50
New Zealand -1,15
-0,60
Hong Kong 1,06
2,07
India -0,59
-0,65
Brazil -2,52
Real Rate (%)
Note: Real rate = nominal rate - inflation rate
Sources: Bloomberg

Signs of Sectoral Recovery

After the relaxation of the mobility restriction (Large-Scale Social Restriction/
Pembatasan Sosial Skala Besar/PSBB) in Jun-2020, the economy has started to recover in
3Q20. Looking at the quarter-on-quarter (qoq) growth of the gross domestic products
(GDP), we see that transportation & storage (24.3%) is the fastest sector to recover,
followed by accommodations & food service activities (14.8%) and health work & social
activities (13.7%). To date, we presume the qoq growth in 3Q20 has shown substantial
recovery compared to 2Q20. Figure 47 shows that the 2Q20 growth dropped drastically
due to the social restriction during Mar-Jun 2020. Our sectoral indicator data (see below)
shows that the sectoral performance in this period was severe. The recovery afterward
was simply the result of the relaxed mobility restriction. The main concern is whether the
recovery will continue and reach the normal level, similar to pre-COVID-19.
FIGURE 47. QUARTER-TO-QUARTER ECONOMIC GROWTH IN 2020 (%QTQ)
Source: BPS.
We are a firm believer that the key factor to fully recover is how Indonesia handles the
COVID-19 pandemic. Unfortunately, in early 2021, the new COVID-19 cases increased
again; thus, the government applied another mobility restriction, this time the so-called
PPKM (Pemberlakuan Pembatasan Kegiatan Masyarakat). Thus, we learned that if the
number of new cases increases, the social and mobility restrictions are applied. However,
we see that the restriction was less severe than the first in Mar-Jun 2020. So, the economic
activities were higher than during the first social restriction but still far lower than normal.
It will take time for the activities to return to normal, parallel to the economic recovery
pace.
FIGURE 48. SECTORAL ECONOMIC GROWTH 2019 – 2021F (%)

Sources: BPS and OCE’s forecast.
Overall, we suppose the economy will continue to recover in 2021 by 4.4%. In particular,
it may accelerate in the second half of 2020, following the massive vaccination program.
Our scenario is that after the restrictions are relaxed, economic activities will improve,
mainly those related to mobility. Hence, the transportation & storage sector, which
suffered the most during the pandemic, can grow by 4.9% in 2021. Simultaneously,
accommodation & food service activities can grow by 4.7%, and wholesale & retail trade
can grow by 3.4%. These sectors are key indicators that production, distribution, and
consumption activities are almost normal. Implicitly, we assume that we can control the
pandemic, mainly depending on the effectiveness of the COVID-19 vaccination program.

FIGURE 49. HOUSEHOLD SPENDING 1Q-4Q2020 STILL CONTRACTED (%YOY)

Source: BPS.
We find that the spending behavior has changed dramatically due to the COVID-19
pandemic. We argue that the two main drivers changing the spending behavior are
weaker income and economic uncertainty.
The latest BPS data shows that the total household spending has decreased since
1Q20. We find a worrying indicator that household spending for food and drink
weakened by -0.73% in 2Q20, -0.69% in 3Q20, and -1.39% in 4Q20. The higher
contraction of spending for food and drink may indicate that people’s income has
shrunk, particularly in the lowest income group.
Another finding shows that the household spending for hotel and restaurant
contracted by -3.31% in 1Q20, -5.14% in 2Q20, -4.29% in 3Q20, and -4.09% in 4Q20.
Correspondingly, the household spending for hotel and restaurant contracted by -
16.55% in 2Q20, -10.9% in 3Q20, and -7.28% in 4Q20. We think the pandemic has
caused uncertainties, implying that people postpone spending as a pr eventive
measure to prepare for the worst. In this circumstance, people will prioritize basic
needs and reallocate unnecessary spending for savings.

FIGURE 50. CONSUMER CONFIDENCE SLOWLY RECOVERS

140
120
100
96,5
80 79 92
77,8
60
40
20
July
January
May
June
February
March
August
October
November
December
April
September
2018 2019 2020 2021
Source: Bank Indonesia.
We believe that consumer confidence is key to recover the economy in the coming
months. Bank Indonesia’s consumer confidence data shows that the confidence has
recovered from its rock bottom at 77.8 in May-2020. The confidence index reached
the highest point at 86.9 in Aug-2020 but weakened to 79.0 in Oct-2020. We presume
the weakening confidence in October was closely related to the increase of positive
COVID-19 cases. In December, the index recovered again to 96.5. These latest data
indicate a good sign of recovery. Consumer confidence can be an important proxy for
household spending behavior. If consumer confidence was high, people would expect
better prospects; thus, they might spend. In this case, people were optimistic about
economic growth, thus also about their income prospects. In the current pandemic,
consumer confidence is obviously the major factor that supports economic recovery.

Some Details of Sectoral Recovery

We did a detailed investigation to scrutinize the sectoral recovery by looking at the

performance of various sectors. Generally, we find that almost all sectors in 2019
operated below their pre-COVID-19 level.
FIGURE 51. INDOMARET SALES PERFORMACE (TRILLION) FIGURE 52. ACE HARDWARE SALES PERFORMANCE (MILLION)
9,0
7,82
7,5 7,09 1.000
6,61 879
6,0 800 772
6,00
4,5 600
4,49 583
3,0 400 436
1,5 200
0,0 0
July
January
February
June
March
May
August
October
November
April
December
September
July
January
May
June
February
March
August
October
April
November
December
September
2018 2019 2020 2018 2019 2020
Source: Indomart. Source: Ace Harware. .
We used Indomaret’s monthly sales performance as a proxy to evaluate the retail sector.
The data show that the retail sector has fully recovered, indicated by Indomaret’s sales
revenue, which is already similar to its pre-COVID-19 level. However, we were informed
that Indomaret’s sales revenue structure has changed toward having a higher
proportion of basic foods (sembako), while the proportions of non-basic needs and
other supplementary foods and goods are lowering in the total sales revenue. It
means that household income is possibly under pressure; therefore, household
spending may focus more on basic-need foods rather than non-basic-need foods. In
addition, ACE’s sales performance is also already similar to its pre -COVID-19 level,
except in April because of the PSBB.

FIGURE 53. NUMBER OF DOMESTIC FLIGHT PASSENGERS FIGURE 54. NUMBER OF TRAIN PASSENGERS (OUTSIDE
(MILLION) JABODETABEK COMMUTER LINE) (MILLION)
10 10
9 9
8,60
8 7,93 8 7,40
7 6,98 7
Juta Orang
6 6
5 6,29 5
3,66
4 4
3 3 2,19
2 2
1 0,09 1 0,41
0 0
Apr
Aug
Feb
May
Sep
Mar
Jan
Jun
Jul
Oct
Nov
Dec
feb
Apr
Aug
Mar
May
Sep
Jan
Jun
Nov
Dec
Jul
Oct
2018 2019 2020 2018 2019 2020
Source: BPS Source: BPS.
Our data show that the number of domestic flight passengers was only 3.66mn people in
Dec-2020, much lower than the pre-COVID-19, which usually reached about 7mn
passengers/month. Similarly, the number of train passengers (excl. commuter passengers
in Greater Jakarta) was only 2.19mn/per month, much lower than the pre-COVID-19,
which was usually about 7mn-8mn/month.
FIGURE 55. NATIONAL HOTEL OCCUPANCY RATE (%) FIGURE 56. BALI HOTEL OCCUPANCY RATE (%)
70
80
60
70
50 60
40 50
40,8 40
30
30
20 19,00
20
10 10
12,7 2,07
0 0
Apr
Aug
feb
May
Sep
Mar
Jan
Jun
Jul
Nov
Dec
Oct
Jan feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2018 2019 2020
2018 2019 2020
Source: BPS. Source: BPS.
A similar pattern could also be found in the hotel occupancy rate, which was only 40.8%
on average nationally in Dec-2020. In Bali, the hotel occupancy rate was even lower, at
only 19% in Dec-2020. Under normal circumstances, the national occupancy rate would
be about 60%, and Bali’s rate would be even higher, possibly reaching almost 70% on
average. We see that promoting the tourism sector is a dilemma. On the one hand, doing
so would increase mobility and then worsen the COVID-19 virus transmission, leading to
more new COVID-19 cases. On the other hand, if we do nothing, we are totally dependent
on handling the COVID-19 pandemic, which may take a long time. However, we see some
opportunities, particularly for hotels that have more open environments with direct access
to rooms, and are reachable by car.
FIGURE 57. CAR SALES (THOUSAND UNITS) FIGURE 58. MOTORCYCLE SALES (THOUSAND UNITS)

120 700
Mandiri Group Research | May 2017ig 561,7
100 600
500
80
400
60 57,1
300
231,6
40
200
20
100
0 0 21,9
Jan Feb Mar Apr May Jun Jul Aug Sep Okt Nov Des Jan Feb Mar Apr Mei Jun Jul Ags Sep Okt Nov Des
2018 2019 2020
2018 2019 2020
Source: Gaikindo. Source: Gaikindo
Further, we also find that car and motorcycle sales are about half of their normal levels
before the pandemic. For Dec-2020, car sales were at 57k units and motorcycle sales at
232k units. We think the uncertainty related to the upcoming economic prospect is key to
improve car and motorcycle sales. The latest Bank Indonesia data show that the consumer
index in Dec-2020 was only 96.5, indicating consumers are not optimistic about the future
economic outlook. It implies that spending may not be so strong, meaning that people
may still postpone spending and prefer holding cash.
FIGURE 59. CEMENT SALES (MILLION TON) FIGURE 60. CEMENT SALES GROWTH (%)
40
8 30 29,3
7 20
6 10
6,23 6,11
5 0
4 -10
5,74 -12,1
3 -20 -8,5 -9,4
2 3,15 -14,9 -15,2 -13,9
-30
1 -40
0 -50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2018 2019 2020

2018 2019 2020
Source: Indonesia Cement Association. Source: Indonesia Cement Association.
On another front, cement sales also contracted by 12.1% in Dec-2020. We see that the
contraction did not improve significantly in the second half of 2020, and cement sales are
highly associated with the construction and property sectors. As many construction and
property projects are postponed, demand for cement declined in 2020. We think cement
sales would slightly improve in 2021 thanks to some infrastructure projects, whereas the
property recovery would be limited to only the medium-to-small size housing.

The Sectoral Recovery Scenario

We assume the vaccination program will be implemented as planned. Note that
the government will execute the vaccination to the general public more intensively
in the second half of 2021. Assuming the vaccine’s efficacy rate is high, we think
consumer confidence will improve from the early second half of 2021. Note that
on 13-14 May-2021, we have Eid al-Fitr 2021, which may boost consumption since
the start of the Ramadhan fasting month, on the Eid al-Fitr day, and a few days
after. We see that these present a great momentum for higher spending, which
could accelerate economic growth. Assuming also that the new COVID-19 cases
can be controlled and that a more massive vaccination program starts in the early
second half, we can expect a bigger window for economic recovery.
FIGURE 61. SECTORAL RECOVERY STAGES
Source: Office of Chief Economist.

We developed a scenario based on the assumptions above: In the first stage, the recovery
will start in basic-need products, such as foods & drinks, supplement products, limited
delivery restaurants, and micro retailers. Afterward, we suppose the recovery will start in
the manufacturing sector that produces durable goods, such as clothes, shoes, and
electronics. We also expect automotive sales to increase significantly in the second half of
2021, especially in the end of 2021, benefiting from end-year discounts.
Meanwhile, we presume that the property sector will recover late in 2020. As commonly
found in every economic crisis cycle, property will recover in the last stage. However, we
find that a few particular segments in property may recover sooner, such as medium-small
housing for end-buyers, specifically for the young who just started their career with fixed
salaries.
Commodity Outlook

We see that commodity prices in 2021 can be an important driver for economic recovery,
particularly for commodity-based regions, such as Sumatera, Kalimantan, and Sulawesi.
To date, the prices are already higher than the pre-COVID-19 levels. For example, crude
oil is already >USD 60/barrel, coal at USD 80/ton, crude palm oil (CPO) at USD 900/ton,
and rubber at USD 1.7/kg. To some extent, we see the current prices are overshooting
because the prices are higher than they should be. The demand increased at the end of
2020, but in our opinion, the increase was to compensate the logistics and distribution
problems during the lockdown in Mar-Jun 2020. Overall, the demand is still weak and
below the pre-COVID-19 level. Further, we also do not think the positive expectation that
drove the price will increase since uncertainty remains high, as we do not know when the
pandemic will end.
FIGURE 62. COMMODITY PRICE IS HIGHLY ASSOCIATED WITH FIGURE 63. COMMODITY PRICE IS ALSO ASSOCIATED WITH
THE FED’S BALANCE SHEET DXY INDEX
500 600 500 140,0
450 500 450

120,0
400 400 400
350 300 350 100,0
300 200 300

80,0
250 100 250
60,0
200 0 200
150 -100 150 40,0

100 -200 100
20,0
50 -300 50
0 -400 0 0,0
Oct-00
Apr-08
Jul-01
Oct-03
Jul-04
Oct-06
Jul-07
Oct-09
Jul-10
Oct-12
Jul-13
Oct-15
Jul-16
Oct-18
Jul-19
Apr-02
Apr-05
Apr-11
Apr-14
Apr-17
Apr-20
Jan-00
Jan-03
Jan-06
Jan-09
Jan-12
Jan-15
Jan-18
Jan-21
Jul-01
Jul-04
Jul-07
Jul-10
Jul-13
Jul-16
Jul-19
Oct-00
Oct-03
Oct-06
Oct-09
Oct-12
Oct-15
Oct-18
Apr-02
Apr-05
Apr-08
Apr-11
Apr-14
Apr-17
Apr-20
Jan-06
Jan-15
Jan-00
Jan-03
Jan-09
Jan-12
Jan-18
Jan-21
Energy and Metal Commodity Price Index Energy and Metal Commodity Price Index (2000=100)
(2000=100) DXY Index
Source: Trademap Source: Bloomberg and OCE Forecast.
Another explanation besides the overshooting, we believe the commodity price increase
was driven by the ample USD liquidity from the quantitative easing in developed
countries, mainly the US. Our study has clearly shown that an increase in USD liquidity is
closely associated with an increase in commodity prices. As we already know that the US
has provided “super jumbo” COVID-19 stimulus packages in 2020 and 2021, at USD 2.1tn
and 1.9tn, respectively, which were much larger than the stimulus package in 2008 at USD
787bn.
Considering the large COVID-19 stimulus package and the Federal Reserve’s quantitative
easing, we believe commodity prices will be fairly high in 2021 and 2022. However, we do
not think we will be in a super-cycle commodity boom like in 2009-2014, as the real
demand, mainly from China, is not strong enough to drive the prices like in the last boom.
FIGURE 64. COMMODITY PRICE FORECAST

End of Period Price Average Price 2021 Forecasts

Bloomberg Bloomberg Forward

Mandiri Group Research |2019
May 2017ig2020 Consensus Consensus Bloomberg Price (EoP,
2019 2020 OCE
(Jul-Sep (Oct-Dec Consensus as of 8 Feb
2020) 2020) (Jan 2020) 2020)
Oil (Brent) (USD per
66 51.8 64.2 43.3 54.4 48.3 49.3 53.9 56.3
barrel)
CPO (FOB Malaysia)
743.4 967.8 524.9 667.6 727 707 750 769 734
(USD per ton)
Coal (Newcastle)
67.7 80.5 78 60.3 74.3 58.8 59.3 62.3 79.2
(USD per ton)
Gold (USD/Troy
1,517 1,898 1,394 1,772 2,084
Ounce) 1,912 1,915 1,869 1,822
LME Nickel Price
14,025 16,613 13,970 13,862 15,215 14,819 15,421 16,781 18,087
(USD/Ton)
Aluminum Price
1,810 1,980 1,813 1,772 1,794 1,744 1,848 1,996 2,047
(USD/Ton)
Copper Price
6,174 7,766 6,020 6,195 5,979 6,470 6,843 7,638 7,848
(USD/Ton)
Source: BPS and OCE’s forecast.
Accordingly, we forecast the average crude oil price will reach USD 54.4/barrel. As a
comparison, the Bloomberg consensus for crude oil price in 2021 is at USD 53.9/barrel,
while the forward price of crude oil is USD 56.3 per barrel. We also forecast the average
CPO price in 2021 will be USD 727/ton, while the Bloomberg consensus is USD 750/ton and
the forward price is USD 769/ton. We expect the average coal price in 2021 to reach will
be USD 74.3/ton, while the Bloomberg consensus is USD 62.3/ton and the forward price is
at USD 79.2/ton.
Lastly, we presume the current commodity prices in early 2021 will be corrected to a
healthy level, as they are overshooting and too high. However, we believe they will be at
least similar to their pre-COVID-19 levels and, of course, higher than in 2020. We still see
risk on commodity prices in 2021 from a slow recovery in the global economy, implying
slow commodity demand. Therefore, the positive expectation, which implies a significant
increase in commodity prices, is still riddled with uncertainties in 2021.

Regional Economic Outlook

We see two main drivers for regional economic recovery in 2021. First, increasing
commodity prices will greatly support the commodity-based regions, such as Sumatera,
Kalimantan, Sulawesi, and Papua. As we know, these islands have vital commodities for
their economy, such as crude palm oil, coal, crude oil, rubber, copper, and nickel.
Naturally, the price increase would be a positive catalyst for their economic growth. For
example, three provinces (i.e., Papua, North Maluku, and Central Sulawesi) had positive
growth in 2020 because of their mining activities, i.e., for nickel and copper. We expect
Sumatera will grow by 4.42% in 2021, Kalimantan 3.17%, Sulawesi 5.43%, and Papua
3.43%.
The second driver that should lead the economy to grow higher in 2021 is the vaccination
program. In this case, we expect the vaccine to protect effectively against COVID-19
infections. Subsequently, we think the government will relax the mobility restrictions,
leading to more activities so that certain sectors can flourish, such as transportation and
trade. Further, we also expect consumer confidence to increase gradually, indicating
people will be more willing to spend. After all, we expect services (transportation & trade
and manufacturing sectors) to recover immediately. The relaxation on mobility
restrictions and the recovery in services & manufacturing sectors are very important for
Java in improving its economic growth in 2021. We predict Java to grow by 4.73% in 2021.
FIGURE 65. REGIONAL ECONOMIC FORECAST FOR 2021
Source: BPS and OCE’s forecast.
In addition, for Bali and Nusa Tenggara, which are highly dependent on international
tourism, we think they may recover late, as international tourists will only come after the
pandemic has been contained. In particular, the tourism sector really depends on the
efficacy of the vaccines in accelerating its recovery. Note that the IATA (International Air
Transport Association) predicts that international flight may recover and reach its pre-
COVID-19 level by 2024. We can use the international flight as a proxy to estimate that

the international tourist number will also return to the pre-COVID-19 level by 2024.
Accordingly, we think in the near future, until 2024, Bali will be very dependent on
domestic tourists. Following our optimistic scenario that the vaccination program is
executed as planned and the vaccine’s efficacy rate is high, we expect the tourism sector
to regain its momentum and recover in the second half of 2021, particularly in the
Christmas and New Year holiday periods in Dec-2021. We expect Bali and Nusa Tenggara
to grow by 0.67% in 2021. If the global vaccination program also succeeds, we expect the
international borders to open gradually. The tourist visits may start increasing in 2022
gradually and reach the pre-COVID-19 level by 2024.

Sector Sales Performance 12M20

Sectoral performance in December 2021 shows inconsistent pattern across sectors.
Some sectors are more contracted in December than its previous month, such as:
automotive, cement and heavy equipment. However, we think this is due to cyclical
pattern. Conversely, we find that other sectors growth slightly better than its previous
months, indicated by the positive month-on-month growth, such as: retail, property loan,
sea transportation commodities (i.e., CPO and coal). We expect that sectoral recovery
trend will continue in 2021 benefitting from vaccination program, which hopefully
improved consumer confidence.
FIGURE 66. SECTOR PERFORMANCE CHART

Growth (% YoY) Growth
Sector Indicator Dec-20
12M20 12M19 Dec-20 Nov-20 Dec-19 2019 2018
(%MoM)
Ace Hardware
Retail1 -7.4 13.0 -12.2 -4.4 5.1 13.0 23.3 32.4
sales (IDR)
Total car sales
-48.4 -10.5 -34.8 -41.0 -0.2 -10.5 6.7 6.1
(Unit)
Commercial
-41.5 -11.6 -28.2 -13.9 10.9 -11.6 17.6 -8.6
vehicle (Unit)
Automotive2
Passenger
-50.5 -10.2 -37.2 -49.3 -3.7 -10.2 3.6 13.7
vehicle (Unit)
Total motorcycle
-43.6 1.6 -45.1 -56.7 -6.8 1.6 8.4 -2.3
sales (Unit)
Housing Credit
8,832 a) 31,903 b) 2.4 c) 2.1 d) 10.5 e) 7.8 13.3 0.8 c)
(IDR)
Property3 Apartment
181 a) 2,195 b) 1.7 c) 2.1 d) 15.4 e) 12.0 29.0 0.3 c)
Credit (IDR)
Total 9,013 a) 34,098 b) 2.4 c) 2.1 d) 10.8 e) 8.0 13.9 0.8 c)
Domestic sales
Cement4 -10.4 0.7 -12.1 -13.9 7.2 0.7 4.8 -6,0
(Ton)
Total domestic
-46.2 f) -26.7 g) -27.7 h) -15.8 i) -29.7 j) -28.0 25.2 -29.3 h)
sales (Unit)
UT Agro
-45.7 f) -55.5 g) 174.5 h) 155.1 i) -84.6 j) -55.0 28.2 -11.7 h)
segment (Unit)
Heavy UT Construction
-43.7 f) -8.8 g) -25.6 h) 50.4 i) -15.8 j) -22.4 29.6 -36.1 h)
Equipment5 segment (Unit)
UT Forestry
-35.0 f) 1.3 g) n. a. -58.3 i) -100.0 j) 1.8 9.2 -6.8 h)
segment (Unit)
UT Mining
-56.4 f) -49.6 g) 18.2 h) -17.5 i) -75.7 j) -51.6 33.0 32.5 h)
segment (Unit)
Loading and
unloading
activities in the 17.6 f) -21.8 g) -7.4 h) -7.4 i) 18.3 j) 17.0 -7.8 5.3 h)
five main ports
(Ton)
Sea Transport6
Passenger
departures and
arrivals in the 78.5 f) -69.3 g) -68.8 h) -71.9 i) 76.4 j) 76.2 3.6 7.6 h)
five main ports
(Passenger)
Domestic
Loading
Air Transport6 activities in the -7.8 f) -25.8 g) 18.2 h) 11.2 i) -20.8 j) -25.2 2.0 7.3 h)
five main
airports (Ton)

International
Loading
activities in the -29.7 f) 3.6 g) -23.8 h) -17.0 i) -15.8 j) 2.7 -6.5 -0.4 h)
four main
airports (Ton)
Domestic
Passenger
departures in the
-56.0 f) -18.9 g) -53.0 h) -65.3 i) -5.4 j) -17.8 3.8 37.4 h)
five main
airports
(Passenger)
International
Passenger
departures in the
-79.4 f) 4.6 g) -96.9 h) -97.5 i) 9.9 j) 4.7 9.5 15.1 h)
four main
airports
(Passenger)
Tourist inbound
Foreign Tourist6 -73.7 f) 3.4 g) -86.3 h) -88.3 i) 10.7 j) 2.9 13.3 10.8 h)
(million visit)
Volume of
-8.6 f) 0.3 g) -0.4 h) -6.7 i) 0.1 j) 1.3 2.0 12.7 h)
exports (Ton)
CPO6
Value of exports
17.3 f) -15.2 g) 39.6 h) 27.2 i) 3.8 j) -11.5 -10.7 20.5 h)
(USD)
Volume of
-13.2 f) 7.5 g) -4.4 h) -21.6 i) 8.4 j) 7.0 10.1 15.2 h)
exports (Ton)
Coal6
Value of exports
-25.7 f) -9.2 g) -17.1 h) -35.9 i) -12.2 j) -9.3 17.1 22.6 h)
(USD)
Notes: a) Jan-Oct 2020; b) Jan-Oct 2019; c) Oct 2020; d) Sep 2020; e) Oct 2019; f) Jan-Sep 2020 change in IDR Bn; g) Jan-Sep 2019 change in IDR Bn; h) Sep 2020;
i) Aug 2020; j) Sep 2019
Sources: 1) ACE Hardware; 2) CEIC and Gaikindo; 3) OJK; 4) ASI and CEIC; 5) United Tractor; 6) BPS.
Retail: Ace Hardware (ACES) retail sales performance contracted by -12.2% YoY in
Dec-20. The contraction was deeper than the Nov-20 sales that fell by -4.4% YoY.
However, on a monthly basis, the December retail sales significantly increased by 32.4%
MoM (vs. -1.4% MoM in Nov-20). Thus, we believe the deep year-on-year contraction in
Dec-20 was due to the seasonally high base effect in the COVID-19 pandemic condition.
In cumulative, FY20 sales contracted by -7.4%, much lower than the FY19 sales (13.0%).
ACES posted ‐14.5% YoY same-store sales growth (SSSG) in Dec-20 compared to ‐6.7%
YoY SSSG in Nov-20, bringing the cumulative FY20 SSSG to ‐9.3% (vs. ‐8.8% YoY 11M20).
By region, Jakarta experienced the weakest SSSG, both in Dec-20 (‐18.4% YoY) and
cumulative FY20 (‐11.0%), followed by Ex-Java and Java (ex. Jakarta).
We expect the retail sector performance to improve in 2021. The Indonesian retail
business association (Aprindo) predicts that national retail sales will grow by 4-4.5% this
year, higher than the 2020 estimate of 1.5-2%. The retail sector recovery will be in-line
with rising consumer confidence, which will be affected by the COVID-19 vaccinations and
policies. As we know, based on the timeline, most of the COVID-19 vaccinations will be in
2H21.
Automotive: Car sales in Dec-20 increased by 6.1% MoM. The latest Gaikindo data
showed wholesale car sales (sales from factories to dealers) in Dec-20 recorded 57,129
units or increased by 6.1% MoM. In more detail, passenger car sales increased by 13.7%
MoM or 40,347 units sold, while commercial car sales fell by -8.6% MoM, with sales of
16,782 units. Car sales in Dec-20 still showed an annual decrease. Total car sales in Dec-20
contracted by -34.8% YoY (vs. -0.2% YoY in Dec-19). Meanwhile, in Dec-20, passenger car

sales contracted by -37.2% YoY (vs. -3.7% YoY in Dec-19), and commercial cars contracted
by -28.2% YoY (vs. 10.9% YoY in Dec-19).
Cumulatively, total car sales in FY20 were at 532,027 units or contracted by -48.4% (vs. -
10.5% in FY19). These numbers are in-line with our estimation at the start of the COVID-
19 outbreak in 2020; we estimated car sales would contract by -49.9%. Meanwhile,
passenger car sales contracted by -50.5% in FY20, with sales of 388,886 units (vs. -10.2%
in FY19), and commercial car sales contracted by -41.5% in FY20, with sales of 143.141
units (vs. -11.6% in FY19). As a result of the pandemic, not only the car sales’ outlook
dropped sharply, but also motorcycle sales’. Annually, motorcycle sales dropped by -
45.1% YoY in Dec-20 (vs. -6.8% YoY in Dec-19), with sales of 231,637 units. Cumulatively,
in FY20, motorcycle sales contracted by -43.6% (vs. 1.6% in FY19); with sales of 3,660,616
units. Nevertheless, motorcycle sales in Dec-20 showed a decrease by -2.3% MoM.
We estimate car sales in 2021 to grow by 34.4%, with total car sales reaching 712,880 units.
The positive catalyst for car sales in 2021 is the national economic recovery. First, the fiscal
stimulus program, which is still quite large at IDR 403.9tn, is expected to be able to
accelerate the economic recovery. Second, the ongoing vaccination program is expected
to create positive expectations for future economic recovery. Furthermore, consumer
confidence is also expected to increase, which will encourage the purchase of durable
goods, including automotives. However, we see that the risks are still high in 2021, such
as increasing COVID-19 cases that could hamper the economy’s overall recovery.
Property: Still on a downhill track. According to the Otoritas Jasa Keuangan (OJK) data,
mortgage only grew by 2.4% YoY in Oct-20 (vs. 2.1% YoY in Sep-20). This achievement is
actually insignificant from a month-over-month point of view, with a 75 bps increase. For
us, this condition is not a surprise. The current condition is still in-frame with our
prediction; we believe the property sector will suffer and constantly sink deeper. However,
property came as one of the several important sectors that still grew, though booking a
contraction on a month-on-month basis.
It is hard to expect mortgage performance to rise significantly in the coming years. From
the historical trend, we all understand that the property sector never reached the
condition when the commodity market was blossoming around 2013–2014. Hence,
mortgage growth has been slowly declining, especially since mid-2018 until today. Within
2018 and 2019, mortgage’s average growths were at 13.4% and 11.86%, respectively.
Nowadays, adding the pandemic as a significant factor damaging the economy, up to Oct-
20, mortgage’s average growth was only as low as 4.57% YoY or around 60% lower from
its average growth in FY19.
Even by assuming the pandemic eases this year, which is rather improbable, the Office of
Chief Economist Bank Mandiri sees the lowest growth might still come in this quarter
(1Q21) before gradually bouncing back to the normal trend. We believe mortgage growth
will range 0.8–1.8% in 2021 and 4.2–5.2% in 2022. The property sector is probably one of
many to have a late recovery. Comparing this sector to others, we see that property has a
huge demand, but housing prices are relatively high and inelastic to the pandemic.
Moreover, this condition is also a result of our centralized demography in Jakarta and West
Java.

In the future, with systemic improvement in our infrastructure, transportation, and urban
development, developers may have more courage to develop small towns in the
peripheral, which may bring both houses and businesses.
Cement: Domestic cement sales in FY20 contracted by -10.4%. Domestic cement sales
recorded 5.7mn tons in Dec-20, contracting by -6.0% compared to Nov-20. Likewise,
domestic cement sales on a yearly basis in Dec-20 still contracted by -12.1% YoY. For
information, the highest domestic cement sales in 2020 occurred in October, at 6.2mn
tons, while the lowest was in May, at 3.2mn tons. Cumulatively, domestic cement sales in
FY20 contracted by -10.4% (vs. 0.7% in FY19), in-line with our projection range between -
8.5% to -11.6%. The sales growth in 2020 was the lowest in the last 10 years. By island, on
both monthly and yearly basis, cement sales in all islands contracted in Dec-20. On a
monthly basis, the deepest contraction in cement sales occurred in Maluku-Papua (-20.0%
MoM). Similarly, on a yearly basis, the deepest contraction in cement sales occurred in
Bali-Nusa Tenggara (-36.7% YoY). In 2020, only cement sales in Maluku-Papua had a
positive growth of 9.6%. Bali-Nusa Tenggara had the deepest contraction of -13.7%,
followed by Java (-13.1%), Sulawesi (-11.8%), Kalimantan (-10.8%), and Sumatera (-3.9%).
On another front, cement exports contracted in Dec-20 by -1.6% MoM or recorded 0.67mn
tons. However, cement export growth on a yearly basis was high, at 142.8%. Cumulatively,
cement exports in 2020 grew by 48.2% to 9.3mn tons. However, the export market is only
12.9% of total production, without any significant rise in demand in the national cement
industry.
The Office of Chief Economist Bank Mandiri estimates that domestic cement sales in 2021
will grow by 3-6%. There are two positive catalysts for cement sales in 2021. First,
infrastructure projects will rise in 2021, in-line with increasing infrastructure expenditure
in APBN 2021 by 47.3% to IDR 414tn. The infrastructure budget in 2021 is greater than the
realization of infrastructure spending in 2019 of IDR 339.8tn (before the COVID-19
pandemic). Second, the implementation and effectiveness of the vaccination program,
which is expected to have positive impact on economic recovery.
Heavy equipment: Total heavy equipment sales growth contracted in Nov-20. UNTR's
heavy equipment sales amounted to 154 units in Nov-20 or decreased by -11.7% MoM.
This MoM growth reversed UNTR’s positive trend of MoM growth since Jun-20. Three of
the four segments experienced negative MoM growth in Nov-20, namely agro,
construction, and forestry. The construction segment's sales plunged from 72 units to 46
units or decreased by -36.1% MoM. Furthermore, the sales from agro and forestry
segments decreased by -11.8% MoM and -7.1% MoM. Meanwhile, mining segment sales
surged by 32.4% MoM, from 37 units in Oct-20 to 49 units in Nov-20.
Furthermore, UNTR's heavy equipment sales performance in 2020 was substantially lower
than in 2019. Cumulatively, from January to November 2020, UNTR's heavy equipment
sales only reached 1,481 units or dropped by -46.2% YoY. UNTR also reported its domestic
heavy equipment market share in Nov-20 was at 30%, the same as its Oct-20 market
share. With that market share data, the overall domestic heavy equipment sales in Nov-
20 were approximately 4,937 units, substantially lower than the same period last year that
reached 9,171 units. Low capital expenditure realization from commodity producers
(especially coal) caused heavy equipment sales to contract significantly.

As we advance, heavy equipment sales in Dec-20 will likely be lower than in Nov-20 due
to fewer effective working days. We predict the total heavy equipment sales will only be
5.883 units for the whole year, a decline by -39.7% from the 2019 total heavy equipment
sales of 9,753 units. Meanwhile, in 2021, we predict better performance for heavy
equipment sales. The rebound of commodity prices, such as for coal, nickel, and CPO, will
induce higher activities in mining and agriculture sectors, leading to more heavy
equipment needs from them. Besides, the restart of a government project in 2021 will
increase the construction sector's heavy equipment needs. We forecast the total heavy
equipment sales in 2021 will increase to 6,123 units or grow by 5.9% from the 2020 total
heavy equipment sales estimate.
Sea transport: The growth of loading and unloading activities in the 5 main ports
decreased by -7.4% YoY in Nov-20. That number is lower than the same period last year,
which recorded an increase of 18.3% YoY. The decline in Nov-20 was due to decreasing
growth of Belawan Port’s loading and unloading activities by -18.8% YoY, followed by
Tanjung Priok Port at -6.0% YoY, Tanjung Perak Port at -19.4% YoY, and Makassar Port
at -6.7% YoY. Balikpapan Port was the only one with positive growth of 1.6% YoY. On a
monthly basis, there was an increase of 5.3% MoM in Nov-20. On the other hand, the
number of sea transport passengers decreased by -68.8% YoY in Nov-20 due to decreases
at Belawan Port (-71.0% YoY), Tanjung Priok Port (-82.5% YoY), Tanjung Perak Port (-
66.5% YoY), Balikpapan Port (-68.5% YoY), and Makassar Port (-64.5% YoY). On a
monthly basis, there was an increase of 7.6% MoM in Nov-20.
Air transport: Domestic freight increased in Nov-20. The increasing amount of air
freights in Nov-20 was due to increasing growth in Kualanamu Airport at 150.3% YoY,
Soekarno-Hatta Airport at 6.6% YoY, Juanda Airport at 20.3% YoY, and Hasanuddin
Airport at 64.3% YoY. Meanwhile, Ngurah Rai Airport had negative growth at -27.0% YoY.
On the other hand, international air freights in Nov-20 decreased by -23.8% YoY. This was
due to decreasing growth in Kualanamu Airport (-93.7% YoY), Juanda Airport (-48.5%
YoY), and Ngurah Rai Airport (-87.4% YoY), whereas Soekarno-Hatta Airport had a
positive growth at 4.4% YoY. On a monthly basis, domestic freights increased by 7.3%
MoM, and international freights decreased by -0.4% MoM. On another front, domestic
passengers at Indonesia’s 5 main airports in Nov-20 decreased by -53.0% YoY (vs. -
5.4% YoY in Nov-19). The decrease was due to declining growth in Kualanamu Airport (-
49.1% YoY), Soekarno-Hatta Airport (-53.5% YoY), Juanda Airport (-56.6% YoY), Ngurah
Rai Airport (-61.0% YoY), and Hasanuddin Airport (-35.4% YoY). The number of
international passengers decreased by -96.9% YoY (vs. 9.9% YoY in Nov-19), caused by
decreasing growth in Kualanamu Airport (-99.7% YoY), Soekarno-Hatta Airport (-93.8%
YoY), Juanda Airport (-98.9% YoY), and Ngurah Rai Airport (-100.0% YoY). On a monthly
basis, all domestic and international passengers increased. Domestic passengers
increased by 37.4% MoM, while international passengers by 15.1% MoM.
We predict that transportation performance in 2021 will depend on the success in reducing
the number of COVID-19 cases and in the vaccination program. The success of these two
factors will increase people's confidence to travel.
Foreign tourist: Mission impossible. For the past 7 months, everything goes as expected:
stagnant in 150k–160k arrivals every month. Surprisingly, in Nov-20, the total number of
foreign visitors into Indonesia achieved the highest level for the past semester. We

welcomed 175,310 foreign visitors, quite significant compared to Oct-20 at 158,190

visitors. The statistics showed that the numbers improved by 10.8% MoM. However, the
pandemic is still here, and the government, through the new minister of tourism and
creative economy and the minister of foreign affairs, has implemented new policies with
health protocols in mind. Indonesia will not welcome any foreign visitors until the end of
January 2021.
It is important to remind us all that there are several important key points we must learn.
First of all, our lowest performance in foreign tourist arrivals of around 150k actually does
not include real tourists. There is a high probability this number came from workers who
were commuting between Indonesia and Timor Leste. The Indonesia Statistical Bureau
(BPS) has shown that more than 50% of the foreigners came from Timor Leste. For
example, by Oct-20, 82k out of 158k foreign visitors were from Timor Leste, or as high as
52% of the total arrivals in Oct-20. Commuters, however, are not likely to bring any
significant impact on the tourism industry as a whole since they are just doing their
routine, meaning their daily spending is measurable and does not bring any revenues to
hotels and other accommodation sectors.
Our stand remains the same: it is impossible to recover anytime soon since the
government has already extended the “no-tourist-policy” until the end of 2020. The Office
of Chief Economist confidently expects the number of foreign visits in Dec-20 to be lower
than in Nov-20. We believe the total tourist visits in 2020 to reach 4.05mn.
Considering the state of the pandemic now, we think the government might need to
extend the red flag by not welcoming any foreign visitors for a couple of months. It might
hurt the economy, especially the tourism industry in the first quarter of 2021. Yet, it might
be good in the long term, as it would protect the people against risks of any new
metastatic virus, which has been reported in several European countries.
What we need to embrace now is this: we need to remember that we still welcomed 1.2mn
foreign visitors in 1Q20, which was around 30% of the total expected realization for FY20.
This year, it will not happen. So, roughly, we reasonably argue that the total foreign visits
may hit as low as 1.8mn–2.2mn in FY21.
CPO: Indonesia’s crude palm oil (CPO) export volume still contracted. Indonesia’s CPO
export volume continued its monthly increase for the third time by 12.7% MoM in Nov-20.
However, Indonesia’s export volume in January-November 2020 (11M20) still contracted
by -8.6% YoY due to weak CPO demand in early 2020. On the other hand, Indonesia’s CPO
export value increased by 17.3% YoY in 11M20 due to higher CPO price in 2020. The
average CPO price in 11M20 was USD 646/ton, higher than in 11M19 at USD 510/ton.
Furthermore, the average CPO price in 2020 was USD 666/ton, higher than the average
price in 2019 at USD 524/ton. This 2020 figure is in-line with our 2020 forecast at USD
646/ton. CPO continued its price hike in Jan-21 and was traded at USD 933/ton on 28-Jan-
21, or a decrease by -3.6% YTD. The sentiment beyond the current price hike expects a
declining supply amid recovering demand, which would create a short-term undersupply.
Moreover, the lockdown in Malaysia could hamper CPO production in early 2021.
However, we see that the current CPO price tends to overshoot and will gradually return
to its fundamental level. We predict the average CPO price in 2021 at USD 727/ton, slightly
lower than the consensus forecast at USD 769/ton.

Coal: Indonesia's coal export growth continued its positive performance in Nov-20.
According to the BPS data, coal export volume and value increased by 15.2% and 22.6%
MoM, respectively, in Nov-20. These positive numbers in November continued their
positive MoM growth in Oct-20. In more detail, from Indonesia's four largest coal export
destinations, two countries recorded positive export volume growth. The destinations
that recorded positive volume growth in Nov-20 were China by 78.2% MoM and Japan by
29.3% MoM. Meanwhile, India and South Korea posted a decrease of -9.2% MoM and -
35.7% MoM in Nov-20.
On a yearly basis, Indonesia's coal export in 2020 was still below the 2019 level. In Nov-20,
the BPS reported Indonesia's coal export volume and value declined by -4.4% and -17.1%
YoY. Cumulatively, from January to November, Indonesia's coal export volume and value
decreased by -13.2% and -25.7%.
From now on, we predict Indonesia's coal export performance to recover, as coal price has
started to rebound in 4Q20. In total, we expect Indonesia's coal export volume to reach
425mn tons in 2021, an increase of 9.8% from the estimated coal export volume in 2020
that probably achieved 387.2mn tons.


Banking Sector Updates: Worst Year Since 1998
Loan posted a negative growth of 2.4% at the end of 2020. Meanwhile liquidity remain ample
as deposit growth remain solid at 11.1% yoy and LDR stood at 82.2%. BI had injected
IDR726.6 trillion liquidity in the banking system last year through lower reserve requirement
and monetary expansions. Asset quality continued to stabilize and is expected to improve this
year together with the improvement in the economy. We expect loan will grow 5.0% this year
while deposit will grow 8.0%.
Banking industry loans contracted by 2.4% yoy in Dec-20. Banking industry loan growth
have contracted in three months, from October through December 2020, each by 0.5%,
1.4% and 2.4% yoy as the economic growth is experiencing a recession that caused the
demands for loans deteriorate. At the other hand the deposit growth remained strong at
to 11.1% yoy in Dec-20 (vs 11.9% in Nov-20 and 6.5% in Dec-19). LDR up but remained low
at 82.2% in Dec-20 (vs 81.9% in Nov-20 and 93.6% in Dec-19). The detail loan and deposit
data is not available yet for Dec-20. Latest detail from Indonesian Banking Statistic
currently is Nov-20 data. IDR loans contracted deeper in Nov-20 to -1.3% yoy (vs -0.9 %
yoy in Oct-20) while FX loans growth at the same time contracted 2.0% yoy (vs positive
growth 2.4% yoy in Oct-20).
Only the largest banks recorded positive year on year growth. BUKU 4 banks’ loan
growth decelerated to 2.7% yoy (vs 4.1% yoy in Oct-20). BUKU 3 and 1 banks’ loan
contracted deeper, each to 9.6% and 51.5% yoy in Nov-20 (vs 9.0% and 38.1% yoy
contraction in Oct-20). BUKU 2 banks loan growth turned positive to 0.1% yoy (vs 0.1%
yoy contraction in Oct-20). On a monthly basis, all groups’ loan contracted. BUKU 4, 3, 2
and 1 banks loan contracted, each by 0.3%, 1.2%, 0.1%% and 21.7% mom. Largest banks
in BUKU 4 are the only ones that posted positive growth year to date up until Nov-20.
From Jan through Nov-20, BUKU 4 banks posted loan increase by 0.4% ytd (IDR12.0
trillion ytd). Meanwhile, BUKU 3, 2 and 1 banks posted negative growth during the same
period, each by 10.3% (IDR179.3 trillion), 0.6% (IDR3,354.1 trillion) and 50.7% (IDR19.2
trillion) ytd.
FIGURE 67. LOAN & DEPOSIT GROWTH (% YOY) FIGURE 68. LOAN TO DEPOSIT RATIO (%)
30
25
20
15
10
5
82,2
0
-5
-10
Dec-13
Nov-16
Jun-17
Dec-20
Jul-14
Oct-12
Oct-19
Feb-15
Sep-15
Apr-16
Aug-18
May-13
Mar-19
May-20
Jan-18
Apr-20
Apr-19
Jul-19
Jul-20
Feb-19
Jun-19
Sep-19
Oct-19
Feb-20
Jun-20
Sep-20
Nov-19
Oct-20
Nov-20
Dec-18
May-19
May-20
Jan-19
Dec-19
Jan-20
Dec-20
Mar-19
Mar-20
Aug-19
Aug-20
Loan growth Deposit growth
Source: OJK Source: OJK

Deposit growth weakened across BUKU groups except BUKU 3. BUKU 4 and 2 banks’
deposit growth decelerated in Nov-20 to 15.9% and 8.2% yoy (vs 17.8% and 8.7% yoy in
Oct-20). BUKU 1 banks’ deposit contracted deeper to 57,4% (vs 39.3% contraction in Oct-
20). Meanwhile, BUKU 2 banks deposit growth accelerated to 5.6% yoy (vs 4.0% in Oct-
20). BUKU 4 and 3 banks’ LDR fell, each to 80.3% and 87.4% (vs 81.1% and 88.7% in Oct-
20), while BUKU 2 and 1 banks’ LDR rose to 80.1% and 91.3% in Nov-20 (vs 79.7% and
78.8% in Oct-20).
Liquidity and capital ratio remain healthy. As of February, 18th 2021, banks’ placement
at BI Open Market Operation instruments declined but remained relatively high at
IDR579.7 trillion, decreased by IDR17.5 trillion compared to the end of 2020. We expect
liquidity in the banking system will remain ample supported by BI’s accommodative
monetary policy. BI had injected liquidity in the banking system of IDR726.6 trillion last
year through lower reserve requirement and monetary expansions, each by IDR155 trillion
and IDR555.8 trillion. Moreover, the IDR inter-bank rates remained stable at a very low
level in Jan-21. We expect BI will maintain the BI7 DRRR flat at 3.75% this year. Meanwhile
banking industry CAR in Nov-20 increased to 24.3% (vs 23.8% in Oct-20).
Policy rate lowered with more accommodative policies. BI in Feb-21 Board of

Governor’s Meeting decided to lower the policy rate, The BI 7 DRRR, by 25 bps to 3.50%
as well as the deposit and lending facilities rate, also by 25 bps to 4.25% and 2.75%
respectively. Furthermore, macroprudential policy also loosened, by relaxing the
downpayment regulation for all types of motor vehicles to 0% and relaxing the loan-to-
value/financing to value (LTV/FTV) to maximum of 100% for all kinds of properties for
banks that meet the certain level of NPL/NPF. BI also erased the staging disbursement
regulation that depended on the house construction progress.
FIGURE 69. BANK OMO PLACEMENT (IDR TN) FIGURE 70. INTERBANK RATES (%)
900 8,5
700
7,5
500
6,5
300
100 5,5
-100 4,5
-300 3,5
Jan-18
Mar-18
May-18
Jan-19
Mar-19
May-19
Jan-20
Mar-20
May-20
Jan-21
Sep-17
Feb-18
Sep-18
Feb-19
Sep-19
Feb-20
Sep-20
Dec-17
Jul-18
Dec-18
Jul-19
Dec-19
Jul-20
Dec-20
Oct-17
Nov-17
Apr-18
Jun-18
Aug-18
Oct-18
Nov-18
Apr-19
Jun-19
Aug-19
Oct-19
Nov-19
Apr-20
Jun-20
Aug-20
Oct-20
Nov-20
2,5
Aug 18
Oct 18
Nov 18
Apr 19
Aug 19
Oct 19
Nov 19
Apr 20
Aug 20
Oct 20
Nov 20
Jun 18
Jun 19
Jun 20
May 18
Jan 19
Mar 19
May 19
Jan 20
Mar 20
May 20
Jan 21
Sep 18
Feb 19
Sep 19
Feb 20
Sep 20
Jul 18
Dec 18
Jul 19
Dec 19
Jul 20
Dec 20
Deposit Facility LF/Term Repo

Term Deposit Swap BI
Reverse Repo SBN SBI 9M+SDBI
Outstanding liquidity IndONIA O/N rates 1W Jibor
1M Jibor 3M Jibor
6M Jibor 12M Jibor
NPL increased in Nov-20 but remained manageable. Banking industry NPL increased to
3.18% in Nov-20 (vs 3.15% in Oct-20). We estimate loan at risk at 25.3% in Nov-20 (vs
24.9% in Oct-20). OJK stated that Restructuring for loans impacted by the COVID-19
Pandemic in Dec-20 reached IDR971 trillion for estimated 7.6 million borrowers and NPL

fell to 3.06% at the same time. By major industry, NPL of Wholesale and Retail Sales
Mandiri Group Research | May 2017ig Industry (17.1% of total loan) was stable at 4.6% while Processing Industry NPL (16.1% of
total loans) increased slightly to 4.7% from 4.6% in Oct-20. Loan to those sectors each
contracted by 5.8% and 2.5% yoy in Nov-20 (vs 5.6% and 0.2% yoy contraction in Oct-20).
FIGURE 71. NPL & SML (%) FIGURE 72. NPL BY INDUSTRY (%)
8,0 6,0
7,0 5,0
6,0 4,0
5,0 3,0
2,0
4,0
1,0
3,0
0,0
2,0
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Jan-18
Mar-18
Jan-19
Mar-19
Jan-20
Mar-20
May-18
May-19
May-20
Sep-17
Jul-18
Sep-18
Jul-19
Sep-19
Jul-20
Sep-20
Nov-17
Nov-18
Nov-19
Nov-20
Agricultures, Hunting and Forestry Procesing Industry

NPL (%) SML (%)
Wholesale and Retail Trade Non-industrial
NPL has stabilized across bank groups by BUKU. BUKU 4 banks NPL have increased
from 2.2% in Dec-19 and stabilize at 3.1% in Sep-20 through Nov-20. NPL of BUKU 3 and
2 banks in Nov-20 were also stable at 3.1% and 3.6%. Meanwhile, BUKU 1 banks NPL in
Nov-20 increased significantly to 3.5% (vs 2.7% in Oct-20). SML of banks in BUKU 4, 3 and
2 have decreased from its peak in Apr-20, each at 6.8%, 8.0% and 6.5% to 4.5%, 5.6% and
4.8% in Nov-20. However, BUKU 1 banks SML stayed high at 14.2% in Nov-20.
Profitability remains under pressure. Banking industry net profit after tax fell sharply by
30.2% yoy in Nov-20 (vs -29.2% yoy in Oct-20). Industry NII fell 2.2% yoy in Nov-20 while
NIM stayed at 4.41% same with Oct-20 number. Banks’ return on assets (ROA) fell to 1.6%
in Nov-20 (vs 1.7% in Oct-20) lowest ROA since Jan-06. OJK stated that banks’ net income
after tax contracted by 33.1% in Dec-20. The sharp deterioration in banks’ net profit was
due to weak loan growth, loan restructuring and an increase in loss provision to anticipate
worsening condition and weakening asset quality.
Gradual improvement in loan growth this year. We expect loan growth will gradually
improve this year together with an improvement in the economy and accommodative
fiscal and mixed policies by Government and BI. We expect loan will grow 5.0% while
deposit will grow 8.0%. Slower deposit growth compared to last year will be supported by
the improvement in market’s risk appetite. Moreover, banks’ net income performance will
also improve as loan demand increase while provisioning cost will slowly decrease at the
same time.
FX Market and Capital Flows Outlook: Rupiah Stability

Predicted to be Maintained in 2021
At the end of Dec-20, the rupiah strengthened to 14,050 against the USD after experiencing
considerable fluctuations throughout 2020. The USD index’s downward trend supported the
strengthening rupiah exchange rate against the USD after a large depreciation to 16,000 at
the start of the COVID-19 pandemic in March-April 2020. The combination of external and

internal sentiments toward the year-end strengthened the rupiah. Assuming that the vaccine
progress can increase investor confidence, we see there are still opportunities for the rupiah
to strengthen. However, the rupiah appreciation will follow the market fundamentals and
mechanisms.
The rupiah continued to strengthen to around 14,100/USD. The rupiah’s strengthening

trend was still supported by fund inflows into the capital market and fairly good economic
data, such as a consecutive surplus on the trade balance, controlled inflation, and still-high
foreign exchange reserves. Additionally, the COVID-19 vaccination has just kicked-off
after obtaining the license for use from the BPOM, thus becoming a positive catalyst for
the rupiah. External sentiments related to the US’s hampered stimulus and rising
unemployment rate have perpetuated the USD index’s downward trend. The USD index
is currently at 90, the lowest since 2018. In contrast, the rupiah strengthened together
with most regional currencies against the USD. At the start of 2021, the rupiah
strengthened to a range of 13,900-14,100/USD, along with stronger regional currencies.
COVID-19 vaccine development will be a game-changer for the global market. In

suppressing the COVID-19 pandemic, countries worldwide have now placed orders for
vaccines. Vaccine development is one of the keys to reduce the pandemic; thus, the hope
for vaccine effectiveness is very high. Vaccine optimism is sufficient to support the
strengthening of the rupiah. Rupiah volatility has declined and tended to move sideways
in recent weeks, in-line with relatively improving global indicators. From several global
indicators, Indonesia’s 5-year CDS is still declining to 68 from 245 at the peak of the
COVID-19 pandemic in Mar-20. Likewise, the VIX was at 21 at the end of Dec-20.
The vaccine program for Indonesia, which began in early Jan-21, and a strict application of
health protocols are expected to support the domestic economic recovery. Furthermore,
five policies will also support this, including nationally opening up the productive and safe
sectors and, in each region, accelerating fiscal stimulus, channeling bank credit from the
demand and supply sides, continuing monetary and macroprudential stimulus programs,
and accelerating economic and financial digitalization, particularly related to the
development of MSMEs. With all these goals, Indonesia’s economic growth is expected to
increase in 2021.
Central banks around the world have maintained low interest rate policies to boost
the economy. The US Central Bank tends to continue its dovish policy, which means it
will maintain its benchmark interest rate, the Fed Funds Rate, at 0-0.25% at least until
2023 due to the US’s low economic growth and its inflation rate, which is still below the
target of 2%. In 2020, the Fed cut its benchmark interest rate by 150 bps as an emergency
cut amid the COVID-19 pandemic.
In the financial market, investors are becoming more selective in investing. They tend to
place their funds in safe-haven assets, such as hard currencies (US dollar, Japanese yen,
Swiss franc, etc.) and commodities (gold and petroleum), and bond market. However as
of recent, expectation of economic recovery in the US has led investors to start to reduce
placement in safe havens which reflected in the recent rise in the UST yield. The risk-on
perception will support capital inflows to the Emerging Market including Indonesia.
Furthermore, potential additional fiscal stimulus and a continuing loose monetary policy
will still support capital flows prospect in 2021 to the Emerging Market

BI maintain accommodative monetary policy and supports various advanced policies

to build optimism for national economic recovery. BI may have little room for another
reduction in the benchmark rate this year with higher expectation of inflation rate along
with expected economic recovery. BI also took the following steps to support the
economic recovery:
1) Continuing the rupiah exchange rate stabilization policy, in-line with market
fundamentals and mechanisms;
2) Continuing to strengthen its monetary operation strategy to support its
accommodative monetary policy;
3) Continuing to accelerate financial market deepening by strengthening the Jakarta
Interbank Spot Dollar Rate (JISDOR) as a reference for the rupiah exchange rate against
the USD to increase the credibility of the domestic foreign exchange market and support
exchange rate stability in Indonesia;
4) Strengthening its accommodative macroprudential policies to encourage increased
credit/financing to priority sectors in the context of national economic recovery;
5) Promoting transparency of bank credit interest rates to accelerate the transmission of
monetary and macroprudential policies;
6) Strengthening integrated banking supervision coordination between BI, the Financial
Services Authority (OJK), and the Deposit Insurance Corporation (LPS) to support
financial system stability;
7) Strengthening the role of payment system policies and the management of the rupiah
to encourage the formation of a digital economic and financial ecosystem to accelerate
economic recovery.
Synergy between monetary policy and fiscal stimulus will support national economic
recovery. To encourage the national economic recovery in the pandemic era, BI continues
its commitment to fund the 2020 State Budget by purchasing SBNs in the primary market.
In 2020, BI purchased SBNs for funding and burden-sharing in the 2020 State Budget for
the PEN Program, amounting to IDR 473.42tn, consisting of IDR 75.86tn and IDR 397.56tn,
respectively, based on the joint decrees from the minister of finance on 16-Apr-20 and the
governor of BI on 7-Jul-20. BI also realized the burden-sharing with the government for
the issuance of SBNs, amounting to IDR 114.81tn for non-public goods-MSME funding and
IDR 62.22tn for non-public goods-corporations.
FIGURE 73. RUPIAH VS CAPITAL INFLOW
16900 4000
1st quarter 2019 2nd quarter 2019 3rd quarter 2019 4th quarter 2019 1st quarter 2020 2nd quarter 3rd quarter 2020 4th quarter 2020
Net capital inflow: Net capital inflow: Net capital inflow: Net capital inflow: Net capital 2020 Net capital Net capital
USD6.85 bn USD5.37 bn USD1.71 bn USD3.48 bn outflow: Net capital outflow: inflow:
16400 Rupiah Rupiah Rupiah Rupiah USD10.37 bn inflow: USD2.25 bn USD1.74 bn
14,241/USD 14,128/USD
3000
14,195/USD 13,866/USD Rupiah USD5.97 bn Rupiah Rupiah
(appreciated (appreciated (appreciated (appreciated 16,310/USD Rupiah 14,880/USD 14,050/USD
1.04% ytd) 1.82% ytd) 1.36% ytd) 3.64% ytd) (depreciated 14,265/USD (depreciated (depreciated
15900 17.63% ytd) (depreciated 7.31% ytd) 1.33% ytd)
Rupiah appreciation As USD Index increased,
2.88% ytd) 2000
USD Index decreased
in 4Q19 due to Rupiah tends to and COVID-19 vaccine
15400 trade war tension depreciate against USD progress are support
decreased in February - March stronger rupiah against
2020 due to USD 1000
COVID-19 outbreak
14900
0
14400
-1000
13900
Please see important13400

disclosure at the back of this report Page 55 of 69-2000
Dec-19
Mar-19
Jul-19
Sep-19
Mar-20
Jul-20
Dec-20
Feb-19
Jun-19
Nov-19
Feb-20
Jun-20
Aug-20
Sep-20
Nov-20
Jan-19
Aug-19
Apr-19
May-19
Oct-19
Jan-20
Apr-20
May-20
Oct-20
Source: Bloomberg, as of Dec, 2020
In 2021, BI plans to purchase SBNs in the primary market to finance the 2021 State Budget
through a mechanism under the Joint Decree of the Minister of Finance and the Governor
of BI. Overall, the amount of SBN purchases in the primary market until 19-Jan-21
amounts to IDR 13.66tn, consisting of IDR 9.18tn through the main auction and IDR 4.48tn
through the green shoe option (GSO). With this synergy, the government can focus more
on efforts to accelerate the state budget realization to promote national economic
recovery.
FIGURE 74. SEVERAL FACTORS THAT AFFECT RUPIAH MOVEMENT
Rupiah was fluctuated between 13,500 – 14,400 in 2021*
COVID-19 pandemic risks, Vaccines progress, Trade war, and Geopolitical tensions
Accommodative policy of global Central Banks (Dovish The Fed, Benchmark Rate cuts)
Government stimulus and Bank Indonesia policy mix (Economic packages, Burden Sharing
Scheme, Triple Interventions, etc.) and economic recovery
Bilateral agreement to reduce USD transaction
Foreign funds flow and investor’s confidence will affected by the weakening of the global
economic growth during COVID-19 pandemic
Trend of USD index (ranging from 85 - 100 level)
Sources: Bank Mandiri, The Federal Reserve, Bloomberg

Better prospect of capital flows should support the bond market and the appreciation
trend in the Rupiah. The foreign fund inflows into the bond market in Dec-20 reached IDR
2.5tn (or outflow of IDR 89tn YTD). As of 30-Dec-20, foreign ownership was at IDR 974tn
(25% of total SBN ownership), a decrease compared to the end of Jan-20 at IDR 1,077tn
(38.65%). As a response to maintain financial market stability due to COVID-19, BI’s
ownership in the SBN market also increased to IDR 454tn (11.7% of total SBN ownership)
from IDR 120tn (4.3%) in Jan-20.
Government Bond YieldOF
of Benchmark SeriesSERIES Tradable Domestic Government Bond Flow by Ownership
FIGURE 75. GOVT. BOND YIELD BENCHMARK
Government Bond Yield of Benchmark Series
FIGURE 76. TRADABLE
Tradable BOND FLOW
Domestic Government BondBY OWNERSHIP
Flow by Ownership
10 (%) 300 (Net Flow, IDR tn)

10 (%) 300 (Net Flow, IDR tn)
250
9 250 Foreign
9 200 Foreign
8 200
8 150
150
77 100
100
Insurance+Pension Fund Fund
Insurance+Pension
66 5050
55 - - Mutual Fund+Others
Mutual Fund+Others
-50-50
44
-100
-100
33 55yr:
yr:5.21%
5.21% 10
10yr:
yr: 5.89%
5.89% 15 yr:
15 yr: 6.37%
6.37% 20
20yr:
yr:6.54%
6.54% Central
Central Bank Bank
-150
-150
22 -200
-200
Sep-20
Sep-18
Sep-19
Mar-18
Mar-19
Mar-20
Bank
Oct-19
Feb-20
Apr-20
Oct-20
Jun-20
Dec-20
Dec-19
Aug-19
Aug-20
Sep-20
Sep-18
Sep-19
Mar-18
Mar-19
Mar-20
Bank
Oct-19
Feb-20
Apr-20
Oct-20
Jun-20
Dec-20
Dec-19
Aug-19
Aug-20
5 year 10 year 15 year 20 year
5 year 10 year 15 year 20 year
Source: Office of Chief Economist, Bloomberg DJPPR as of Dec-2020 Source: Office of Chief Economist, Bloomberg DJPPR as of Dec-2020
Most foreign investors are still interested in investing in government bond instruments
with long tenors or maturity of more than five years. In Dec-20, foreign investors’ bond
holding reached 36% for tenors of 5-10 years, 33% for more than 10 years, and 31% for 0-
5 years. Thus, the trend in benchmark bond yields is estimated to be stable in 2021,
assuming well-maintained economic indicators.
We see that bonds are still worth collecting currently. The bond market is also an
important factor in maintaining the domestic financial market stability. Improving
economic fundamental and the continuing demand support from BI will still support the
bond market going forward.
With this global and policy backdrop, we see there is a potential of rupiah appreciation
to continue in-line with its fundamental value. The downward trend in the USD index
and better prospect of capital inflows supported the strengthening of the rupiah. The
government and BI will continue various stimulus programs to boost the economy after
the pandemic’s adverse impact. BI stated that the rupiah is still undervalued; thus, it still
has room for future strengthening. BI will continue its policy mix to maintain market
stability and strengthen the monetary operation strategy to increase monetary policy
transmission. BI’s accommodative policy measures, the liquidity injection, and slow
recovery in the domestic economy are projected to support the money market.
FIGURE 77. RUPIAH GOVERNMENT

Rupiah
Rupiah Government BOND
GovernmentBond
Bond YIELD
Yield
Yield FORECAST
Forecast
Forecast FIGURE 78. INDONESIA
IndonesiaLTLT
Indonesia SOVEREIGN
LTSovereign
SovereignCreditCREDIT
RatingRATING
Rating
Credit
Yield
Yield
8.0% Rating Agency
Rating Agency
8.0%
Year
Year Standard
Please see important disclosure at the back of this report Standard&& Fitch Moody's R&IR&IPage 57 of
JCRA 69
7.0% Poor's Fitch Moody's JCRA
7.0% Poor's
2008 BB- BB Ba3 BB+ BB
2008 BB- BB Ba3 BB+ BB
6.0% 2009 BB- BB Ba2 BB+ BB+
6.0% 2009 BB- BB Ba2 BB+ BB+
Source: Bloomberg DJPPR as of Dec-2020 Source: Bloomberg DJPPR as of Dec-2020
However, market players must remain vigilant about what can arise at any time, such as a
spike in COVID-19 cases, slow and uneven recovery in the global economy, early
expectation of a ‘reflation’ that can trigger capital outflows from the domestic market.
These risks could cause the rupiah to reverse direction; hence, they must be anticipated
as soon as possible.
We see that the rupiah still has room to strengthen, following its fundamentals in 2021.
We predict the rupiah will move at an average level of 14,085 throughout 2021, with a
year-end projection at 14,177/USD.

Rupiah Long-Term Trend

EVENT ANALYSIS DURING CRISIS: RUPIAH DEVELOPMENT 1992-2020
Jan-20: Dovish The Fed

19000 USDIDR (1992-2020) & Easing Trade War 200
Lowest level: 1,995 (Jan-92) Mar-20
Highest level: 16,650 (Jun-98) Oct-18: Aggressive Fed 13,583 COVID-19
policy & Trade war tension Outbreak
180
17000
Long-legged Doji,
15,158 16,320
16,650 indicates
Sep-15: Yuan supply and
Devaluation 160
15000 demand near equilibrium
14,670
14,050
140
Jan-98: Pre Financial Shooting
Nov-08: Global Star
Financial -
Crisis Dec-20:
13000 USD Index
Crisis End of12,550
uptrend Oct-13: Bearish Harami, Downtrend,
12,950 120 inflow
Capital
Fed Taper Tantrum indicates a future
Bearish Harami, 13,920
11000 Tweezer bottom, 11,560 bearish trend
indicatesa future Feb-19: 100
bearish trend indicatesminor Dovish The Fed
long term average bearish reversal
9000 80
13,885
8,904 Long-legged Doji, Tweezer top, Bullish Harami,
indicatesminor
Jun-20: 60
Bearish Harami, indicates
7000 indicatessupply and indicatesa future BI's Accomodative
a future bearish trend, demand near equilibrium
6,575 bearish reversal bullish
Volatility trend
increased Policies
confirmed down trend during Rupiah depreciation 40
Nov-99: End of Asia Financial Crisis
5000 Sideways Volatility
Upside Tasuki Gap - Abandoned baby bottom. 20
Bullish continuation indicatesbullish reversal
3000 Jan-97: pre Asia Financial Crisis 0
Morning Star2,434
Downside Tasuki Gap Inverted Hammer to
1000 continuation
- Bearish asan early -20
indication of determine a bottom trend
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
bullish reversal
USDIDR 1-mo volatility (rhs) USDIDR Currency (lhs) USDIDR Long Term average (lhs)
Hawkish
End of The Fed
FFR Taper China Yuan COVID-19
Macro Indicator Asia Financial Crisis Global Economic Crisis Europe Crisis Commodity and
Tantrum Devaluation Pandemic
Boom US-China
Trade War
Year 1997 1998 2007 2008 2010 2012

RenyEkaPutrir
2013
eny.putri@bankmandiri.co.id
2015 2018 2020*
IDR/USD 5403 8000 9393 11120 9013 9638 12170 13788 14390 16310
Rupiah(%Fluctuation
yoy) Against
128.7 USDollar
48.1 4.4 18.4 (4.2) 6.3 26.3 11.3 6.1 14.5
USD Index 99.7 94.2 76.7 81.3 79.0 79.8 80.0 98.6 96.2 99.0
(% ytd) 13.1 (5.5) (8.3) 6.0 1.5 (0.5) 0.3 9.3 4.4 1.8
10-yr US Treasury Yield 5.7 4.6 4.0 2.2 3.3 1.8 3.0 2.3 2.7 0.7
(bps ytd) (67.6) (109.4) (67.9) (181.1) (54.3) (11.9) 127.1 9.8 27.9 (173.6)
5-yr Credit Default Swap - - 152.8 691.4 128.2 124.0 236.9 229.9 137.5 210.4
(% yoy) - - 26.6 352.4 (33.2) (40.4) 91.1 43.4 61.2 129.3
Volatility Index 24.0 24.4 22.5 40.0 17.8 18.0 13.7 18.2 25.4 53.5
(% yoy) 14.8 1.7 94.6 77.8 (18.1) (23.0) (23.9) (5.2) 130.3 290.5
Source: Bloomberg, OCE Bank Mandiri Calculation, *) table as of March 31, 2020

Lower Rupiah Volatility

RUPIAH TREND AND DEVELOPMENT AGAINST USD
Long-legged Doji,
indicatessupply and
demand near equilibrium
Shooting Star -
End of uptrend Bearish Harami,
indicatesa future
Bearish Harami,
Tweezer bottom, bearish trend
indicatesa future
bearish trend indicatesminor
bearish reversal
Long-legged Doji, Tweezer top, Bullish Harami,

Bearish Harami, indicates indicatessupply and indicatesminor indicatesa future
a future bearish trend, demand near equilibrium bearish reversal bullish trend
confirmed down trend
Upside Tasuki Gap - Abandoned baby bottom.
Bullish continuation indicatesbullish reversal
Downside Tasuki Gap Morning Star

asan early Inverted Hammer to
- Bearish continuation determine a bottom trend
indication of
bullish reversal
RenyEkaPutrireny.putri@bankmandiri.co.id
Rupiah traded between IDR 14,000 to

14390 14177
Rupiah Fluctuation Against USDollar 13788 14050 IDR 14,300 against the USD in
12385
13473
13568 13866 December. The RSI indicator has
11120 12170
10400 recently triggered an overbought
9830
9675 9270 9404 9638 reading and moved back into SELL
9393
8000 8950 8995 9013 9067 USD territory at around 32 level or
8420
7100
lower than IDR 14,300/USD in the short
5403 term.
1995 2102 2287 From the technical side, we expect in

2363
2067 2199 the short-term, the rupiah will fluctuate
between IDR 13,900 and IDR 14,100
2021F
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
against the USD. External factors (such

as COVID-19 risks and capital inflow)
may affect the foreign exchange
market, thus decreasing rupiah’s
note: RSI = Relative Strength Index volatility.
MACD = Moving Average Convergence/Divergence
DMI = Directional Movement Index
Source: Bloomberg, OCE Calculation

January Bond Market Recap

No January Effect for INDOGB This Year
After strong rallies in the last 3consecutivemonths, the January effect did not happen for
INDOGB this year as it reported a loss of -0.7% (vs. net gains of 14.0% in 2020 and 2.2% in
January last year). Similarly, other countries’ local-currency government bonds also suffered,
mostly due to global factors: increasing US Treasury yield by 15 bps to 1.06 and rebounding
DXY index by 0.72%. Meanwhile, foreign investors were still net buyers of INDOGB, posting
net buy of +Rp13.4tn in January (vs.net buy of +Rp15.2tn in the same period last year and net
outflow of IDR 87.9tn in FY2020), according to DMO’s data with settlement date as of 29-Jan.
Increasing volatility in January, more due to global factors. The rupiah government
bond market reported negative returns in the first month of this year, reporting a loss of -
0.7% (vs. net gain of 14.0% in 2020 and +2.2% in the same month last year) after
maintaining strong rallies in 3 consecutive months: 1.8% (Oct-2020), 2.8% (Nov-2020),
and 1.8% (Dec-2020), according to Bloomberg as of 29-Jan. Similarly, other countries’
local-currency government bonds also suffered, mostly due to global factors: increasing
US Treasury yield by 15 bps to 1.06 and rebounding DXY index by 0.72%. There were at
least two factors behind the trend reversal: (1) Shifting expectations from “fiscal gridlock”
to “blue wave” scenario after a Democrat-controlled Senate that would raise the chances
of new stimulus and infrastructure spending. This outcome—along with the rollouts of
COVID-19 vaccines—is seen as more positive for the stock market, but not for the bond
market. (2) Risk-off sentiment also rose early this year and pushed the DXY index to rally,
following a new strain of COVID-19 virus that urged some countries to do another
lockdown.
FIGURE 79. INDOGB POSTED NET LOSS IN THE FIRST MONTH FIGURE 80. INCREASING US TREASURY YIELD AND US DOLLAR
OF THIS YEAR RECOVERY
4,0% US 10yr DXY Index (RHS)

3,0% 2,8%
3,0% 2,2% 2,6% 1,40 102
1,8% 1,9% 1,8% 1,8%
2,0% 1,3% 100
1,20
1,0% 98
0,1%
1,00 96
0,0%
-0,1% 0,80 94
-1,0%
-0,7% 92
-2,0% 0,60 90
-3,0%
0,40 88
-4,0%
86
-5,0% 0,20
84
-6,0% -5,2% 0,00 82
Nov-20
Mar-20
May-20
Aug-20
Jan-20
Jun-20
Sep-20
Apr-20
Jul-20
Feb-20
Oct-20
Dec-20
Jan-21
Nov-20
May-20
Aug-20
Jun-20
Apr-20
Jul-20
Sep-20
Oct-20
Dec-20
Jan-21
Source: Bloomberg and Mandiri Sekuritas Source: Bloomberg DJPPR as of Jan 21

Meanwhile, the domestic data released in January was not surprising and had mixed
effects on the bond market. (1) Indonesia’s foreign exchange reserves increased by USD
2.3bn to USD 135.9bn in December compared to November. The increase was mostly
influenced by the government’s foreign loan withdrawal and tax receipts. (2) Indonesia
recorded a trade surplus of USD 2.1bn in Dec-2020, marking eight straight months of
surplus in the trade balance. Export was at +14.63% YoY (vs. +9.54% YoY in Nov-2020)
and import at -0.47% YoY (vs. -17.46% YoY in Nov-2020). (3) BI decided to hold its policy
rate at an all-time low of 3.75% in its Board of Governor meeting on 20–21 Jan-2021. The
deposit and lending facilities were also held at 3.00% and 4.50%, respectively. The
decision was consistent with the low inflation projection and in-line with maintaining
external sector stability and supporting economic recovery. BI will keep a low interest rate
until there are signs of the CPI picking up significantly. BI also maintains the 2021 inflation
outlook unchanged at 2-4%. It forecasts the 2020 CAD at only -0.5% of GDP and to
potentially widen in 2021, and the BoP to remain healthy, supported by the expectation
of portfolio flows, estimated at USD 19.1bn in 2021 (vs. USD 11bn in 2020).
Rupiah yield curve bearish flattened in the first month of this year. In early 2021, the rupiah
yield curve bearish flattened. Compared to the end of last year, the 2-yr bond yield was
traded at 4.55% or increased more by 70bps, and the 10-yr bond yield also increased by
25bps to 6.21%.
FIGURE 81. COMPARED TO THE END OFLASTYEAR, RUPIAH YIELD CURVE BEARISH FLATTENED
8,0
7,0
6,0
Yield (%)
5,0
4,0
3,0
Dec-19 Dec-20 Jan-21
2,0
0 5 10 15 20 25 30
Maturity (Years)
Sources: Bloomberg

Both onshore and offshore investors supported INDOGB in January. Interestingly,

INDOGB was still supported by onshore and offshore demand, as all investors reported
net buy YTD, based on DMO data with settlement date as of 29-Jan. The biggest net buyer
of rupiah government bonds for the first month of this year was BI at IDR31.2tn, followed
by onshore banks and insurance & pension funds, with net buys of +IDR24.7tn and
+IDR14.9tn, respectively. Retail investors are also actively buying government bonds so
far this year, reporting IDR 8tn, or higher than the mutual fund industry’s net buy. We
suspect the increasing demand from retail investors is due to the lowering interest trend,
as BI’s rate and the deposit guarantee are both at their all-time lows. With the pandemic,
not many are going abroad and spending their money offshore. Another trigger that led
to retail purchases of government bonds is because the tax on fixed-income mutual fund
products has increased from 5% to 10% as of 2021. Meanwhile, foreign still reported net
buy in government bonds for the first month of this year, totaling IDR13.4tn. Thus, the
foreign ownership portion in INDOGB continued increasing to IDR987.3 tnor 24.9% of the
total outstanding.
FIGURE 82. INDOGB STILL SUPPORTED BY BIAND ONSHORE BANKS, YET FOREIGNERS CONTINUED REPORTING NET BUY,
TOTALING IDR 13.4TN
Outs as of % of Total Net Buy/ (Sell) - Rp tn

Type of Investor
29-Jan Outs.
Jan-21 Jan-20 FY2020 FY2019
Bank (excl. reverse repo) 979.8 24.7% 24.7 (6.7) 384.4 53.2
Bank Indonesia 906.1 22.8% 31.2 22.7 601.7 55.8
Mutual Fund 166.2 4.2% 4.8 (0.5) 30.5 12.2
Insurance and Pension Fund 557.7 14.0% 14.9 5.1 71.1 57.2
Foreign 987.3 24.9% 13.4 15.2 (87.9) 168.6
Retail 139.2 3.5% 8.0 (2.0) 50.1 8.1
Others 235.7 5.9% 4.2 0.2 68.2 29.1
Total 3,972.0 100.0% 101.2 34.0 1,118.0 384.3
Sources: DMO and Mandiri Sekuritas
Front-loading policy holds on this year. In the primary market, the government has
already issued IDR173tn—gross so far this year (including dual currency global bonds) or
11.3% of issuance target for this year, assuming the budget deficit is at 5.7% of GDP. The
government also held some additional auctions (greenshoe option) this month to meet
the target when the total incoming bids during an auction were below expectation. Note,
as there is no more SKB II in 2021, we estimate the government should target to issue
IDR52.8tn in every two weeks’ auction.

FIGURE 83. THE GOVERNMENT ALREADY ISSUED IDR 173 TN-GROSS OR 11.3% OF GROSS ISSUANCE TARGET
Government budget deficit financing 2021 (IDR tn) Budget - APBN 2021
Budget deficit % of GDP 5.70

Budget deficit (IDR tn) 1,006.4
Maturing government bond (477.6)
Government bond net issuances 1,057.5
Government bond gross issuances 1,535.1
Realized issuance as of 29-Jan-2021 173.0

Domestic Bonds 113.0
Auction conventional FR/ VR and T-Bills/ ZC 81.0
Retail bonds (ORI & Sukuk) -
Domestic sukuk 32.0
Private placement -
Global bonds 60.0
USD Bonds 42.7
EURO Bonds 17.3
Samurai Bonds -
Sources: DMO and Mandiri Sekuritas Estimates
What is the outlook? We are still positive on INDOGB this year and maintain our forecast
for the 10-yr INDOGB yield at 5.75-6% by YE2021. In our view, there are some positive
catalysts to support Indonesian government bonds this year: 1) global liquidity projection
is still ample this year due to more QEs from developed central banks; 2) lower global
interest-rate outlook (including for Indonesia) may continue; 3) attractive bond yield
valuation, and; 4) still light investor positioning in government bonds, as the central bank
was the biggest bond buyer last year.


Equity Market Update
After the strong outperformance in November and December last year, JCI ended January
2021 with a 2.0% pullback after briefly hitting a strong 7.6% return as it hit 6,435 on 13
January. With forward PE touching over 17x, the market had renewed concerns over EPS
growth disappointment in 1Q21 following the reimposed lockdown in Java and Bali. Domestic
individual investors’ sell-off on some overvalued counters triggered profit taking across other
stocks, though the index has since recovered in February as mobility restrictions were relaxed
while expectations are growing on the passing of a US fiscal stimulus. We retain our 6,850
end-of-year target for JCI Index.
JCI retreated 2.0% in January 2021. JCI initially began 2021 with a strong rally, up as high
as 7.6% as it hit 6,435 on 13 January 2021 before pulling back and ended the month with a
negative 2.0% return. The pullback was partly a result of domestic retail investors’ sell-off
on some overvalued stocks triggering profit-taking across other counters, while there are
growing concerns of muted earnings growth recovery as the surge in COVID-19 cases led
to reimposed lockdown in Java and Bali. In USD term, JCI declined by 1.9% in January,
underperforming North Asia’s bourses and some ASEAN exchanges except Malaysia and
the Philippines. JAKTRAD, JAKFIN, JAKBIND, JAKMIND, and JAKMINE outperformed the
broad market while JAKPROP, JAKAGRI, JAKCONS, and JAKINFR underperformed.
The pullback helps discounting 1Q21 EPS risks. We expect EPS recovery momentum to
be strong in 4Q20, with our bottom-up analyst estimates aiming for 37% QoQ EPS
rebound in 4Q20, with the YoY decline estimated to narrow to -22% from -43% in 3Q20.
While our analysts have, in aggregate, reduced 2021 EPS by 5.2% since end-Oct, we
expect 1Q21 EPS to be affected by the reimposed mobility restrictions in Java-Bali.
According to Google data, the nationwide mobility into retail and recreational areas and
workplaces retreated to around 70% of normal after the reimposed lockdown, from
around 80-82% of normal in 4Q20. While our bottom-up estimates are for 35% EPS
growth this year, our 6,850 end-2021 index target was constructed based on a more
conservative 30% EPS growth this year.
Foreign flows returned. Foreign investors registered net purchases of IDR 10.9tn in
January, based on data compiled by Bloomberg. Based on the data sorted from the
constituents of KOMPAS 100 Index, most the top five net inflows were in BBRI, BMRI, ASII,
BBCA, and TLKM, with the largest five net outflows on ICBP, TINS, SMGR, CPIN, and
CTRA. Indonesian Rupiah depreciated 0.8% against the US dollar, while the 10Y
government bond yield appreciated 0.3ppt. While there were rising expectations of a USD
weakness following the Democrats’ victory in the US senate election, the market briefly
had concerns over the potential Fed tightening that briefly pressured Indonesia’s capital
market, though the Fed quickly reassured the market for its accommodative stance in
supporting employment recovery.

Our 6,850-index target is unchanged, with six themes to watch. Our BULL/BEAR case
is 7,300/5,270 while our base case assumes 17x forward PE target with a more conservative
EPS growth of 30% in 2021 compared to our bottom-up estimate of 40%. Our preference
over cyclicals are unchanged, though we still keep a selection of defensive as a hedge. We
have identified six themes for 2021: 1) backloaded vaccine-led EPS growth recovery; 2)
uneven normalization with post-pandemic industry consolidation favoring well-
capitalized companies; 3) abundant liquidity supporting 2021-22 recovery in growth,
credit cycle, and fueling pent-up demand; 4) pursuit of yield and renewed dollar weakness
benefitting EM including Indonesia; 5) strong commodity tailwinds entering 2021; and 6)
simultaneous reforms taking place with the emergence of Indonesia as a nickel/EV supply-
chain powerhouse.

FIGURE 84. JCI FIGURE 85. TRADING SUB-INDEX OUTPERFORMED THE INDEX
(YTD)
8,000 40 4.4%
JCI
7,000 35
6,000 30
Billions
5,000 25
-0.3%
4,000 20 -0.9% -1.0% -1.2%
-2.0%
3,000 15
-3.7%
2,000 10
1,000 5
-7.4% -7.8%
0 0 -8.0%
Jan-10
Sep-13
Jan-21
Oct-12
May-17
Dec-10
Jul-15
Mar-19
Nov-11
Aug-14
Feb-20
Jun-16
Apr-18
JAKINFR
JAKMINE
JAKCONS
JAKPROP
JAKFIN
JAKAGRI
JAKMIND
JAKBIND
JAKTRAD
JCI
Volume (RHS) Index (LHS)
Sources: Bloomberg and Mandiri Sekuritas Sources: Bloomberg, Mandiri Sekuritas
FIGURE 86. NET FOREIGN INFLOWS (IDR BN) FIGURE 87. TOTAL TRADING BY INVESTOR TYPES
(Rpbn) 100%
60,000 90%
50,000 80%
40,000 70%
30,000 60%
20,000 50%
10,000 40%
0 30%
20%
-10,000
10%
-20,000
0%
-30,000
Jan-15
May-15
Sep-15
Jan-16
Jan-20
May-16
Sep-16
Jan-17
Jan-18
Jan-19
May-17
Sep-17
May-18
Sep-18
May-19
Sep-19
May-20
Sep-20
Jan-21
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
May-15
May-16
May-17
May-18
May-19
May-20
Domestic Investor Foreign Investor
Sources: IDX and Mandiri Sekuritas Sources: IDX and Mandiri Sekuritas
FIGURE 88. MONTHLY JCI PERFORMANCE FIGURE 89. REGIONAL MARKET VALUATION
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2021F PE(x)
2009 -1.7 -3.5 11.6 20.1 11.3 5.7 14.6 0.8 5.4 -4.0 2.0 4.9 SE Thai 19.1
2010 3.0 -2.4 9.0 7.0 -5.9 4.2 5.3 0.4 13.6 3.8 -2.9 4.9
2011 -7.9 1.8 6.0 3.8 0.5 1.3 6.2 -7.0 -7.6 6.8 -2.0 2.9 PSEi - Philippine 18.1
2012 3.1 1.1 3.4 1.4 -8.3 3.2 4.7 -2.0 5.0 2.1 -1.7 0.9 FTSE Straits Times 15.3
2013 3.2 7.7 3.0 1.9 0.7 -4.9 -4.3 -9.0 2.9 4.5 -5.6 0.4
JCI Index 15.3
2014 3.4 4.6 3.2 1.5 1.1 -0.3 4.3 0.9 0.0 -0.9 1.2 1.5
2015 1.2 3.0 1.3 -7.8 2.6 -5.9 -2.2 -6.1 -6.3 5.5 -0.2 3.3 KOSPI 14.3
2016 0.5 3.4 1.6 -0.1 -0.9 4.6 4.0 3.3 -0.4 1.1 -4.6 2.9
FTSE Malay KLCI 13.6
2017 0.0 1.7 3.4 2.1 0.9 1.6 0.2 0.4 0.6 1.8 -0.9 6.8
2018 3.9 -0.1 -6.2 -3.1 -0.2 -3.1 1.3 2.4 -0.7 -2.4 3.8 2.3 Shanghai Comp 13.5
2019 5.5 -1.4 0.4 -0.2 -3.8 2.4 0.5 -1.0 -2.5 1.0 -3.5 4.8 Hang Seng 12.7
2020 -5.7 -8.2 -16.8 3.9 0.8 3.2 5.0 1.7 -7.0 5.3 9.4 6.5
2021 -2.0
Avg 0.5 0.6 1.7 2.5 -0.1 1.0 3.3 -1.3 0.2 2.0 -0.4 3.5
Sources: Bloomberg and Mandiri Sekuritas Sources: Bloomberg and Mandiri Sekuritas

FIGURE 90. MACROECONOMIC INDICATORS AND FORECAST

2013 2014 2015 2016 2017 2018 2019 2020F 2020N 2021F
National Account
Real GDP (% yoy) 5.56 5.01 4.88 5.03 5.07 5.17 5.02 -2.07* -2.07* 4.43
Real Consumption: Private (% yoy) 5.43 5.15 4.96 5.01 4.94 5.05 5.04 -2.63* -2.63* 4.69
Real Consumption: Government (%
6.75 1.16 5.31 -0.14 2.13 4.80 3.25 1.94* 1.94* 5.59
yoy)
Real Gross Fixed Capital Formation (%
5.01 4.45 5.01 4.47 6.15 6.67 4.45 -4.95* -4.95* 4.00
yoy)
Real Exports (% yoy) 4.17 1.07 -2.12 -1.66 8.91 6.48 -0.87 -7.70* -7.70* 3.15
Real Imports (% yoy) 1.86 2.12 -6.25 -2.41 8.06 12.04 -7.69 -14.71* -14.71* 6.00
GDP (IDR tn) - nominal 9,546.00 10,570.00 11,526.00 12,401.73 13,589.83 14,838.31 15,833.94 15,434.15* 15,434.15* 16,591.43
GDP (USD bn) - nominal 915.28 890.77 860.85 932.31 1,015.58 1,042.22 1,119.24 1,059.31* 1,059.31* 1,181.26
GDP per capita (USD) - nominal 3,667.70 3,531.64 3,369.80 3,601.98 3,877.29 3,932.21 4,191.94 3,920.46* 3,920.46* 4,330.74
External Sector
Exports (% yoy) - Merchandise -2.81 -3.73 -14.93 -3.12 16.9 7.01 -6.79 -8.12 5.27
Imports (% yoy) - Merchandise -1.35 -4.51 -19.75 -4.39 16.2 20.58 -8.85 -16.64 18.38
Trade Balance (USD bn) 5.83 6.98 14.05 15.32 18.81 -0.23 3.51 13.24 27.20 11.51
Current Account (% of GDP) -3.19 -3.09 -2.04 -1.82 -1.59 -2.94 -2.72 -1.49 -0.51 -1.88
Current Account (USD bn) -29.11 -27.51 -17.52 -16.95 -16.20 -30.63 -30.42 -15.76 -5.47 -22.21
IDR/USD (period average) 10,439 11,875 13,394 13,305 13,384 14,247 14,141 14,543* 14,543* 14,085
IDR/USD (year end) 12,170 12,385 13,788 13,473 13,568 14,390 13,866 14,050* 14,050* 14,177
Other
BI rate (% year end) 7.5 7.75 7.5
BI 7 days reverse repo rate (% year
4.75 4.25 6.00 5.00 3.75 3.75 3.50
end)
Headline Inflation (% yoy, period
6.40 6.40 6.40 3.50 3.81 3.20 3.03 2.04* 2.04* 2.33
average)
Headline Inflation (% yoy, year end) 8.08 8.36 3.35 3.00 3.61 3.13 2.72 1.68* 1.68* 2.92
S&P's Rating - FCY BB+ BB+ BB+ BB+ BBB- BBB- BBB BBB* BBB* BBB
S&P's Rating - LCY BBB- BBB- BBB- BBB- BBB- BBB- BBB BBB* BBB* BBB
Source: Mandiri Group estimate

Mandiri Group Research | May 2017ig Mandiri Research Team

Bank Mandiri Mandiri Sekuritas
Chief Economist Economic Research
Andry Asmoro Chief Economist Bank Mandiri Leo Putera Rinaldy Chief Economist
andry.asmoro@bankmandiri.co.id +62 21 30023693 leo.rinaldy@mandirisek.co.id +6221 5296 9406
Macroeconomic and Financial Market Research Imanuel Reinaldo Economist
Dian Ayu Yustina Department Head
Imanuel.reinaldo@mandirisek.co.id +6221 5296 9688
dian.yustina@bankmandiri.co.id +62 21 5245088 Equity Research
Rully Arya Wisnubroto Banking & Financial Market Adrian Joezer Head of Equity Research, Strategy, Consumer
rully.wisnubroto@bankmandiri.co.id +62 21 5245935 adrian.joezer@mandirisek.co.id +6221 5296 9415
Reny Eka Putri FX & Quantitative Analyst Tjandra Lienandjaja Deputy Head of Equity Research, Banking
reny.putri@bankmandiri.co.id +62 21 5245516 tjandra.lienandjaja@mandirisek.co.id +6221 5296 9617
Faisal Rachman Economist Ariyanto Kurniawan Automotive, Coal, Chemical
faisal.rachman@bankmandiri.co.id +62 21 5245516 ariyanto.kurniawan@mandirisek.co.id +6221 5296 9682
Industry and Regional Research Kresna Hutabarat Telecom, Media
Dendi Ramdani Department Head
kresna.hutabarat@mandirisek.co.id +6221 5296 9542
dendi.ramdani@bankmandiri.co.id +62 21 5245087 Lakshmi Rowter Healthcare, Consumer
Nadia Kusuma Dewi F&B, Cigarette, Pharmacy, Retail
lakshmi.rowter@mandirisek.co.id +6221 5296 9549
nadia.dewi@bankmandiri.co.id +62 21 52913501 Robin Sutanto Property
Adjie Harisandi Oil & Gas, Electricity, Petrochemical & Coal
robin.sutanto@mandirisek.co.id +6221 5296 9572
adjie.harisandi@bankmandiri.co.id +62 21 5245172 Edbert Surya Construction, Transportation
Andrian Bagus Santoso Rubber, Palm Oil, Animal Feed & Fertilizer
edbert.surya@mandirisek.co.id +6221 5296 9623
andrian.bagus@bankmandiri.co.id +62 21 29528608 Silvony Gathrie Research Assistant
Mamay Sukaesih Construction, Telco, Toll Road, Cement
Silvony.gathrie@mandirisek.co.id +6221 5296 9544
mamay.sukaesih@bankmandiri.co.id +62 21 52913501 Riyanto Hartanto Research Assistant
Astari Adityawati TPT, Automotive, Steel
riyanto@mandirisek.co.id +6221 5296 9488
astari.adityawati@bankmandiri.co.id +62 21 5245557 Henry Tedja Research Assistant
Haris Eko Faruddin Air & Sea Transportation
henry.tedja@mandirisek.co.id +6221 5296 9434
haris.faruddin@bankmandiri.co.id +62 21 5245557 Wesley Louis Alianto Research Assistant
Wesley.alianto@mandirisek.co.id +6221 5296 9510
Strategic Research (Mandiri Institute)
Fixed Income Research
Teguh Yudo Wicaksono Department Head
Teguh.wicaksono@bankmadiri.co.id +62 21 29528606 Handy Yunianto Head of Fixed Income Research
Bobby Hermanus Analyst
handy.yunianto@mandirisek.co.id +62 21 5296 9568
bobby.hermanus@bankmandiri.co.id +62 21 29528606 Teddy Hariyanto Senior Credit Analyst
Andre Simangunsong Analyst
teddy.hariyanto@mandirisek.co.id +62 21 5296 9408
andre.simangunsong@bankmandiri.co.id +62 21 29528608 Ali Hasanudin Credit Analyst
Andjarsari Paramaditha Analyst
ali.hasanudin@mandirisek.co.id +6221 5296 9629
andjarsari@bankmandiri.co.id +62 21 29528608 Yudistira Yudadisastra Credit Analyst
Elisabeth Carolina Analyst
yudistira@mandirisek.co.id +62 21 5296 9698
elisabeth.carolina@bankmandiri.co.id +62 21 29528608 Ariestya Putri Adhzani Research Assistant
ariesty.adhzani@mandirisek.co.id +62 21 5296 9465
Supporting Data
Sindi Paramita Section Head
sindi.paramita@bankmandiri.co.id +62 21 5245272
Andhi Prasetyo Hadi
andhi.hadi@bankmandiri.co.id +62 21 5245935
Istiqomah
istiqomah.oce@bankmandiri.co.id +62 21 5245272
Marsella Ayu Ariwandi
marsella.ayu@bankmandiri.co.id +62 21 5243024
Giffari Al Hadi
giffari.alhadi@bankmandiri.co.id +62 21 5245172
DISCLAIMER: This report is issued by Mandiri Group (Bank Mandiri and Mandiri Sekuritas), registered and supervised by the Financial Services Authority (OJK). Although
the contents of this document may represent the opinion of Mandiri Group, deriving its judgment from materials and sources believed to be reliable, Mandiri Group cannot
guarantee its accuracy and completeness. Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the
securities recommended herein. Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further
information please contact our number 62-21-526 3445
ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities
and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her
compensation.

Econmark February 2021 Edition-Outlook 2021-A Shot of Hope

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ECONMARK

Mandiri Group Research | February 2021

ECONMARK ECONOMIC OUTLOOK 2021

Please see important disclosure at the back of this report

Please see important disclosure at the back of this report Page 2 of 69

Mandiri Group Research | May 2017ig

FIGURE 1. WORLD VACCINATION PROGRESS

U.S. 61.3 18.46 12.9 5.4 1.3

China 40.5 2.89 - - 1.6

EU 26.2 5.91 3.7 2 0.7

U.K. 17.9 26.73 25.8 0.9 0.4

India 10.8 0.79 0.7 0.1 0.4

Israel 7.1 78.8 47 31.8 0.1

Brazil 6.6 3.15 2.7 0.5 0.3

Turkey 6.6 7.89 6.6 1.3 0.4

UAE 5.6 51.66 - - 0.1

Germany 4.9 5.86 3.8 2 0.1

France 3.7 5.66 3.9 1.7 0.1

Italy 3.4 5.7 3.5 2.2 0.1

Spain 2.9 6.32 3.8 2.5 0.1

Chile 2.9 15.09 14.8 0.3 0.1

Poland 2.7 7.01 4.6 2.4 0.1

Morocco 2.5 6.92 6.9 0 0.2

Russia 2.2 1.5 1.5 - 0.0

Indonesia 2.0 0.73 0.5 0.3 0.1

Bangladesh 1.8 1.11 1.1 - 0.3

Please see important disclosure at the back of this report Page 3 of 69

Please see important disclosure at the back of this report Page 4 of 69

Source: IMF, Jan-2021 WEO Source: IMF, Jan-2021 WEO

Growth trajectory: Significant rebound next year; moderate afterward. We see a

Please see important disclosure at the back of this report Page 5 of 69

4,0% US 10yr DXY Index (RHS)

Source: Bloomberg and Mandiri Sekuritas Source: Bloomberg as of Jan 21

Please see important disclosure at the back of this report Page 6 of 69

Please see important disclosure at the back of this report Page 7 of 69

Indonesia 2021: Recovery and Reform

FIGURE 6. DOSES OF VACCINES ADMINISTERED FIGURE 7. INDONESIA VACCINATION SCHEDULE

Health Public Elderly Vulnerable Others

Source: Our World in Data as of 2-Feb-2021 Source: Ministry of Health

Please see important disclosure at the back of this report Page 8 of 69

Please see important disclosure at the back of this report Page 9 of 69

Tax Revenue 1,404.5 1,282.8 91.3% -17.0% 1,444.5

II. Transfer to Region

Source: MoF Source: MoF

Please see important disclosure at the back of this report Page 10 of 69

FIGURE 10. NATIONAL ECONOMIC RECOVERY PROGRAM

IDR IDR IDR

1. The COVID-19 vaccine 1. PKH 10 million beneficiaries (KPM) 1. Tourism Supports

IDR IDR BUSINESS INCENTIVES

Please see important disclosure at the back of this report Page 11 of 69

Meanwhile, to revive household consumption as the other dominant source of

Please see important disclosure at the back of this report Page 12 of 69

FIGURE 11. SPENDING PATTERN AMID COVID-19 PANDEMIC

1) Large-scale social restriction

2) Relaxed social restriction

4) risk normalization period in

Sources: Bank Mandiri

Please see important disclosure at the back of this report Page 13 of 69

FIGURE 12. THE SPENDING VALUE AND FREQUENCY INDICES

Sources: Bank Mandiri Big Data Analytics

FIGURE 13. THE SPENDING INDEX BY PPKM STATUS

Sources: Bank Mandiri Big Data Analytics

Please see important disclosure at the back of this report Page 14 of 69