DKI’s Economy:

Navigating the Danger Zone

Fithra Faisal Hastiadi Ph.D

Executive Director of Next Policy
A STARTING POINT

◉ Indonesia (and Jakarta) bids farewell to

recession with positive 2021.
◉ Higher adoption of digital technologies by
actors of economy.
 The Disproportional Growth

What I told the Minister of Trade in May 2020:

1. Fiscal stimulus from the big boys (US, EU, Japan, China) will
push the demand.
2. On the other hand, the supply side is quite lagging because it
takes time to restart the production given the inputs stickiness.
3. Those two above will create the disproportional growth between
supply and demand, creating price surge in commodities
Primary Source of Shocks:
Covid-19 and Inflation- and Possibly from trade

Source: Author’s Calculation

 AI Based Sentiment Analysis: Overall Economic Sentiment

14000 neg
pos
net
12000

10000
net
35%

8000 neg
43%

6000

4000

2000

0
Jan Feb Mar Apr May Jun Jul Aug pos
22%

© 2022 | Next Policy 03

 OVERALL SENTIMENT – POPULAR TOPIC

120000 pos
neg
net
100000

80000

60000

40000

20000

0
miskin investasi bisnis industri pengangguran krisis bangkrut impor phk stimulus

© 2022 | Next Policy 04

Indonesia:
Solid growth but shocks are still looming

Source: Author’s Calculation

 Jakarta's Phillips Curve (2011-2021)
4.00%

Jakarta’s Economy

Change in Inflation Rate

2.00%
0.00%
-2.00%

120.00% -4.00%
13% 13% 13% 13% 13% 12%
11% 11% 12% 11% -6.00%
13% 14% 10%
90.00% -8.00%
48% 47% 48% 48% 47% 45% 43% 44% 44% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00%
41% 37% 38% 38%
Change in Unemployment Rate
60.00%

Jakarta's Okun's Law (2011-2021)

30.00% 61% 61% 61% 61% 61% 60% 60% 60% 60% 60% 60% 60% 61% 8.00%
6.00%

Change in GDP Growth

4.00%
0.00% 2.00%
-12% -11% -12% -9%
-22% -21% -22% -22% -20% -18% -15% -15% -16% 0.00%
-2.00%
-30.00%
-4.00%
-6.00%
-8.00%
-10.00%
Consumption Investment Gov't Expenditure Net Export -4.00% -2.00% 0.00% 2.00% 4.00% 6.00%
Change in Unemployment Rate

Source: Own Illustration Based on Statistics Indonesia

Jakarta’s GDRP Forecast
35 308.7 350 15.00%
28.9
30 300
10.93%
29.2 10.00%
Passengers (Million)

Tourist (Thousand)
25 250

Y-on-Y GDRP Growth

6.15% 6.56%
19.4 5.04% 5.59%
20 200 5.00%

15 121.4 150 3.83%

0.00%
10 100 Forecast
-1.94%
FY2022:
5 5.1 5.1 50 -5.00% 5.14%
0.4 FY2023:
0 0 -8.35% 6.96%
M11

M11

M11

M11
M02

M02

M02

M02
M08
M05

M05

M05

M05
M08

M08

M08

M08 -10.00%
2018 2019 2020 2021 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Jabodetabek Train's Passenger (LHS) 2019 2020 2021 2022

Int'l Tourist Arriving in Soetta (RHS) Forecast Actual

Source: Own Illustration Based on Statistics Indonesia Source: Own Calculation Based on Statistics Indonesia
The Bitter pills: Reducing
Energy Subsidy, Increasing BI
7DRR

10
The BBM Subsidy should be focused on the bottom layers, it
should not be equally distributed across Income Groups

Gini ratio: 0.3

Source: Author’s Calculation 11

How is it affecting the poor?

1. Using NTP IB as Proxy, the shock will be there for at least 2 quarter.
2. There will be a 5.44 percent of NTP IB rise but BLT is giving the bottom
20 percent a 7.5 percent additional income.
3. But we need another fiscal push to overcome the price shocks to the
overall middle class.

Source: Author’s Calculation 12

BI Effort to anchor inflation is very much needed
since the future inflationary shocks will constraint
Economic Growth

Elasticity

BI rate shifts the economic

growth prospects in a positive
magnitude. The secret lies on
how it can contain inflationary
shocks

Source: Author’s Calculation 13

Inflation (1/2)

Source: Author’s Calculation 14

 Inflation (2/2)
Accumulated Response to Cholesky One S.D. Innovations ± 2 S.E.
14.00%
Accumulated Response of CONSUMER_INFLATION to PRODUCER_INFLATION

12.00% 6

4
10.00%
Extreme Deviation Narrow Deviation 2

8.00% Regime Regime

Extreme Deviation 0
83.87% 16.13%
6.00% Regime
-2
Narrow Deviation
21.67% 78.32%
4.00% Regime -4
1 2 3 4 5 6 7 8 9 10
Impulse Response Function
2.00% Transition Probabilities Matrix Between Extreme
(S1) and Narrow Deviation (S2) Regime AccumulatedShock
ResponseImpact of to
of INFLASI_K Producer Price
CONS_GROWTH
Inflation to Consumer Price
0.00% Consumer vs Producer Price 6
Inflation
Source: Own Calculation Based on Statistics 4 Source: Own Calculation Based on
-2.00% Indonesia Database
2
Statistics Indonesia Database
-4.00%
The extreme gap between producer price and 0
consumer price inflation implies a
-6.00% ticking bomb situation. Impulse Response Function -2 shows that the shock in producer
inflation will taken effect on the consumer inflation after 4 quarters.
2011Q1
2011Q4
2012Q3
2013Q2
2014Q1
2014Q4
2015Q3
2016Q2
2017Q1
2017Q4
2018Q3
2019Q2
2020Q1
2020Q4
2021Q3
2022Q2

-4
1 2 3 4 5 6 7 8 9 10

Consumer Price inflation
Producer Price Inflation
Inflation Gap
Consumer Price vs Producer Price Inflation
Source: Statistics Indonesia Database
From the matrix, Both S1 and S2 are stable equilibrium conditions yet S2 is less stable.
S1 has an 83.87% chance of staying in S1 but an 16.95% chance of changing to S2. While
S2 has a 78.32% chance of staying in S2 but only 21.67% of changing to S1.
With further calculation, we expect the duration of S1 to be 6.19 quarters and S2 to be
4.61 quarters. This means the extreme deviation will gradually be narrowed in Q4 2022
and consumer price will catch up with the producer price.
Indonesia amidst The Global
Shock

16
Solid Industrial Expansion
 Economic Growth
30.00%

25.00%

20.00%

15.00%
IND
10.00%
IDN, 5.44%
5.00%
USA
JPN
0.00%
CHN
-5.00% GBR

-10.00%
Q1 Q2 Q3 Q4 Q1 Q2
2021 2022
 Exchange rate

Depreciation Appreciation

RUB 20.46%
BRL 7.10%
MXN 1.62%
VND* -0.37%
BND -2.49%
SGD -2.50%
AUD -3.15%
IDR -3.60%
MYR -6.61%
INR -6.87%
CNY -7.02%
ZAR -7.81%
THB -7.93%
PHP -8.81%
KRW -10.42%
EUR -11.71%
JPY -17.75% Percentage Change in Currency Values
TRY* -28.62% Jan '22 - Aug '22
ARS -30.14% *)Jan '22 - Jul '22

-40.00% -30.00% -20.00% -10.00% 0.00% 10.00% 20.00% 30.00%

 Fiscal consolidation and External Balance
25.00%

20.00% AZE
Fiscal Balance, % of GDP (2022)

15.00%

10.00%
QAT
5.00% SAU NOR
KNA AGO
DNK SGP
0.00% TON BIH HTI LUX
KAZ SWE CHE IRL
DMA WSM BLZ CYPHND CANGTM KOR
GRD PRT
SRB
XKXSVN
UZB PER
DOM
LCA FIN
BGR HRV NLD
TJK
DEU
ISRRUS HKG
KHM ATG USA
URY ARM
GMB
ESP PAN
CRI CZE
EST
LTU
P
MEX ARG
POL
AUTRYBLR GIN
-5.00% GBR
SVKCOL
GRC
NZL
ALBSLV ZAF
VCT NPL MNE BGD
ISLFRA
HUN
PAK
MKD
BEL
MARTUR
LVA
AUS
ITA
PHL CPV
MDANAM MLT
ROU LSO BOL
BRA CHNJPN
-10.00% IND ZMB IDN
0.29%, -3,97%
VNM FJI MDV MYS
-15.00% THA
-20.00%
-50.00% -40.00% -30.00% -20.00% -10.00% 0.00% 10.00% 20.00% 30.00% 40.00%
Current Account Balance, % of GDP (2021)
 Luckily, we have a persistent trade surplus
8.00 7.565

7.00

6.00 5.757

5.00

4.00
Juta USD

3.00

2.00

1.00

0.00

-1.00

-2.00
M01 M02 M03 M04 M05 M06 M07 M08 M09 M10 M11 M12 M01 M02 M03 M04 M05 M06 M07 M08 M09 M10 M11 M12 M01 M02 M03 M04 M05 M06 M07 M08
2020 2021 2022
Possible Recession?

→ After Sri Lanka Defaulted, Who’s Next? 22

The detrimental effects of the
Russian Invasion

23
Source: Economist Intelligence Unit
Source: Economist Intelligence Unit
Source: Economist Intelligence Unit
What about the Crisis in Sri lanka?

27
The Root cause

✓ Economic Mismanagement
Slashing taxes-causing credit rating downgrades
Corruption
Non diversified source of income
Creeping protectionism
Persistent deficit in trade
Hasty switch from pesticides to organic fertilizers (man-made food crisis)
Failed to do debt smoothing (Debt to GDP ratio reaching 101 %, unpayable short-term
debt )
✓ The value chain shocks from the Russian Invasion-happening especially on fertilizers
 Sectors
Road Transportation
Automobiles-Reparation
Restaurant
Post Covid Poultry

Recovery: Cattle Industry

Motorbike
Pushing Key Private School
Animal and Vegetable oil
Sectors Aviation
Textile
Company Services
Private medical Service
Feedmills Industry
ICT
Fisheries
Transport Support
Rubber
 Product Resiliency in
coping with the
global shocks 2.50
yang akan tetap
yang berpeluang diimpor Indonesia di
mengalami tengah pelemahan
penurunan pangsa 2.00 prospek ekonomi
ekspornya global
Indeks Keterkaitan Ke Depan Total

1.50

1.00
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80

0.50
Yang berpeluang
bertahan di tengah
pelemahan prospek
ekonomi global
0.00
Indeks Keterkaitan Ke Belakang Total

Source: Author’s Calculation

 Product Resiliency
Sektor Primer Sektor Tersier
Penangkapan ikan dan akuakultur Kegiatan tambahan untuk jasa keuangan dan kegiatan asuransi
Kehutanan dan penebangan Kegiatan arsitektur dan teknik; pengujian dan analisis teknis
3.51% Penelitian dan pengembangan ilmiah
Periklanan dan riset pasar
Sektor Sekunder Kegiatan profesional, ilmiah dan teknis lainnya; kegiatan kedokteran hewan
Perbaikan dan pemasangan mesin dan peralatan Kegiatan pos dan kurir
Pembuatan peralatan transportasi lainnya Pendidikan
Pencetakan dan reproduksi media yang direkam Selokan; pengumpulan sampah, kegiatan pengolahan dan pembuangan; pemulihan material; kegiatan remediasi
dan layanan pengelolaan limbah lainnya
Pembuatan furnitur; manufaktur lainnya Kegiatan rumah tangga sebagai majikan; kegiatan memproduksi barang dan jasa yang tidak dibedakan dari rumah
tangga untuk penggunaan sendiri
Industri tekstil, pakaian jadi dan produk kulit Kegiatan organisasi dan badan ekstrateritorial
Memproduksi produk mineral non-logam lainnya Pengumpulan air, perawatan dan pasokan
Industri kayu dan produk dari kayu dan gabus, kecuali furnitur; pembuatan barang dari Kesehatan manusia dan kegiatan pekerjaan sosial
bahan jerami dan anyaman
Industri produk logam fabrikasi, kecuali mesin dan peralatan Kegiatan real estat
Industri logam dasar Administrasi dan pertahanan publik; jaminan sosial wajib
Pembuatan peralatan listrik Kegiatan penerbitan
Industri karet dan produk plastik Pemrograman komputer, konsultasi dan kegiatan terkait; kegiatan layanan informasi
Produksi gambar bergerak, video dan program televisi, rekaman suara dan kegiatan Kegiatan hukum dan akuntansi; kegiatan kantor pusat; kegiatan konsultasi manajemen
penerbitan musik; pemrograman dan kegiatan penyiaran
Industri komputer, produk elektronik dan optik Transportasi udara
Pembuatan produk farmasi dasar dan sediaan farmasi Asuransi, reasuransi dan dana pensiun, kecuali jaminan sosial wajib
Industri mesin dan peralatan Kegiatan akomodasi dan layanan makanan
Pembuatan kendaraan bermotor, trailer dan semi-trailer Transportasi air
28.07% Kegiatan pergudangan dan pendukung untuk transportasi
Kegiatan administrasi dan layanan dukungan
Kegiatan layanan lainnya
Perdagangan grosir dan eceran dan perbaikan kendaraan bermotor dan motor
Transportasi darat dan transportasi melalui jalur pipa
3.51% 45.61%
Resilient sectors still needs strong import supports
Sektor Sekunder Sektor Tersier
Pembuatan peralatan transportasi lainnya Kegiatan pos dan kurir
Pencetakan dan reproduksi media yang Kesehatan manusia dan kegiatan pekerjaan
direkam sosial
Pembuatan furnitur; manufaktur lainnya Kegiatan penerbitan
Industri tekstil, pakaian jadi dan produk kulit Pemrograman komputer, konsultasi dan
kegiatan terkait; kegiatan layanan informasi
Memproduksi produk mineral non-logam Kegiatan hukum dan akuntansi; kegiatan
lainnya kantor pusat; kegiatan konsultasi
manajemen
Industri kayu dan produk dari kayu dan Transportasi udara
gabus, kecuali furnitur; pembuatan barang
dari bahan jerami dan anyaman
Industri produk logam fabrikasi, kecuali Kegiatan akomodasi dan layanan makanan
mesin dan peralatan
Industri logam dasar Transportasi air
Pembuatan peralatan listrik Kegiatan pergudangan dan pendukung
untuk transportasi
Industri karet dan produk plastik Kegiatan layanan lainnya
Industri komputer, produk elektronik dan Transportasi darat dan transportasi melalui
optik jalur pipa
Pembuatan produk farmasi dasar dan
sediaan farmasi
Industri mesin dan peralatan
Pembuatan kendaraan bermotor, trailer dan
semi-trailer
 Potential Winners 2022 and Beyond: ICT and Health
Memiliki performa kurang
20.00% baik pada kondisi Pandemi
13.67% COVID-19
10.39%
15.00%
9.81%
9.18%
7.83%
7.09%
5.93%
5.89%
5.59%
5.39%
5.31%
5.21%
5.15%
10.00%

4.64%
4.56%
4.50%
4.17%
3.98%
3.97%
3.94%
3.83%
3.52%
3.52%
3.49%
3.17%
3.16%
2.90%
2.86%
2.58%
2.56%
2.55%
1.71%
1.55%
1.16%
1.15%
1.13%

-13.31%
-10.31%
5.00%

0.08%
0.00%

-0.36%
-0.73%
-0.82%
-1.24%
-1.39%
-2.99%
-5.00%

-3.52%
Memiliki performa buruk

-4.55%
-4.73%
-5.30%
pada kondisi Pandemi

-6.96%
Memiliki performa cukup

-7.28%
-10.00% Memiliki performa sangat COVID-19
baik pada kondisi Pandemi

-9.33%
baik pada kondisi Pandemi
COVID-19 COVID-19
-15.00%
Post Recovery
Action
Post
Recovery
Alternatives
What will determine the shape of the recovery?

•Household ability and willingness to spend

•State and local government finances
•Businesses—bankruptcies and lower
investment
•Human capital-preserve or not to preserve
 Embracing Foreign Investment: FDI and NEM
Pratomo and Hastiadi (2018)
FDI • Overall, MSMEs in Indonesia encounter several
PRP 0.34673313** problems such as lack of access to finance, poor
quality of managerial and human resources, lack
(0.1455444) of access to markets and raw materials, minimal
LnGDPPC 1.2376126*** technology adoption and licensing.
(0.257027) • For instance, to improve MSMEs’ financial
LnPOP 1.3374051*** access, the government has issued a people’s
business credit (kredit usaha rakyat) policy,
(0.1438981)
followed by an ultra-microfinancing (UMI) policy
DIST -0.11029903*** • Another program worth mentioning is
(0.0394965) JakPreneur, an entrepreneurial development or
HUMANCAP 0.24341978*** incubation program organized by the DKI Jakarta
Provincial Government.
(0.0878094)
• This program includes various activities that
ECONFREE 0.46016915** include training for entrepreneurs and MSMEs,
(0.1869757) entrepreneurial assistance, licensing assistance,
Overall R2 0.4166 marketing assistance, training in preparing
Observasi 458
financial reports and capital facilitation.
• This program not only involves the government,
Needs Strong and resilient Human but also society at large. The community can be
Capital, Patent Right Protection and involved as trainers, business assistants and
Market Oriented Government… business coaches.
Pushing Innovation as means for future
leveraging… (Hardiana and Hastiadi, 2019)
P(𝐘𝒄𝒕 > j) L to LM LM to UM UM to H
Innovation 0.0327043 0.0378456** 0.0056989
FDI 0.3077188** 0.1276984 0.0350988
Intensity
Productivity 1.62827*** 0.3314414** 0.2070858**
* *
 The Emancipatory Potential of Digital Entrepreneurship: A Study of Financial
Technology-Driven Inclusive Growth

For digital entrepreneurs, our case has shown how constraints faced
by the local market can open up an opportunity for social change,
and thus business prospect...

Our study presents how various digital financial tools (FinTech) can
stimulate the growth of micro-entrepreneurship by resolving
different constraints…

Source: Leong, Tan, Tan, & Hastiadi (2020)

 What needs to be done Pushing MSMEs to the GVC
MSMEs Go Digital

Ilmi and Hastiadi (2017)

Dependent variable : Real Export Intermediate goods
Independent All Period Machinery ICT Transport Resource Other Mfg
Variable Equip. based
RER 0.776*** 1.173*** 0.742*** 0.886*** 0.905*** 0.604***
LabCost 0.22*** 0.393*** 0.235*** 0.255*** 0.246*** 0.111**
TradeCost 0.259*** 0.141** 0.157*** 0.132* 0.166*** 0.081
Trade Open 0.447*** -0.006 0.762*** 0.338** 0.308** 0.453***
Infrasturcture 0.275** 0.2 0.094 0.658*** 0.246* 0.648***
FDIOpenn 0.317*** 0.288*** 0.282*** 0.382*** 0.263*** 0.371***
VTWR 0.111*** 0.082*** 0.23*** 0.145*** 0.121*** 0.241***
GDPpercap 0.659*** 0.91*** 0.563*** 0.802*** 0.826*** 0.637***
Dummy Euro Currency -0.177** -0.404*** -0.013 -0.42*** -0.508*** -0.486***
Dummy Trade Contraction 0.109** 0.131*** 0.105*** 0.081 0.068 0.01
Observation Number 969 940 966 927 965 960
Adjusted R2 0.947 0.953 0.953 0.938 0.942 0.924
Quadruple Helix Ecosystem
Shovel Ready Project:
Ex-ante Impact of LRT Project-Jabodetabek

Pendapatan; 6.52%
Rp 6,8 Triliun

Output; 1.56%
Rp 39,5 Triliun Nilai Tambah; 1.34%
Rp 22,5 Triliun
Tenaga Kerja; 0.91%
47.200 Orang

Output Nilai Tambah Pendapatan Tenaga Kerja

Shovel Ready Project:
Ex-ante Impact of Loop line Project

Rp 440,21 Miliar; 0.41% 53,78 Miliar; 0.33%

Rp 166,57 Miliar; 0.27%

13188 Orang; 0.08%

OUTPUT NILAI TAMBAH PENDAPATAN RUMAH TANGGA TENAGA KERJA

Asia Pacific
Megatrends
2040

Source: Atherton J and Cameron A. (2020). Asia Pacific megatrends 2040. CSIRO’s Data61: Brisbane, Australia.
Global Risks Horizon

Source: World Economic Forum Global Risks Perception Survey 2020

Thank You
Fithra Faisal Hastiadi, Ph. D.
Department of Economics, Faculty of Economics and Business, Universitas Indonesia