The document summarizes a presentation on the impact of the global financial crisis in Asia and the Pacific region. It discusses how Indonesia was less impacted than expected due to strong economic growth prior to the crisis. While export and import growth declined, domestic consumption helped maintain GDP growth. The government implemented fiscal stimulus and social protection programs to mitigate effects. It also established a crisis monitoring system to better understand vulnerabilities and impacts on the poor.

1. BAPPENAS
Workshop to Launch
UNDP’s Regional Synthesis Report on Global Financial Crisis and Asia‐
Pacific Region
ISEAS‐Singapore, 30 November 2009

2. dadang‐solihin.blogspot.com 2

3. Overview of Presentation
BAPPENAS
 OVERVIEW OF MACROECONOMIC IMPACT
 SOCIAL IMPACT OF CRISIS
 RESPONDING TO THE CRISIS
• Fiscal Stimulus
• Social Protection
 WAY FORWARD
• Tracking Vulnerabilities and Early Warning System
dadang‐solihin.blogspot.com 3

4. Macroeconomic Overview
BAPPENAS
 When the international crisis hit the world, Indonesia’s overall economic
situation was promising.
 Prior to the crisis, the country witnessed strong growth, peaking in mid
2008 with 6.4% growth.
 The export sector boomed due to the world commodity boom.
 Budget deficits remained low and external debt ratios declined from
almost 90% in 2000 to about 33% at the end of 2008.
 Since the last crisis, Indonesia has also introduced several social protection
mechanisms.
 This all assisted the country in dealing with the crisis and in mitigating its
impact on the economy as the next few slide will show.
dadang‐solihin.blogspot.com 4

5. Macroeconomic Overview
BAPPENAS
Pre‐crisis: strong economic growth and performance
GDP Growth (% )
8 6.3 6.1
5.4 5.7 5.5
4.7 4.7 5
4.4
3.8
3
0.8
(y-o-y, %)
-2
97
98
99
00
01
02
03
04
05
06
07
08
19
19
19
20
20
20
20
20
20
20
20
20
-7
-12
-13.1
-17
dadang‐solihin.blogspot.com 5

6. Macroeconomic Impact of Crisis
BAPPENAS
 Decline from Q4 2008 onwards but still positive with growth (y‐
o‐y) 2009: 4.0% in QII, 4.2% in QIII
 Modest impact on remittances
 In Sept. 2008 Stock Exchange Index dropped but since QI foreign
capital inflows resumed
 Since beginning 2009 most economic indicators strengthened
again
• Strong domestic (private and public) consumption main
driver of growth
• Consumer confidence high
• Recovery of industrial activity
dadang‐solihin.blogspot.com 6

7. Macroeconomic Impact
BAPPENAS
 As you can see from the graph, prior to the crisis Indonesia’s
export performance has been strong due to the world
commodity boom.
 Export growth declined from QIII onwards, followed by falling
imports in QI 2009.
 However, export growth resumed already in May 2009.
dadang‐solihin.blogspot.com 7

8. (y-o-y, %)
Ja
n,
-60
-40
-20
0
20
40
60
80
100
120
Fe 200
b, 8
M 200
ar
, 8
Ap 200
r, 8
M 20 0
ay 8
,
J u 200
n, 8
2
J u 00
l, 8
Au 20
g, 08
Se 200
p, 8
O 200
ct
,2 8
N 00
ov 8
,
D 20
ec 08
Export Grow th
,
J a 200
n, 8
dadang‐solihin.blogspot.com
Fe 200
b, 9
M 200
ar
,2 9
Ap 00
r, 9
M 20 0
Import Grow th
ay 9
Export and Import Growth, 2008-2009 (y-o-y, %)
,
J u 200
Macroeconomic Impact
n, 9
2
J u 009
l,
Au 20
g, 09
Se 20
Main Transmission Channel: Export and Imports
p t 09
,2
00
9
8
BAPPENAS

9. A Reflection of Impact of
1997/98 Asian Financial Crisis BAPPENAS
 Before going into detail about the social impact of the current crisis, it
is useful to go back to the impact of the 1997/1998 crisis.
 In the 1997/98 crisis Indonesia’s economy contracted by nearly 14%.
 The impact of the crisis was compounded by the El Nino phenomenon
leading to drought and a shortfall in rice production, while the instable
political climate in the wake of the fall of the Suharto regime
complicated the formulation and implementation of mitigation policies.
 As you can see from the graph, poverty increased rapidly, reaching
33.2% in late 1998 and then gradually falling again. Common coping
strategies included cutting down on food consumption, moving into
informality and agriculture, reducing spending on health care and
education. As a result school attendance rates dropped, particularly at
the secondary level and many people stopped attending health care
centres.
dadang‐solihin.blogspot.com 9

10. A Reflection of Impact of
1997/98 Asian Financial Crisis BAPPENAS
Poverty Rates between Feb. 1996 and Feb. 2002
35
33.2
30
28.0
27.1
25
24.1
22.9 22.3
20
18.1
15.3 15.4 17.4 18.7 15.5
18.7
15
14.2 10.3
13.1
10
5
0
dadang‐solihin.blogspot.com 10

11. Poverty and Vulnerability
BAPPENAS
 While poverty rates since then have been falling to pre-crisis levels,
there is a very high clustering around the poverty line – as you can see
from the graph. More than half of the population in Indonesia lives
below US$2/day.
 These households are facing a very high probability of becoming
tomorrow’s poor during an economic crisis or as a result of an
exogenous shock.
dadang‐solihin.blogspot.com 11

12. Poverty and Vulnerability
BAPPENAS
Large Number of Indonesians Vulnerable to Poverty
59.3% below US$2/day
US$2/day (PPP)
US$1/day (PPP)
10.4% below US$1/day
dadang‐solihin.blogspot.com 12

13. Percentage of Poor People
BAPPENAS
 There are wide disparities in Indonesia with
poverty rates particularly alarming in the East of
the country and Aceh.
 However, in terms of absolute numbers, most of
the poor are concentrated in Java and Sumatra.
dadang‐solihin.blogspot.com 13

14. Current Crisis – Impact on Poor
Preliminary Findings BAPPENAS
 Preliminary findings show that overall social impact of crisis
limited
 Workers in export‐oriented manufacturing most affected
but overall employment in manufacturing grew
 Unemployment rates continue to decline
 Food insecurity levels, however, remain high and make
many susceptible to increases in food prices
dadang‐solihin.blogspot.com 14

15. Government Response
BAPPENAS
Fiscal Stimulus Package
 To strengthen and maintain stability of domestic financial
sector
 To stabilize and stimulate domestic economy by fiscal
expansion in 2009
Social Protection Mechanisms
 Rice for the poor (RASKIN)
 Community Empowerment Programme (PNPM)
 Cash transfers (BLT, etc.)
dadang‐solihin.blogspot.com 15

16. Government Response –
Fiscal Stimulus BAPPENAS
Stimulus Package 2009 (In IDR Trillion)
Description IDR Trillion
1 Tax Savings 43
Reductions in Income Tax Rates: 32
Lower Corporate Tax Rate 18.5
Lower Personal Income Tax rate 13.5
Income tax-free band raised to IDR 15.8 million 11
2 Tax /Import Duty Subsidies for Business/Targeted Households 13.3
VAT on oil/gas exploration, cooking oil 3.5
Import duties on raw materials and capital goods 2.5
Payroll tax 6.5
Geothermal tax 0.8
3 Pro-business/Jobs subsidies + budget expenditures 15
Reduced price for automotive diesel 2.8
Discounted electricity billing rates for industrial users 1.4
Additional infrastructure expenditures + subsidies + government 12.2
equity injection
Upscaling of Community Block Grants (PNPM) 0.6
Total Stimulus 73.3
dadang‐solihin.blogspot.com 16
Source: Coordinating Ministry of Economic Affairs, 2008

17. Establishing a Crisis Monitoring System
BAPPENAS
 Establishment of crisis monitoring and response system
• To understand the impact of crisis on vulnerable
• To undertake appropriate, targeted and effective policy
response
 Ongoing data collection activities include
• Crisis impact household survey (World Bank/BPS)
• Pilot food security and nutrition monitoring survey
(WFP/UNICEF/ILO)
• Qualitative studies
• Regional assessments
dadang‐solihin.blogspot.com 17

18. Beyond the Crisis
BAPPENAS
 Impact of global crisis less severe than anticipated
 Current economic crisis intersects with food price crisis,
follows fuel price crisis
 Different crises show that policy makers lack data to design
and target response in timely manner
 Setting up a crisis impact and vulnerability monitoring and
response system
 Preparing for future crises/ exogenous shocks ‐ early warning
system
 Building a sustainable system
 Linking monitoring with response
dadang‐solihin.blogspot.com 18

19. Monitoring Vulnerabilities
BAPPENAS
 The system seeks to track vulnerabilities across multiple
dimensions of distress and will focus on vulnerabilities caused or
exacerbated by external shocks.
 A simple, manageable indicator framework is being developed with
both, lower frequency, ‘contextual’ indicators drawn from existing
data bases and higher frequency, ‘pulse’ indicators drawn from
ongoing qualitative and quantitative assessments.
 As you may know, on the global level the UN, on request of the
G20, is setting up a Global Impact and Vulnerability System
(GIVAS) which envisions to include similar data and analysis on
the global level.
 For those interested, we have provided the web addresses of our
evolving website as well as the one of GIVAS.
dadang‐solihin.blogspot.com 19

20. Monitoring Vulnerabilities
BAPPENAS
MDGs/Human
Development
Indicators
(DevInfo, BPS,
Disaster UNDP)
Risk
Vulnerability Monitoring Response/
Indicators Social Protection
(DESINVENTAR) Schemes
VULNERABILITY PNPM, etc.
INDICATORS
Macro Indicators (early
warning/ transmission Crisis Impact
channels) Indicators
Bank of Indonesia, IMF, BPS, Food Insecurity
MoF (BPS/WB survey;
UNICEF/WFP/ILO; JICA))
dadang‐solihin.blogspot.com 20

21. BAPPENAS
Thank You
for further information on Indonesia:
www.vulnerabilitywatch.web.id/v1/
for further information on Global Impact and
Vulnerability Alert System (GIVAS):
www.voicesofthevulnerable.net
dadang‐solihin.blogspot.com 21

22. Tentang Narasumber
dadang‐solihin.blogspot.com 22