OPTIMISM ON THE RISE OVER GOVT’S SECOND TERM

The business community is more optimistic about theirbusiness as well as economic condition in third quarter of this year. This optimism is reflected in the Q3 2019 Composite Business Optimism Index (BOI) that generates 3.78 percentage points hike from 40.40% in Q2 to 44.19%. Among other parameters only Inventory posted lowering index while the remaining (Volume of Sales, Net Profit, Selling Price, New Orders, and Employment) recorded positive trend. The survey concluded majority of respondents (77.89%) assumed that their business is not likely to change while 19.56% of respondents projected that their business will improve during the quarter and the rest (2.56%) expressed pessimistic outlook. – Optimism index of Volume of Sales took a largest percentage increase on q-o-q basis, from 24% in previous quarter to 31%. Around 35% of respondents across all sectors expected inclining sales while only 4% anticipated decrease and the remaining 61% assumed no change. Transportation is the most favorable sector regarding to this parameter, followed by Construction and Mining. – New Orders enjoyed a quarterly gain of 6.67%, from 23% in Q2 to 29.67% in Q3 2019 with 33.7% of respondents predicting an increase, 4% decrease, and 62.3% foreseeing no change. Transportation, Construction, and Wholesale are the most optimistic sectors that see improving. Meanwhile, Net Profit registered a q-on-q increase by 6.33% (from 23% to 29.33%). – Employment and Selling Price posted a slight hit on quarterly basis, by 1% and 1.67% respectively. The increase of workforce is estimated to occur most in transportation sector while among other sectors, the inclining price of mining commodity is most likely to occur. – Inventory slightly plunged from 2.33% to 1.67% (q-on-q), with 3.3% of respondents predicting an increase, 1.7% decrease, and 95% unchange. Deep cuts of the parameter are felt in Mining and Agriculture. With the completion of presidential election dispute and the general elections commission (KPU) has legitimated the elected president and vice president, domestic economy is expected to run faster and investors, both foreign and domestic, will continue to expand after choosing to wait and see since the end of last year. Domestic economic indicators that are still solid amid global economic uncertainty and positive ratings from international rating agencies indicate that the outlook for Indonesian economy is still strong and also the primary key attracting greater investment to the domestic market. Standard & Poor's (S&P) raised Indonesia's sovereign credit rating from BBB- to BBB with a stable outlook at the end of May 2019. Previously, in February 2019, the credit rating agency Moody's argued that Indonesia was a disciplined fiscal country so that it could control budget deficits to a healthier level and successfully manage a low debt burden. Bank Indonesia (BI) estimated that economic growth in the second quarter of this year tends to be not much different from the previous growth of 5.07 percent. Despite the global turmoil, Indonesia's economy grows at a consistent level with quarterly GDP growth of 4.9 to 5.3 percent over the past 3.5 years. The World Bank predicted that Indonesia's economy will grow 5.1 percent in 2019 and increase to 5.2 percent in 2020. This projection is supported by consumer spending, which is expected to continue increasing because of low inflation rate and relatively strong labor market.

BUSINESS OPTIMISM INDEX