·Indonesian  consumer  turned  to  be  optimistic  as   it  is  reflected  on   Consumer  Confidence  Index  (CCI)  June’s figure.

·CCI increased by 3 points to 107.7 in June-21 from 104.4 in May-21. This was the highest reading since the  implementation of Large Scale Social Restriction (PSBB) in April-20.

·Both Current Economic Condition and Economic Expectation Index has continued to gain strength.

·Consumer optimism was observed to improve across all spending and education as well  as most age  brackets according to Bank Indonesia recentdata.

·Bank Indonesia reported May-21 retail sales growth decelerated. The last figure was slowing to 14.7% YoY from  15.6% YoY in April-21. Retail sales in June-21 was predicted to be at 4.5% YoY.

·Slowing pace of growth was particularly driven by limited demand hike  post Ramadan momentum. We  observed broad retail sales has decelerated across most commodity groups particularly spareparts and  accessories as wellas food, beverages and tobacco, while sales of information  and communication  equipment and cultural and recreational goods slipped intocontraction.

·However if slowing retail sales in June-21 materialize it would be in line with slowing pace of inflation, note  that June-21 CPI was rising only 1.33% YoY or 35 bps lower than previous month at 1.68% YoY. The inflation  rate was also the lowest reading sinceAugust-20.

 

·As of July 9, 2021 Indonesia recorded an increase of 38,214 Covid-19 cases. Cases continue to rise despite  vaccination campaign are ramped up.

·Furthermore, there was 871 additional fatality cases reported at the same time. Yesterday’s active cases number has reached 367,733. The total confirmed cases stood at 2.45 mn people.

·The Covid-19 cases spike has forced government to implement emergency public activity restriction (PPKM  Darurat) in Java & Bali which contribute 60% from national GDP.

·We expect state spending continues to be intensified in response to Covid-19 cases spike recently. Under Economic Recovery Program (PEN), government allocates nearly IDR40 tn to cushion the economic impact of stricter social restriction by disbursing healthcare support and social assistance.

·With tighter and prolong restriction measures, the downside risk for domestic recovery will likely to materialize.  Hence we downgraded our FY21E GDP projection from 4.46% YoY to 4.01-4.18% YoY under scenario of 2.5-4  weeks PPKM Darurat.

·We tried to model Indonesia Covid-19 cases dynamic using India as proxy model country. Note that we only  modeled Indonesia second wave outbreak since the start of exponential phasein early June-21.

·Our model inputs included daily & cumulative cases using logistic growth model to understand the outbreak  trajectory.

·The modeling function also considering daily testing rate. Under our base case scenario we estimated the daily cases to reach the peak of the curve by mid July-21 with more than 42,000 cases reported daily. Under this  scenario we expect the end of second wave outbreak will be in mid September-21 with the total cumulative  cases of 3.91mn.

·However, if government consistently ramp up the testing capacity following what India did, Covid-19daily cases will exceed 50,000 in the third week of July-21. Therefore the second wave outbreak won’t end by mid  September-21. The total cumulative cases will surpass 5.42 mn in the second week of September-21 under the  upperscenario.

·We understand that our model has some limitations as it is not including the degree of stringency fromsocial restriction measures as well as vaccination impact function. However we believe that our model will still be able  to depict the path of Covid-19outbreak.