Indonesia Daily Focus December 3, 2020
Retail – 2021F: U-shaped recovery expected
Better store traffic to offline retailers approaching 2Q21
We
expect better foot traffic to offline retailers in 2021 compared to the
overall traffic in 2020 (especially in 2Q21), supported by low based
effect, seasonality factor and our assumption that vaccine will be
partly available. Our ground check to some malls indicates that
consumers were still willing to spend on food and beverages (F&B),
especially restaurants, during the weekends. Meanwhile, on weekdays,
there was less foot traffic. As for clothing, middle-income consumers
were seen willing to spend on types of clothes which are recognized for
brand yet valued for money.
Foot traffic likely improves in 2021F, but some people’s purchasing intention might still be low
The
government’s stimulus package has yet to address the cash problem being
faced by millions of informal workers in Indonesia, which is the loss
of their daily income due to their inability to work remotely. As of
August 2020, there were 77.7mn informal workers (60.5% of total workers)
who would desperately need the stimulus, as shown by data from
Statistics Indonesia. From the perspective of 2021 state budget,
although the national economic recovery still becomes the focus, the
budget allocation (IDR372.1tr) is significantly lower than that of 2020
(IDR695.2tr). The budget for national economic recovery in 2021 includes
a lower social safety net budget of IDR110.2tr (vs. IDR203.9tr). We are
not confident at all that 2021 state budget could significantly
alleviate the already weak confidence and purchasing power of middle-low
income households. Overall, despite our expectation for a gradual
recovery in the retailer sector, we would like to maintain a neutral
view on the sector as we think purchasing power is still uncertain and
possesses a risk to the retail sector. For the time being, we believe
that the government’s stimulus, including PKH (family assistance
program) and BLT (direct cash assistance program), are more likely to be
spent by the recipients on basic necessities (such as food and
beverages).
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