Three Things Your Business Needs to Know About 2016

We sat down with the General Manager of Dun & Bradstreet (D&B) Indonesia, Krisantus Veni Calix, and asked him about their latest Business Optimism Index for Q4 2015, the outlook for 2016 and how companies are faring in these times.

1. What can businesses expect for the rest of 2015 and the new year, 2016?

Based on our recent survey, businesses are feeling more pessimistic across all key indicators, namely sales, net profits, selling price, new orders, inventory, and employment. This is the fourth consecutive quarter of decline, and shows that the global slowdown is taking its toll on domestic firms.

 

Nonetheless for 2016, we expect Indonesia to perform better in line with the improving global economy. According to the World Economic Outlook (WEO) 2016 released by International Monetary Fund (IMF), global economy is expected to grow by 3.8%, an increase of 0.5% from 2015. Our D&B analysts forecast 6.0% growth for Indonesia next year compared to 4.7% this year.

 

Growth will be supported by recovery in developed markets such as US, EU and Japan, which are our main export destinations. In addition, commitment from Indonesian government to boost state spending in infrastructure sector will be an important driving force. However, China’s slowdown, weakening global commodity prices, and prolonged instability of global financial markets could negatively impact Indonesia’s growth prospects.

 

2. How has the credit quality of Indonesian firms changed in the past year?

 

Screen Shot 2015-10-28 at 3.46.38 PM

 

We find that the overall credit ratings of Indonesian firms have largely remained unchanged over the past year (2014 to 2015). In fact, the percentage of local firms which have had their credit ratings downgraded was significantly lower than those which were unchanged.

 

The D&B Rating consists of two indicators – one measures the financial strength and another measures the risk condition of the company. Financial strength is an indication of how financially sound the company is while the risk indicator focuses on the management experience and any negative listings of the company.

 

Based on our findings, we find that Indonesian firms are still financially sound. Out of every 100 firms, we noted that none of the firms have had their credit ratings downgraded over the past year (2014 to 2015). This is in line with the upgraded credit ratings, which was only 3.13% over the past year.

 

In conclusion, we can say that most Indonesian firms have had their financial strength unchanged over the past year. On the contrary, there is considerable movement in risk conditions. However, this should be no cause for alarm as the credit ratings are evaluated based on a company’s fundamentals and merits.

 

3. What advice do you have for Indonesian firms to tide through the rough times?

The business community is expected to begin rationalization and efficiency amid current economic conditions, such as reviewing investment expenses, and re-planning and optimizing existing ones. Firms must also continue to be creative and smart in utilizing the government economic package policies to stimulate local economy and business activity.

 

Finally, it always helps to stay informed of your business partners and suppliers. Any failure or stress in them especially during an economic slowdown can potentially disrupt your business.