Global Economic Pressure Quite Serious

KOMPAS/PRIYOMBODO

A ticker on a display monitor shows stock movements on April 16, 2019 on the floor of the Indonesia Stock Exchange (IDX) in Jakarta. The IDX composite closed 46.39 points up at 6,481, an increase of 0.72 percent, in late trading on the day before the 2019 general election. The IDX had declared April 17 an exchange holiday in observance of election day, which had been declared a national holiday.

JAKARTA, KOMPAS — Uncertainty in the global economy caused by the escalation of the trade war between the United States and China has put the local stock market and the rupiah exchange rate under pressure. The biggest impact is the decline in global trade.The Jakarta Stock Exchange Composite Index (JCI), the main price gauge of the Indonesian Stock Exchange (IDX), fell below the level of 6,000 points to close the trading session at 5,980.88 points on Wednesday. Since the beginning of the year, the JCI has lost 3.45 percent. Meanwhile, based on Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (Jisdor), the rupiah further weakened to Rp 14,448 per US dollar.

The International Monetary Fund (IMF) estimates that the global economy will grow by 3.3 percent in 2019, which is considerably higher than the 2.9 percent forecast by the World Bank. The global economic slowdown has affected Indonesia’s exports.

Minister of Finance Sri Mulyani Indrawati said that, given the global economic uncertainties, Indonesia could no longer rely on exports to support its economic growth.

AFP/NICOLAS ASFOURI

US President Donald Trump (left) and Chinese President Xi Jinping leave a business leaders event at the Great Hall of the People in Beijing in this Nov. 9, 2017 file photo. On Sept. 18, 2018, President Trump accused China of seeking to influence the US midterm elections in November 2018 by taking aim at his political support base through the escalating trade war. "China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me," Trump tweeted, a day after he targeted another US$200 billion in Chinese imports with tariffs starting next week, drawing an immediate vow of retaliation from Beijing.

Therefore, added Sri Mulyani, the government should safeguard domestic economic growth drivers, such as household spending and domestic investment. "The economy is under serious global pressure due to uncertainties," she said in Jakarta.

Sri Mulyani added that the government was at a high level of alert, because there were no signals of the US-China trade war ending anytime soon. Statistics Indonesia (BPS) data show that the trade balance suffered a deficit of US$2.50 billion in April 2019. In the first four months of this year, the trade deficit amounted to $2.56 billion.

Exports in the period of January-April 2019 totaled $53.2 billion, down 9.39 percent year-on-year (yoy). The decline in exports was steeper than the decline in imports, which fell 7.24 percent to $55.77 billion in the same four-month period.

The decline in imports occurred in all categories of goods, with the largest decline seen in consumer goods, which were down 11.87 percent yoy. Raw materials and intermediate goods fell 7.08 percent, while capital goods fell only 5.39 percent.

The raw materials and intermediate goods as well as capital goods are used by domestic industries to support their production.

KOMPAS/TOTOK WIJAYANTO

Workers unload freshly harvested oil palm fruit bunches on Sept. 14, 2015 from a plantation in Tungkal Jaya, Musi Banyuasin, South Sumatra. The farm-level price of oil palm fruits dropped from Rp 1,500 per kilogram to Rp 500-Rp 700 per kg over the last three months in 2015.

Trapped

Lana Soelistianingsih, a lecturer at the University of Indonesia, emphasized that, to avoid getting trapped in the trade deficit, Indonesia had to immediately turn to manufacturing-based exports. "However, this transition requires high imports of raw materials and capital goods. Indonesia must attract investment for export-oriented industries," she said.

The chairman of the committee for export development at the Indonesian Chamber of Commerce and Industry (Kadin), Handito Joewono, said the decline in exports could not be separated from external and internal pressures.

The external factors were related to global economic conditions. As for the internal aspects, the elections, for example, had prompted many businesspeople to take a wait-and-see approach, because they needed to assess the latest developments to make further decisions.

Even though exports fell, there was hope in car exports, which rose 4.9 percent to $2.45 billion yoy during the period of January-April 2019.

KOMPAS/DWI BAYU RADIUS

Workers affix decals to ceramic bowls on Monday at the Indo Porcelain tableware factory in Tangerang, Banten. The company produces around 1.7 million dishware per month, of which 65 percent is exported to the United States, Asia and Europe

In 2018, exports of cars totaled 346,000 units worth $4.78 billion. This year, Industry Minsiter Airlangga Hartarto hopes car exports will increase to 400,000 units. The executive director of Bank Indonesia’s monetary management department, Nanang Hendarsah, stressed that BI continued to strive to keep markets and people confident amid pressure from global economic uncertainty "by maintaining stability in the foreign exchange market and the bond market," Nanang said. (KRN/CAS/ DIM/JUD/FER)