Business sentiment low in December-January period
Business sentiment low in December-January period
The Jakarta Post, Jakarta
Even before it was announced, the government's intention to raise
domestic fuel prices caused a decline in business sentiment, as
gauged by the Business Sentiment Index (BSI), in the December-
January period, according to a survey.
Exacerbated by concerns over the fallout of the Dec. 26
tsunami disaster, during that period, the BSI slipped slightly by
0.2 percent to 115.7 points, just off its 50-month high of 115.9
during the previous two-month period, Danareksa Research
Institute (DRI) reported.
"The slide in the BSI reflects the uncertainty surrounding the
government's imminent decision to hike fuel prices, and was
magnified by the apprehension of businesspeople over the fallout
of the tragedy in Aceh," it said.
The government eventually increased the fuel prices, on March
1, by an average of 29 percent as a way of reducing the costly
fuel subsidy, discouraging the smuggling of subsidized fuel and
promoting more efficient fuel usage.
However, DRI viewed the move as a dilemma for producers, as
the fuel price hikes would eventually erode the buying power of
consumers and also push up their production costs.
It leaves companies with two choices, either raise the prices
of their products -- with the risk of losing some customers -- or
keep the prices unchanged with the risk of margin erosion.
"The ramifications of the government's subsidy cut threatens
to squeeze profit margins," it added.
In the survey, the respondents, covering more than 700 chief
executives or directors representing a wide variety of leading
companies in various sectors -- construction, agriculture,
finance, transportation & communication, manufacturing, hotel &
restaurant services and others (mining) -- answered a total of 12
questions.
The lowest response was "0", and that is when all respondents
were pessimistic on all questions, while the maximum was "200" --
that is when all respondents give optimistic responses on all
questions with "100" being the middle value.