The central bank on Thursday painted a bleak picture of the country's economy, forecasting non-oil and gas exports to plunge by as much as 28 percent this year, as the world economy dives into negative growth for the first time since World War II.
Bank Indonesia deputy governor Hartadi A. Sarwono said overseas trade was likely to contract by between 25 and 28 percent this year due to a "combination of the world economic slowdown and falling commodity prices".
The release of the figure is the first by a high-ranking official.
The World Bank has said world trade was expected to fall at the fastest rate in 80 years. According to the Central Statistics Agency (BPS), Indonesia's exports in January contracted by 36 percent from a year earlier, the steepest since 1986.
Exports began their decline in October 2008, the BPS said.
The country notched up total exports, including of oil and gas, of US$136.76 billion in 2008 - almost 20 percent higher than the $114.1 billion recorded the previous year.
BI also estimates imports of non-oil and gas products to plunge by between 24 and 27 percent this year. Most local exporters import goods as capital to produce more value-added export goods.
Hartadi forecast the country would sustain a current account deficit this year of around 0.5 percent of GDP, or about $2.54 billion.
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Indonesia banked a current account surplus of $600 million last year overall. The highest surplus of $2.6 billion was recorded during the first quarter of last year, before falling into deficit of $1.5 billion for the first time in three years during the second quarter due to soaring imports of oil and fuel.
The International Monetary Fund has said the world economy may experience negative growth of between 0.5 and 1.5 percent this year. BI expects Indonesia's economy to expand by 4 percent this year.
As export and foreign investment inflow prospects waver, Indonesia is increasingly dependent on domestic consumption to fuel the economy, which last year drove 70 percent of the economy. Exports usually account for 20 percent, mostly from the commodities, textile, footwear, furniture and forestry businesses.
Analysts have warned the government to immediately help offset the decline in exports by boosting local demand to absorb the excess products, particularly from the textile and footwear industries.
Between October and March, the Indonesian Employers' Association (Apindo) recorded 237,500 workers nationwide had been laid off.
The government has said Rp 12.2 trillion ($1.02 billion) of the total Rp 73.3 trillion economic stimulus package will be channeled by March for infrastructure projects to help drive the economy.
"Macroeconomic policies, fiscal stimulus and loose monetary policy are all important to support the growth in domestic demand," Hartadi said.
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