Wed, 02 Aug 2000

Exports reach record high of US$5.29 billion

JAKARTA (JP): Indonesia's monthly exports hit a record high of US$5.29 billion in June, raising optimism that economic recovery will continue despite the country's political problems.

The Central Bureau of Statistics (BPS) reported on Tuesday that exports in June, the highest ever, were 9.64 percent higher than the $4.83 billion recorded in May.

"Indonesia's exports in June 2000 hit a record high of $5.29 billion, and for the first time surpassed $5 billion," BPS chief Soedarti Surbakti told a news conference.

She said non-oil and gas exports this month were $4.15 billion or 8.5 percent higher than in May, while oil and gas exports increased by 14.01 percent to $1.14 billion.

The bureau said exports in the first six months of this year jumped by 34.95 percent to $29.27 billion compared to the same period last year.

The bureau said the increase in exports during the first half of this year was helped by a 27.16 percent hike in non-oil and gas exports to $22.80 billion and a 72.16 percent increase in oil and gas exports to $6.47 billion.

Soedarti said the stronger performance in oil and gas exports was due to higher oil prices from an average of $27.70 per barrel in May to $29.87 per barrel in June.

BPS said in the second quarter of this year, the increase in exports was attributed to, in particular, machinery and electrical appliances, apparel, processed wood, pulp and children's toys.

The bureau said the largest export destination was the United States.

BPS also reported that imports in June increased by 2.23 percent to $2.42 billion from $2.37 billion in May.

It said imports in the first six months of the year increased by 18.62 percent to $13.68 billion, compared to the same period last year.

BPS said the import of raw materials in the January to May period increased by 19.23 percent to $8.86 billion compared to the same period last year, while the import of consumer goods declined by 2.87 percent to $856.2 million.

Indonesia has witnessed monthly increases in exports since early this year, except in May.

PT Danareksa Securities economist Raden Pardede said a strong export performance would be a very positive contributor to the country's economic recovery amid the current unfavorable political environment.

"The impact on the gross domestic product (GDP) will be very positive because most of our exports come from the manufacturing sector," he said, pointing out that the manufacturing sector usually contributes up to 29 percent to the GDP.

Raden said exports would likely remain strong in the coming months due to the country's comparative advantages, including a weaker exchange rate of the rupiah to the U.S. dollar and cheaper labor costs.

He said the average wage in Indonesia in 1999 was about $41 per month compared to $78.50 in China, $156 in Thailand, $175 in the Philippines and $353 in Malaysia.

He also said the country's export industry would benefit from the strong economic growth in the United States.

"We expect a growth in exports of between 15 percent and 20 percent this year," he said.

But Raden said despite a stronger export performance, the economy would still grow within the 3 percent to 4 percent target for this year.

"Other sectors, particularly the financial sector, are still lagging behind," he said.

Raden said the other positive statistic was the increase in imports, particularly the import of raw materials.

"If imports increase because of a rise in exports, it is good," he said.

Indonesia's production sector has been dependent on imported raw materials.


Meanwhile, BPS also reported that inflation in July was 1.28 percent higher than many expected.

Soedarti said year-on-year inflation (July this year compared to July last year) was 4.56 percent.

"The higher inflation in July was very much affected by the fall in the rupiah and the start of the school year," Soedarti added.

"We think July's inflation was the peak and we expect it to decline in the following months," she added.

She said the government's plan to raise fuel prices in October would not make much of an impact on prices because most prices had sharply increased last month.

But Soedarti said inflation might surpass the 5 percent to 7 percent government target for this year.

"Inflation might be slightly higher than the projection," she said.

Raden said inflation this year would likely reach eight percent.

He said transportation costs and prices of goods would increase following the hike in fuel prices. He also said prices would increase again during the holidays in December.

The rupiah has been under strong pressure over the past couple months, particularly due to domestic political uncertainty. The rupiah is now hovering at about Rp 9,000 to the U.S. dollar compared to the government's target of Rp 7,000 for this year.

BPS said July's inflation included a 2 percent increase in the food index; a 0.97 percent hike in the processed food, beverages and tobacco index; a 0.68 percent increase in the housing index; a 1.64 percent in the clothing index; a 1.29 percent hike in the health cost index; a 1.77 percent in the education, recreation, and sports index; and a 0.45 percent in the transportation and communications index.(rei)