Exports have continued falling, by another third in February, signaling a further drop in forecast growth, says the Central Statistics Agency (BPS).
Exports in February contracted by 32.9 percent from a year earlier, having slid 1 percent further from January, with the global economic crisis cutting demand and pushing down the price of key commodities, BPS head Rusman Heriawan told a press conference on Wednesday.
“If exports continue to decline, then economic growth will face a greater downside risk,” he said. Between January and February, Indonesia exported US$14.2 billion of goods in total, a 34.5 percent decline from the same period in 2008, BPS data shows.
Going down: A crane is lowering a cradle on a construction project at Sudirman Central Business District in Jakarta. While inflation was relatively high in 2008, this year’s full-year inflation is forecast to fall to between 5.5 percent and 6 percent. (JP/Ricky Yudhistira)Going down: A crane is lowering a cradle on a construction project at Sudirman Central Business District in Jakarta. While inflation was relatively high in 2008, this year’s full-year inflation is forecast to fall to between 5.5 percent and 6 percent. (JP/Ricky Yudhistira)
As the impacts of the global downturn worsen, the central bank has again revised downward its 2009 economic growth forecast to between 3 percent and 4 percent, as exports, export revenue and inward investment continue to plunge.
Initially BPS forecast a growth of 4 to 5 percent. It also has forecast that full-year exports may contract by as much as 28 percent.
“The government’s stimulus package must be carried out immediately to help stimulate the economy. The government must also quickly execute its plan to shift focus from exports to boosting domestic demand,” said Rusman.
Last year GDP comprised about 60 percent private consumption, 10 percent or so was government consumption, with the rest was equally from exports and investment.
The government’s economic stimulus package, which includes infrastructure development, has yet to be fully implemented, although it is expected to help cushion the impact of the crisis.
The government has allocated Rp 73.3 trillion (around $6.4 billion) in its stimulus package, Rp 12.2 trillion of which to be allocated for infrastructure projects.
Although BPS will only announce the official figure of Indonesia’s first quarter economic growth in May, Rusman said the economy would likely grow slower than it did in the first quarter of last year.
M. Fadhil Hasan, an economist at the Institute for the Development of Economics and Finance (Indef), said economic growth would drop to as low as 3 percent this year, compared to 6.1 percent in 2008.
“We need to shift our exported products to a new market, that is the domestic market. Slowing exports will cause more layoffs in export-oriented industries,” he said.
He added that the central bank could help lift the economy by further reducing its key interest rate.
This is possible in particular with inflation continuing to ease. The BPS also reported Wednesday that on-year inflation had further slowed to 7.9 percent in March,
A lower BI rate should mean banks cutting lending rates, which would help spur economic growth.
“I think the slowing year-on-year inflation will provide room for BI to cut its rate by a minimum of 25 basis points to further push banks to cut their deposits and lending rates,” said Ryan Kiryanto of Bank Negara Indonesia (BNI).
Rusman said that as inflation had been relatively high in 2008, it would definitely slow this year, providing more headroom for BI to keep cutting its base rate.
Analysts have forecast that full-year inflation would slow to between 5.5 percent and 6 percent. With a real interest rate - nominal interest minus inflation - of 1.5 percent, it means the BI rate may stabilize at between 7 percent and 7.5 percent by the year’s end.
The central bank will hold its regular collegial meeting on Friday, to decide the rate adjustment.
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