RI exports may drop by 50% in Q2, Kadin says

From: The Jakarta Post

As the global downturn is still nowhere near recovering, Indonesia’s exports - having dropped 30 percent in the first quarter - will fall even faster in the second three-month period, a business grouping predicts.

The Indonesian Chambers of Commerce and Industry told a forum on Tuesday evening that exports would most likely plunge by up to 50 percent in the second quarter as the slump in global demand continued.

“In the second quarter, the country may see a 50 percent decline in exports after a fall of around 30 percent in the first quarter,” said Kadin chairman M.S. Hidayat said.

The Central Statistics Agency (BPS), the official body to issue export statistics, is yet to announce its quarterly export performance.

It reported however that exports in February contracted by 33 percent from a year earlier, having slid 1 percent further down from January, with the global economic crisis cutting demand and pushing down the prices of key commodities.

As the impact of the global economic downturn worsens, including upon exports and investment flows, the central bank has made a further revision to the country’s 2009 economic growth rate previously forecast at between 4 and 5 percent, down to between 3 and 4 percent.

Neither compares well with last year’s growth of 6.1 percent.

But, Hidayat was optimistic that exports would start to rebound beyond the second quarter, taking into account various incentive schemes by governments across the globe to bolster the financing of international trade, which could then help boost export demand.

For Indonesia, Hidayat also expects the government’s stimulus package - including trade financing facilities for exporters - to gradually help relieve the economic misery for Indonesian businesses.

The government has secured a US$500 million trade financing facility loan from Japan and is looking at similar schemes with the Asian Development Bank (ADB) and the International Finance Corporation (IFC) - the private arm of the World Bank.

“Exports will bounce back after the second quarter, boosted in part by recovery schemes involving lower interest rates and disbursement of fiscal stimulus,” Hidayat said.

He expected that the export slowdown would not have too negative an impact on the economy so long as the country could keep its domestic market demand robust.

Domestic consumption makes up around 60 percent of Indonesia’s economy, as measured by gross domestic product (GDP).

Even in the first quarter, when exports dropped by around 30 percent, the economy still managed to grow by 4.6 percent, according to Finance Minister Sri Mulyani Indrawati on Tuesday, in line also with Bank Indonesia’s estimate.

Rusman Heriawan, head of BPS, while not mentioning figures, agreed with the government and central bank on Indonesia’s first quarter growth, that the elections had helped bolster economic growth.

“There are three factors which have contributed a major part in stimulating consumption in order to achieve positive economic growth - the 15 percent rise in state employees’ salaries, political parties spending on election campaigns and the low level of prices tending to strengthen consumer purchasing power,” Rusman said Wednesday.

Rusman agreed with Hidayat that that despite declining exports, the country would be able to achieve positive growth if the government managed to promote and sustain growth in consumption.

“What is important now is to accelerate the disbursement of the stimulus package and to maintain consumer spending. If the government is able to do that, we may see a better result in the second quarter.”

The government has allocated a Rp 73.3 trillion ($6.4 billion) stimulus package to help cushion the impact of the crisis. (fmb/hdt)

JAKCHAT/RI exports may drop by 50% in Q2, Kadin says

JP/RI exports may drop by 50% in Q2, Kadin says