Tuesday, 1 July 2014


Whoever leads the nation, he would be faced with economic problem which was structural; because it was structural, the solution should be structural too. This would not be easy, because the complexity degree was high.

The signals of worsening economic performance was already visible in the past 3 to 4 months. In May 2014 there was inflation of 0.16% with Consumers Price Index [IHK] of 111.53. Of the 82 IHK cities there were 67 cities having inflation and 15 cities posting deflation.

High inflation was in Pematang Siantar posted at 1.61% with IHK 115.14 and the lowest was in Tegal and Kupang 0.01% with IHK 108.30 and 112.72 respectively. Highest inflation was in Pangkal Pinang 1.17% with IHK 10.83 and the lowest was in Palembang 0.03% with IHK 108.41.

Inflation happened due to increase in index of some expenditure category, i.e. ready food, beverages, cigarettes, tobacco 0.35%; Housing, water, electricity, gas and fuel 0.23%; garment 0.12% health 0.41%; education, recreation and sports 0.07%, and transportation, communication and finance 0.21%.

The expenditure category posting downturn of index on May 24, 2014 was food category 0.15%. Inflation level of calendar year [January-May] 2014 was 1.56% and inflation level y o y [May 2013 – May 2014] was 7.32%.

So far the course of inflation was still in the right corridor, i.e. around 4.5% + 1% assuming that essential food was better managed till end of year and the Government would not increase price of certain commodities including oil.

Only trouble was, trade performance flopped deeply. Indonesia’s export by April 2014 came to USD 14.29 billion, a downturn of 5.92% against that of March 2014. Compared to April 2013, the downturn was 3.16%. Non oil-gas export in April 2014 came to USD 11.66 billion, down by 7.09% against March 2014 the same was compared to export in April 2013 which compared to export in April 2013 which dropped by 5.26%.

Accumulatively Indonesia’s export in January-April 2014 came to USD 58.59 billion, a downturn of 2.63% against same period of 2013, similarly export of non oil-gas commodities came to USD 48.09 billion, downturning by 3.00%. The biggest downturn in non oil-gas export in April 2014 was happening in fat an animal/vegetable oil USD 916.5 million [45.2%].

Export of non oil-gas commodities to the USA in April 2014 came to highest level at USD 1.38 billion, followed by China USD 1.27 billion and Japan USD 1.17 billion; the three destination countries contributing 32.76% to Indonesia’s total export. Export to 27 Uni Euro states totaled USD 1.28 billion.

Sector wise, export of industrial products through January-March 2014 rose by 3.55% against same period 2013; the same was with export of agricultural products which increased by 4.87% while export of minery products etc dropped by 24.19%.

Still by sector, export of industrial products of January-April 2014 rose by 3.22% compared to same period of 2013. The same was with export of agricultural products which rose by 3.31% while export of other minery products dropped by 26.15%.

Meanwhile, total value of Indonesia’s import by April 2014 came to USD 16.26 billion, an increase of 11.93% against March 2014; but compared to April 2013 it went down by 1.26%. Import non oil-gas products in 2014 came to USD 12.56 billion, an increase of 19.31% against March 2014 but to compare against April 2013 it went down by 2.11%. Import of oil-gas in April 2014 came to USD 3.70 billion or down by 7.55% against March 2014 but to compare against March 2014 but to compare against import of April 2013 it rose by 1.76%.

The biggest non oil-gas import of April 2014 were mechanical instrument worth USD 2.35 billion an increase of 17.89% against import of goods of the same category in March 2014. Supplier countries of non oil gas products through April 2014 was firstly China, at the value of USD 2.86 billion [22.78%], next: Japan at USD 1.62 billion [12.93%] and Singapore USD 0.96 billion [7.66%]. Non oil-gas import from Asean states constituted 22.24% while Uni Europe 9.37%.

Total import of auxiliary goods and capital goods through January-April 2014 was posting downturn against same period year before at 4.89% - 4.57% respectively, while import of consumer goods increased by 4.69%.

Total import minus total export arrived at trade deficit of USD 1.96 billion, a figure away above most observer’s estimation. Most economists predicted deficit was around USD 300 million, but reality was different. Those were the points that made markets players avoid Rupiah and embraced USD. rupiah value nose-dived to Rp11,850 lately.

To bring back Rupiah value to respectable level of Rp 11,000 – Rp 11,500 per USD, restoration of fundamental economy was bad, it would be hard for Indonesia to back her feet again.

The horrifying thing was that deficit in trade balance would still happen in May-June in line with import of raw materials toward Ramadhan fasting month and Idul Fitri. Exploding domestic consumption kacked up production.

As raw materials and auxiliary material were not sufficient at home, partly had to be imported. Only trouble was demand for oil as fuel would also soar up in line with home town risk [music]  toward Idul Fitri.

The number of vehicles consuming oil would increase during Ramadhan and Idul Fitri. So import of oil was easy solution resulting in swelling subsidy of oil which burdened APBN State Budget while Rupiah would sink deeper as oil was quoted in USD.

From the above picture it would be indispensable for BI to keep watch on economic slowdown in Indonesia while searing for wayout from the worsening economy: Coordinating Minister Chaerul Tanjung had 3 months before the cabinet ended office. (SS) 

Business News - June 11, 2014    

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