The
World Bank rated that it would be hard for Indonesia’s economy to compete
against neighboring countries because Indonesia was still relying on
commodities while the export condition of competitor countries were getting
better.
World
Bank’s Vice President for the East Asia region and the Pacific Axel van
Trotsenburg said that economy of other countries were in fact end of other
countries were in fact better in spite of some minor irregularities till end of
year. But the impact of economic recovery was different, depending on the
investment climate and export condition of each country.
China,
Malaysia, Vietnam and Cambodia were in excellent position to increase export
which reflected their sound integration into regional and global network, which
had propelled global trading in the past 20 years.
This
report served as revision to the World Bank’s prediction about Malaysia’s
economy in 2014 which came to 5.7%, up from 4.9% in April which was due to
Malaysia’s high export in the first half of this year. Cambodia’s economy was
predicted to grow by 7.2% in 2014, driven
by growing export of garments.
In
case of Thailand, if political turbulence did not happen, they could benefit from
global economic recovery considering their sound integration to global economy.
But Indonesia, who was still relying on export of commodities, the growth rate
decreased from 5.2% this year against 5.8% in 2013. This was due to slump of
commodity prices, less Government expenditure and slow credit expansion.
As
a whole, developing countries in East Asia and Pacific countries were economic
slow down this year. However, the countries were believed to able to restore
their respective economies unlike Indonesia.
Indonesia
was predicted to be able to post economic growth of 5.2% this year compared to
2013 at 5.8%. Economic recovery happened if Indonesia applied the reformation
hindrances, strengthening export competitiveness and scheming up state budget
wisely.
The
World Bank predicted that developing countries in East Asia and next year would
grow by 6.9% on the average. In case of China, economic growth slowed down to
become 7.4% this year and in 2015 was expected to become 7.2%. The Philippines
was predicted to grow by 6.4% this year and 6.7% in 2015.
Myanmar’s
economy would grow by 8.5% this year and next year due to reformation of the bureaucracy,
new strategy and recovered international relationship.
The
advisable way for countries of the region in handling the risk was to overcome
vulnerability due to wrong fiscal policy being adopted to step up export
competitiveness. The next recommended way was to make structural reformation to
strengthen export competitiveness.
One
of the weakest point of Indonesia’s economy was export which tend to be
stagnant. Ministry of Trade Muhammad Lutfi admitted that Indonesia needed to
revise export target 2014 due to slump of commodity princes in the past 2 weeks
like coal price which dropped by nearly 7 percent and CPO by 25 percent. Most
probably the Ministry must revise export target of 2014.
The
Government had reset export target of 2014 at USD 190 billion. Assuming the
revision was around 5 percent, to set export target at USD 180.5 bullion.
Accumulatively Indonesia’s export for the period of January-August 2014 came to
USD 117 billion or down by 1,52% against same period of 2013.
Hench,
deficit in trade balance for the same period came to USD 1.41. Although non
oil-gas trade balance was able to score surplus of 7.18 billion it was still
held down by deficit in oil gas trading of USD 8.59.
All
in all, Indonesia’s economy was predicted to slowdown due to poor export
performance in 2014 before being projected to go up again in 2015 in line with
reformation agenda by the next Government. This was clearly apparent in the
latest Asian Development Bank [ADB] report.
In
their published Annual Report Asian Development Outlook 2014, [ADO 2014] ADB
corrected Indonesia’s GDP growth 2014 to 5.3% against the previous 5.7% in
April.
ADB
also predicted economic growth of 5.8% in 2015, down against that of April at
6.0%. The tight monetary condition and prohibition of raw mineral ores
contributed to reduction of export and axed Indonesia’s growth precentage this
year.
However
expectations of reformation for future economic policy would improve investment
climate, bureaucracy and speed up infra structure building whereby to step up
growth prospect.
GDP
growth slowed down to 5.2% in the first half of 2014 was the lowest growth rate
since 2009. Such happened as BI increased benchmark rate last year to restrict
domestic demand and to control inflation and Deficit in Current Transaction.
The slowdown turned out to be worst than expected especially with declining
export.
Export
of goods dropped by 2.3% in the first half of year based on USD calculation,
due to low demand and low selling price of export commodities like coal and
rubber. Import of goods dropped by 4.4% with deepest downturn in raw materials
and capital goods.
Trade
surplus during first half of the year increased nearly three fold compared to
previous year to become 3.1% of GDP.
Private
consumption which was 56% of GDP grew strongly by 5.6% in first half of year and
was greatest contributor to GDPP growth in terms of demand. Consumption also
soared up as related to General Election. Eased inflation and good harvest
built consumers’ confidence and farmers’ income, but tight credit regulation
supressed sales of durable goods like automotives.
Foreign
investment was relatively strong with USD 10.5 billion while portofolio
investment which entered increased steeply to USD 16.8 billion for half of
year. Foreign investors were buying more Government bonds up to USD 7.3 billion from January to August.
Increased
capital inflow was more than enough for covering deficit in current transaction
to maintain balance of payment at surplus position. Rupiah value strengthened
by 4.1% against USD in the first 8 month of 2014 after being depreciated by
19.5% in 2013.
Growth
forecast of 2014 – 2015 assumed that the new Government who would start to work
on October 21 2014 would implement master policy which was already disclosed
during last election campaign betterment of investment climate, reformation of
the bureaucracy and acceleration of infra structure building.
0.5%
additional growth precentage which was project
for 2015, was based on bettered economy in leading industrial countries
which was expected to jack up export and investment. Growth of private
consumption was predictably still strong. Low inflation was supportive to
consumption this year and the Government might adopt the cash transfer
technology to compensate on the low income group trouble by oil price increase
in 2015.
Private
investment was predicted to improve through trial period, supported by success
in conducting election process and expectations that the new Government would
systematically reform strategies. Growth of investment loan would remain high
at 30.0% although monetary policy was tightened.
Inflation
was predicted to be 4.2% on the average during second half of the year and most
probably to reach 5.8% all year through, higher than predicted on April last
due to increase of electricity tariff and increase of food price due to long
drought of 2014. Inflation was projected to increase for the time being to
arrive at 6.9% on the average in 2015 assuming that the Government increased
price of subsidized oil by 30% - 50%. (SS)
Business News - October 15, 2014
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