The Indonesian government is expecting to achieve 6.3 per cent annual growth in Indonesia’s non-oil and gas exports this year as trading partners have started rolling out coronavirus vaccines to re-emerge from the pandemic-induced economic downturn.

Trade minister Muhamad Lutfi on January 29 said the growth target was based on the assumption that Indonesia’s economy would recover this year, in line with the forecast outlined by various international organisations.

“Of course, there will be many factors that come into play,” Lutfi said in a virtual presser. “First, the success of vaccination not only in Indonesia but also in its major trading partners. Second, the long-awaited reform through the Jobs Creation Law.”

The Covid-19 pandemic has disrupted international trade and global supply chains as mobility restrictions implemented in various countries around the world hampered logistics. In addition, the slowing global economy has resulted in weakening purchasing power and cooling demand.

Indonesia’s overall exports fell by 2.57 per cent year-on-year to $163.3 billion last year while imports slumped by a steeper 17.35 per cent year-on-year to $141.6 billion. As a result, the country booked a trade surplus of $21.7 billion, the second-highest in history.

This year’s target signalled an expectation for a rebound in non-oil and gas exports, which were down 0.58 per cent to $155 billion in 2020 from a year earlier, according to the ministry, quoting data from Statistics Indonesia (BPS).

The unusually high surplus last year was due to declining domestic demand as consumer spending and investment shrank, Lutfi said, in line with the pandemic-induced economic downturn.

“Some 70 per cent or three-quarters of Indonesia’s imports are raw and supporting materials. If raw and supporting materials are falling, it means industrialisation in the country is also declining, perhaps because consumer spending is down,” said the former Indonesian ambassador to the US.

Indonesia’s economy shrank 3.49 per cent year-on-year in the third quarter of last year, marking the country’s first recession in around two decades. Consumer spending contracted deeper by 4.04 per cent year-on-year and investment expenditure by 6.48 per cent year-on-year in the quarter.

The World Bank and the Asian Development Bank (ADB) have projected the country’s economy to grow 4.4 per cent and 4.5 per cent, respectively, this year.

To support the export target achievement, the ministry is planning to promote exports of automotive products to new markets like China, Brazil and Myanmar, metals to Turkey, the UAE and the Philippines, rubber to China, Australia and Vietnam and electronics to the US, Australia and China.

Centre for Reform on Economics (CORE) Indonesia executive director Mohammad Faisal expressed optimism that imports would grow this year as Indonesia’s gross domestic product (GDP) was expected to grow by at least three per cent.

At the same time, he also expected higher exports – despite being still below 10 per cent – as the country’s main trading partners, such as China, recovered from the pandemic.

Moreover, the global economy is also forecast to rebound and grow by 5.5 per cent year-on-year this year, according to the International Monetary Fund (IMF), which is expected to boost trade once again.

THE JAKARTA POST/ASIA NEWS NETWORK