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Weaker global economy, commodity demand cut into Indonesia's 2023 exports

Jakarta Post - January 16, 2024

Deni Ghifari, Jakarta – Indonesia saw last year's exports drop 11.33 percent year-on-year (yoy), according to Statistics Indonesia (BPS) data, as the world economy weakened on top of lower demands and prices for the country's main export commodities, coal and crude palm oil (CPO).

BPS undersecretary for services and distribution statistics Pudji Ismartini told a press briefing on Monday that overall exports in 2023 dropped to US$258.82 billion from $291.9 billion the previous year.

"The economies of our main trading partners, such as China, the United States, Japan and India, continued to grow. This shows that global demand is still growing positively but slowing down," said Pudji.

BPS data also show that last year recorded a drop in the prices of several leading global commodities, with natural gas and nickel slumping respectively 54 percent and 43 percent in December.

Coal, the country's largest export contributor, saw the steepest price decline in December of 62.6 percent yoy to $141.8 per tonne, while the price of CPO fell 13.49 percent to $813.5 per tonne in the same period.

Manufacturing exports, which contributed more than 72 percent of goods shipped overseas, contracted 9.26 percent yoy to $186.98 billion last year.

Mineral products, which comprised 19.91 percent of total exports in 2023, went through the roughest patch as it shrunk 20.68 percent yoy to $51.51 billion.

Meanwhile, overall imports declined 6.55 percent yoy to $221.89 billion last year, with raw materials seeing the largest drop.

Indonesia marked a trade surplus for the 44th consecutive month in December 2023, but the full-year trade surplus hovered at $36.92 billion, shrinking 32 percent or by $17.52 billion compared to the previous year.

David Sumual, chief economist at private lender BCA, told The Jakarta Post on Monday that Indonesia's export performance was "still good enough" thanks to increased volume, given that prices had either stagnated or decreased.

He said many countries including China had restocked throughout 2023, which in turn ramped up the volume of Indonesian exports.

BPS data show that China was still Indonesia's largest trade partner last year, when the two countries traded goods totaling $127.12 billion. It also remained the country's largest export destination and import origin.

David said another key indicator of the country's economy was import performance. In particular, increased imports of capital goods indicated growth in the manufacturing sector.

"Capital goods imports did not seem to move much" in 2023, he added.

BPS noted that capital goods and raw materials imports both contracted in December by 9.91 percent yoy and 4.43 percent yoy, respectively.

Josua Pardede, chief economist at private lender Bank Permata, released a statement on Monday, saying that the Indonesian economy was "more resilient" compared to the global economy last year, given that the country's exports contracted more than imports.

Irman Faiz, an economist at private lender Bank Danamon, attributed this export contraction to a decline in commodity prices amid subdued global demand.

"As the global economy weakens, the demand for exports is expected to slow persistently, exacerbated by a decrease in export commodity prices," Irman said in a statement released on Monday.

Irman said Bank Danamon expected the country's current account to log a deficit of 0.4 percent of GDP for 2023, indicating that it spent more United States dollars than it acquired, partly due to the smaller trade surplus it booked last year.

He also projected that the current account deficit would widen this year to 1 percent of GDP.

Source: https://asianews.network/weaker-global-economy-commodity-demand-cut-into-indonesias-2023-exports