Construction Sector of Indonesia Feels Impact of Economic Challenges
Indonesia's construction industry, which accounts for about ten percent of the country's gross domestic product (GDP), is experiencing turbulent times as the sector is impacted upon by three issues, namely higher minimum wages, higher subsidized fuel prices as well as the depreciating rupiah (against the US dollar). Concerns have arisen that a number of projects cannot be finished due to these issues. Moreover, companies may feel forced to dimiss workers in order to keep a healthy financial balance sheet.
The weakening rupiah, which has depreciated about 20 percent between June and September 2013, results in higher costs for building materials. For example, the price of asphalt has increased significantly. This is felt by the industry as around 56 percent of the country's 1.6 million ton of asphalt demand is imported.
US Dollar vs Indonesian Rupiah (JISDOR):| Source: Bank Indonesia
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