14 June 2022 (closed)
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The slow recovery of global demand made Indonesia decide to revise down its export growth target for non-oil and gas products in 2017. Indonesian Trade Minister Enggartiasto Lukita said the government now targets a 5.6 percent year-on-year (y/y) growth in non-oil and gas exports (down from its earlier target of 11.9 percent y/y). This target is regarded as more realistic considering the slow recovery of international demand. To boost export growth in 2017 the government aims to diversify export markets as well as to, simply, export more products to existing export markets.
There remains a high degree of uncertainty about global trade in 2017. While the latest manufacturing PMIs of Europe, USA and China show a great recovery (supported by jumping export orders) and commodity prices are gradually rising, there remains concern about political risks (stemming from populist protectionism) that can curtail global demand and trade flows this year. The World Trade Organization (WTO) expects global trade to rise moderately in 2017, in the range of 1.8 - 3.1 percent (y/y). This is lower compared to the WTO's initial forecast.
In the first 11 months of 2016 Indonesia exported USD $130.65 billion worth of products, down 5.63 percent (y/y) from the export value in the same period one year earlier. Non-oil and gas exports accounted for USD $118.8 billion of total exports in this period. Indonesia's overall trade balance posted a USD $7.79 billion surplus in January-November 2016.
Meanwhile, a recent HSBC Trade Report says Indonesia will remain dependent on primary commodities (primarily from agriculture and mining), in terms of export, until at least 2020, despite the government's efforts to boost domestic processing facilities (smelters) to produce products that are positioned higher up in the value chain. However, also after 2020 raw materials will remain Indonesia's key export products. HSBC estimates that in the 2021-2030 period, 60 percent of Indonesian exports will consist of primary commodities, despite the relatively strong growth of Indonesia's higher value-added export products (such as chemicals or industrial manufactured commodities) over the same period.
The report also notes that India and China are to become Indonesia's biggest export markets by 2030, hence replacing the USA and Japan. India is estimated to require a significant amount of primary commodities from Indonesia (to support its economic growth) in the years to come, primarily consisting of crude palm oil (CPO) and coal.
Growth of Indonesia's manufacturing industry remains sluggish amid the nation's weak infrastructure, high energy prices, and bureaucracy. In 2015 Indonesia's manufacturing industry expanded by 4.25 percent (y/y) only, below overall macroeconomic growth of 4.78 percent (y/y). Currently, Indonesia’s manufacturing industry contributes 20.84 percent to Indonesia's gross domestic product (GDP), of which 18.8 percent is generated by the non-oil and gas industry.