Indonesian Exports Struggle Due to Dependence on China, Says Economist
Translator
Editor
24 July 2024 17:14 WIB
TEMPO.CO, Jakarta - Executive Director of the Center of Reform on Economics (CORE) Mohammad Faisal attributed the slowdown pace of Indonesia's export sector to the country's reliance on the Chinese market. This has resulted in sluggish export growth, falling below 2% in the first quarter of 2024. On an annual basis, the situation is even more concerning, with exports experiencing a contraction of 3.5%.
Faisal highlighted a seemingly contradictory situation. Prices for Indonesia's key export commodities, such as palm oil, gas, coal, and iron and steel, have actually increased. However, this positive trend has not translated into export growth due to the limited export destinations, primarily focused on China.
“This is a risk that needs to be addressed proactively,” Faisal warned during the CORE Midyear Economic Review on July 23, 2024.
Faisal explains that China's declining domestic demand is the primary culprit behind the sluggish export performance. This slowdown has led to a reduction in imports by China, effectively shrinking one of Indonesia's largest markets.
According to him, Indonesia's import share from China has reached 20 percent, significantly higher compared to neighboring countries like Malaysia, Thailand, and the Philippines, where the share hovers around 10-12%. Consequently, exports to China fell by 4.2 percent, while exports to other nations, such as India, have seen a positive growth of 22%.
Previously, senior economist Chatib Basri also stated that China’s economic slowdown also has an impact on the Indonesian economy, given its dependence on China as the primary target market for its natural resource exports.
During the Grab Business Forum on May 14, 2024, the former finance minister said a 1% decline in China's economic growth could translate to a 0.3% contraction in Indonesia's economy.
HAN REVANDA PUTRA
Editor's Choice: Rupiah Inches Up as China Central Bank Cuts Interest Rate
Click here to get the latest news updates from Tempo on Google News
