Exports fall as global slowdown begins to hit economy

Aditya Suharmoko, The Jakarta Post, Jakarta | Tue, 12/02/2008 10:39 AM 

Confirming that the impact of the global economic slide has hit the country, exports in October dropped from a month earlier on weaker demand and lower prices, the Central Statistics Agency (BPS) reported Monday. 

Indonesia's exports of oil and gas products slumped by 25.72 percent, from US$2.43 billion in September to $1.81 billion in October, while exports of non-oil and gas products dropped by 8.1 percent, from $9.79 billion to $9 billion. 

"Non-oil and gas exports (in October) had quite a significant drop, with the biggest drop suffered by rubber products," BPS chairman Rusman Heriawan said at a press conference. 

October's exports rose 4.92 percent from a year earlier, but still far lower than the 28.53 percent year-on-year growth booked in September. 

"Based on BPS data, the decline in exports occurred because of the drop in demand volume and the declining prices of resource-based products," Rusman said. 

All of Indonesia's main export commodities -- coal, chocolate, palm oil, copra, rubber, copper and tin -- suffered significant declines. 

"Exports to China as well as the United States dropped sharply, while (exports to) Japan remained stable. But because Japan has declared it is in recession, exports (to the country) may drop in November or December," Rusman said. 

As the world heads toward recession, importing countries are reducing their demand, causing trade-dependent countries to suffer. The United States, the world's largest importer, has begun cutting back on imported goods. 

"It was a confirmation that global demand has weakened," said Purbaya Yudhi Sadewa, chief researcher at Danareksa Research Institute. 

"If (the slowdown) continues and imports do not decrease, the balance of payments may not look so good; it may be a deficit," he said. 

However, he went on, imports would likely decline as well, with businesses anticipating a slowdown in demand from foreign countries. Most exporters in Indonesia import much of the raw materials for their products. 

Imports in October reached $10.61 billion, a 5.3 percent drop from September. Only imports of capital goods rose, while imports of raw materials and consumer goods declined, a sign businesses were preparing for 2009 gloomy economic outlook, Rusman said. 

"Capital goods are used to stimulate the domestic economy -- a good sign," Purbaya said. 

Almost 18 percent of imports in October were machinery. Total imports were dominated by China, with 15.30 percent, followed by Japan and Singapore with 14.43 and 11.29 percent respectively. 

Despite the drop in exports and imports, Purbaya was optimistic Indonesia's economy could grow by 5.9 percent in 2009, with domestic demand to remain strong. 

Top global research and advisory firm, the Economist Intelligence Unit, recently predicted 3.7 percent growth for Indonesia, while Swiss-based financial firm UBS projected 2.5 percent growth.