The rise of Indonesian exports

INDONESIA - Report 30 Jul 2021 by Cyrillus Harinowo

Indonesia is in the midst of fighting the impact of the Covid-19 pandemic. The number of new infection cases increased exponentially in the last week of June and the early weeks of July 2021. At the same time the mortality rate was also very high. This situation was worse than the first semester of 2021, when the pandemic was basically already under control. However, the arrival of the new variant of Covid-19, the Delta variant from India, made the situation worse. Although vaccinations continued to be administered, new cases continued to increase. Therefore, the integrity of the hospital system was indeed under a severe test.

However, towards the end of July, we have seen a marked improvement in the control of the pandemic. On July 26, 2021, the official report stated that the number of new infections had gone down significantly, to 28,228 cases, while the number of people who recovered reached 40,374, so for the first time, a significant number of hospital beds can be released.

Prior to the arrival of the new variant, the situation was relaxed. People started to be vaccinated in in large numbers, and there was a feeling of relief. That’s why the Indonesian government was optimistic that the worst would soon be behind us. The projections for economic growth in Q2 2021 were quite optimistic; it was predicted that the Indonesian economy might grew by over 5% in Q2. After the arrival of the new wave, however, the situation became unclear.

In that context, it really was a source of comfort to see that Indonesian exports have continued to increase in the past few months. In fact, in the first half of 2021, Indonesian exports have already hit a record compared with export performances in the first half of previous years. If past performance can be a guide, then export performance in the second half should fare better than the first half. It is with this optimism that I predict that Indonesian exports this year will hit a record.

The Central Board of Statistics reported that the trade balance in June 2021 remained in a large surplus, albeit lower than the previous month. Exports for June reached $18,545.4 million while imports reached $17,229 million. The trade surplus for June 2021 was $1,316.4 million. Cumulative exports from January to June 2021 reached $102,873.3 million, a record for Indonesian exports for the first half of the year. Cumulative imports for the same period reached $91,010.3 million. Therefore, the cumulative surplus for the first half of 2021 stood at $11,863 million. The level of total exports showed that trade activity has expanded beyond its pre-Covid level.

The Central Board of Statistics also reported the Consumer Price Index for June, which registered deflation of 0.16%. With that monthly deflation, Y/Y inflation reached 1.33%, a level below the target inflation corridor of the Central Bank. Given the level of Y/Y inflation, Bank Indonesia decided to keep the benchmark interest rate constant at 3.50% at its Monetary Policy Meeting on July 22, 2021. This policy, together with other measures by the Central Bank, is meant to keep the economy moving forward while at the same time keeping market sentiment on Indonesia positive.

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