Indonesia Economy: GDP Drop Expected due to Decline in Exports

Jakarta, 23 Mar 2009. The global financial crisis has hit Indonesia hard, with a projected GDP growth to less than 4%, down from 2008’s 6.1%. Much of this is due to a slump in exports. [br]

Hartadi Sarwono, the Bank of Indonesia Deputy Chief, said that exports could drop as much as 28% this year. This is after January’s decline of 30%.

Jakarta, 23 Mar 2009. The global financial crisis has hit Indonesia hard, with a projected GDP growth to less than 4%, down from 2008’s 6.1%. Much of this is due to a slump in exports. [br]

Hartadi Sarwono, the Bank of Indonesia Deputy Chief, said that exports could drop as much as 28% this year. This is after January’s decline of 30%.

“We have to see the risk of a (GDP) fall to below 4%,” Sarwono said, “But BI’s growth projection remains 4% because it’s too early to make a revision.”

Indonesia is Southeast Asia’s largest economy, with a GDP of US $930 billion. Like many Asian economies, Indonesia is feeling the effects of declining global demand. Indonesia, however, is much less reliant on exports than most other Southeast Asian economies. As such, Indonesia has pulled through the economic crisis much better than most of its neighbors – so far. [br]

Products Indonesia exports include palm oil, coal, and precious metals like gold and others. Manufactured goods it exports are cars, motorcycles, shoes, textiles, and electronics.

The head of the Indonesian National Statistic Board, Rusman Heriawan, said, “The plunge of export value pushed Indonesian economy into the initial phase of recession.” He further stated that the export figures will continue to worsen.

This initial phase began in the fourth quarter of 2008 as the nation’s GDP shrank by 3.6% quarter over quarter. This is the biggest decline in more than three years.

At the same time, the GDP in the fourth quarter of 2008 grew 5.2% year-on-year. This is less than the for the two previous quarters which were 6.4% and 6.1%.

Indonesia has marked funds for a fiscal stimulus package, which is has yet to implement. This safety net will not bring its GDP back to pre-crisis levels, but it is expected to help.

“Fiscal stimulus packages are effective short-term jump-starts to any nation’s economy, and announcing that they exist even before using them is always a good move as it inspires a bit of confidence in the markets. This is what Indonesia has done,” commented Francesco Gopalakrishnan, EconomyWatch.com correspondent.

Vladimir Gonzales, EconomyWatch.com