SINGAPORE (ICIS)--Indonesia’s total trades continued to contract in August on weakness in both external and domestic demand, which will be weighed down further as Jakarta is placed anew under a lockdown.
Total exports of southeast Asia’s biggest economy in August declined by 8.36% year on year to $13.07bn, while imports had a steeper decline of 24.19% to $10.74bn, official data showed on Tuesday.
Its non-oil and gas exports for the month were down 7.16% year on year at $12.46bn, while total exports in the first eight months of 2020 fell 6.51% to $103.16bn.
Jakarta re-imposed a lockdown on 14 September due to spiking numbers of coronavirus infections which were overwhelming hospitals in the capital.
“The coronavirus pandemic continued to take a toll on Indonesia’s trade in August. Annual growth in exports and imports remained strictly in the negative and the declines were broad-based across major goods categories,” said Sung Eun Jung, economist at research firm Oxford Economics, in a note.
Weak manufacturing and mining shipments largely brought about the decline in overall exports.
“By destination, exports to south and southeast Asia region continued to be very weak, declining 17.1% y/y [year on year]. But exports to China remained robust, expanding 8.6% y/ear on year. Meanwhile, all categories of imports fell by double digits, with the largest drag coming from raw materials,” Sung said.
Imports’ underperformance “points to a much slower recovery in domestic demand compared to external demand”, the economist said, citing that Indonesia’s consumer confidence index in August stood at 86.9, well below the neutral level of 100.
In the polyethylene (PE) market, there are concerns that Jakarta's lockdown could worsen an already sluggish downstream demand.
Indonesia is southeast Asia’s second-largest polyethylene (PE) market in terms of consumption, after Vietnam. Its total annual PE consumption for 2020 is estimated at 1.9m tonnes, according to the ICIS Supply and Demand Database.
The country has the second-highest coronavirus cases in the region, next to the Philippines. Its total confirmed cases stood at 218,382 as of 14 September, with deaths at 8,723, according to the World Health Organization (WHO).
With the re-imposition of partial lockdown measures in Jakarta, Oxford Economics’ Sung said: “We expect domestic demand to significantly drag on growth for the remainder of the year.”
The Indonesian economy will “suffer a sharp recession” in 2020, with GDP forecast to contract by 2.7%, “with risks tilted to the downside”, Sung said.
Focus article by Pearl Bantillo
Additional reporting by Izham Ahmad
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