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EDITORIAL: New signs of recovery
Indonesian manufacturers entered the second quarter of 2017 with a jump in factory activities, partly because of a turnaround in new export orders, which increased in April for the first time since last September.
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A worker watches the newly manufactured tire product at Multistrada Arah Sarana's factory. (Kontan/Cheppy A. Muchlis)
T
he recovery in the country’s manufacturing sector appears to be continuing as evinced by surging exports and demand from the local market. Such improvements, indicated by the rise in the Nikkei Indonesia Manufacturing Purchasing Managers’ Index (PMI), provides some cheer amid disappointing economic growth in the first quarter of the year.
The Nikkei Indonesia PMI, which measures the state of the manufacturing sector, climbed to a 10-month high of 51.2 in April from 50.5 in March. A reading above 50 indicates economic expansion, while one below 50 points toward contraction.
Indonesian manufacturers entered the second quarter of 2017 with a jump in factory activities, partly because of a turnaround in new export orders, which increased in April for the first time since last September.
The data should lead to optimism about the country’s economic outlook as faster expansion of factory production will create new employment that will in turn boost consumer spending, the main driver of the country’s growth.
In fact the surge contradicts the general outlook of the country’s macro economy. Bank Indonesia (BI) Governor Agus Martowardojo, for example, has predicted that Indonesia’s gross domestic product (GDP) growth in the first quarter of the year will fall below the World Bank’s estimate of 5.2 percent. BI forecast GDP growth in the January-March period, which has yet to be announced by the Central Statistics Agency (BPS), will reach 5.05 percent year-on-year.
Low credit growth and lower-than-expected consumer spending still hamper economic growth despite a hike in commodity prices, a stable rupiah, more manageable inflation and low interest rates.
In order to further accelerate the pace of output growth, the government should continue its campaign on the ease of doing business so as to attract new investment and improve the efficiency of existing businesses. Only through such efforts can Indonesian manufacturers compete in international markets, which are now shadowed by growing protectionism.
