TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
RI held hostage by China's slowdown
Indonesiaâs efforts to boost its exports and narrow the current account deficit could falter due to an economic slowdown in China, its largest trading partner
Change Size
I
ndonesia's efforts to boost its exports and narrow the current account deficit could falter due to an economic slowdown in China, its largest trading partner.
Demand for Indonesian exports may weaken as the world's second-largest economy's gross domestic product (GDP) growth, according to official data released last week, fell to its 18-month low at 7.4 percent in the first quarter.
China posted annual GDP growth of 10.4 percent in 2010.
The government has expressed worries about the impact of China's economic slowdown as exports account for around 15 percent of Indonesia's GDP.
'We hope the potential slowdown in China can be compensated for by the ongoing economic recovery in other countries like Japan and the US,' Deputy Finance Minister Bambang Brodjonegoro said recently.
Last year, Indonesia recorded its four-year low economic growth of 5.7 percent and a historic-high of the annual current account deficit of US$28.4 billion.
Bank Indonesia (BI) has trimmed its growth forecast range to 5.5'5.9 percent this year, from 5.8-6.2 percent previously, citing an array of negative external factors, such as an economic slowdown in China that was worse than expected.
Indonesia ships the largest share of its exports to China, mainly in the form of natural commodities, such as crude palm oil.
The Central Statistics Agency's (BPS) latest statistics show that China, among other trading partners, absorbed the most of Indonesia's total exports at 14.3 percent, or $3.4 billion, in the first two months of this year.
According to International Monetary Fund (IMF) estimates, a 1 percent deduction of economic growth in China could decelerate Indonesia's economy by up to half a percent, mainly due to the strong linkage between the two
countries.
'Clearly, China is seeing a structural slowdown, so Indonesia needs to shift its growth model from commodity-based, to non-commodity based,' said Johanna Chua, the head of Asia-Pacific economic and market analysis with Citigroup.
UK-based economic research firm Capital Economics has warned that Hong Kong, Australia, Malaysia and Indonesia are the five Asia-Pacific economies most exposed to the 'hard landing' of the Chinese economy due to close trade links with China, posing risks to the rest of emerging Asia.
'A shift in investor sentiment against the region could also pose problems for economies vulnerable to capital outflows,' Capital Economics analysts wrote in its recent report.
' Satria Sambijantoro
