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Increasing import prices cost Indonesian manufacturing dearly
Economists expect manufacturers to pass on costs to customers soon in response to increasing raw material and fuel prices.
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Business as usual: The COVID-19 pandemic has not stopped the production of electronic manufacturer PT Selaras Citra Nusantara Perkasa in Cileungsi in the West Java regency of Bogor. (JP/Wendra Ajistyatama)
T
he Ukraine invasion and the economic sanctions against Russia are putting Indonesian manufacturers in a tight spot, as increasing import costs eat into profit margins. Economists are saying it will only be a matter of time before firms pass on costs to customers.
Prices of war-impacted commodities like cereals, oil, gas, steel and coal have soared over the last two months since Putin ordered his troops to invade Ukraine in late February, worsening already high prices induced by increasing global demand amid the COVID-19 recovery.
Singapore-based think-tank Oxford Economics said industries in Indonesia, like in many other countries, have suffered from higher input costs as geopolitical tensions led to more supply shortages and trade disruptions.
“Industrial manufacturers will likely suffer with their margins being squeezed from higher input costs,” Sung Eun Jung, senior economist at Oxford Economics, told The Jakarta Post on April 25.
Read also: Indonesia eyes smaller budget deficit in 2023 amid surging commodity prices
Most manufacturing industries have suffered, leaving only mining and raw-material producers to shine during these challenging times.
However, being a net-commodity exporter may not suffice to insulate Indonesia’s economy, Eun Jung warned, adding that the benefits of high commodity prices would only partially offset its negative impact.
