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Investment down as Indonesia fails to capitalize on trade war
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At high stakes: A cargo ship berths at a port in Lianyungang in China’s eastern Jiangsu province, on May 8. China’s exports fell more than expected in April while imports rose, official data showed on Wednesday, ahead of high-stakes talks aimed at resolving a trade war with the United States.
(AFP/-)
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ndonesia is failing to capitalize on the supply chain readjustment caused by the heated United States-China trade war, with investment down during this year’s second quarter, resulting in falling economic growth.
The country’s gross domestic product (GDP) growth plunged to 5.05 percent year-on-year (yoy), its lowest level since 2017’s second quarter when the economy expanded by 5.01 percent, Statistics Indonesia (BPS) data show.
The figure is only a slight decline from the first three months of this year when GDP growth was recorded at 5.07 percent yoy but is a sharp fall compared to the 5.27 percent growth recorded in the same period last year.
The Jakarta Composite Index (JCI), the main gauge of the Indonesia Stock Exchange (IDX), fell by 2.59 percent to 6,175.7 on Monday following the release of the data. The rupiah weakened to Rp 14,241 against the greenback compared to Rp 14,203 recorded last Friday, according to Jakarta Interbank Spot Dollar Rate (JISDOR) data.
BPS revealed that household spending, which accounts more than half of GDP, increased by 5.17 percent in the second quarter thanks to the positive momentum generated by the Idul Fitri holiday and the disbursement of annual bonuses for civil servants. However, investment growth nosedived to just 5.01 percent yoy from 5.85 percent in the same period in 2018.
The sluggish investment growth is a sign that Indonesia has been unable to capitalize on the supply chain reorganization caused by the ongoing trade war between the US and China, Bank Central Asia (BCA) chief economist David Sumual told The Jakarta Post.
“The primary key [to GDP growth] going forward amid the trade war and global uncertainty is how to attract more investments,” said David. “The government should speed up structural reforms in terms of ease of doing business, particularly to attract FDI [foreign direct investment].”
