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‘A shock like no other’: Commodity slide to pressure Indonesia
The World Bank’s 2020 commodity outlook report projects a 40.3 percent decline in energy commodity prices from last year’s average.
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A worker monitors the mineral flotation process to produce copper, gold and silver concentrates at a Freeport Indonesia facility in Mimika, Papua. (Kompas/B. Josie Susilo Hardianto)
G
lobal commodity prices are expected to tumble this year in a way unseen since the 1900s. This is bad news for major commodity exporting countries like Indonesia.
The World Bank’s 2020 commodity outlook report projects a 40.3 percent decline in energy commodity prices from last year’s average. This is accompanied by drops in industrial metal prices (13.2 percent) and agricultural prices (1.1 percent).
Such observations are not new but the report, released on April 23, provides a quantitative measure of COVID-19’s impact on commodity markets. The World Bank describes the impact as “a shock like no other” since the 1900s, including the 1980 global recession, the Sept. 11 terrorist attacks and the 2014 Ebola outbreak in Africa.
“This will add pressure for Indonesia,” economist Piter Abdullah of the Perbanas Institute told The Jakarta Post on Friday, “because falling commodity prices will strain exports, especially because Indonesia’s main products are commodities.”
Statistics Indonesia (BPS) data shows that Indonesia’s top two exports last year were coal and palm oil. The two commodities alone contributed a quarter of the country’s total export value: US$154.9 billion in 2019.
The government added mining and agriculture to the list of “essential” industries exempt from mandatory workplace closures under the Health Ministry’s large-scale social restrictions (PSBB).
The World Bank writes that the sharp decline in energy prices was led by “the collapse” of oil prices followed by “sizable declines” in gas consumption and “smaller declines” in coal consumption. Demand for coal had been propped up by continued electricity and heating demand in countries experiencing winter.
