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Manufacturing recovery in jeopardy as virus curbs hurt businesses
Most manufacturing subsectors in Indonesia are predicted to slow down, such as paper and printing, food and beverages, tobacco, transportation equipment, as well as machinery and equipment.
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Operations are running at Softex Indonesia's factory in Sidoarjo, East Java, on Jan. 23, 2020. Indonesia's manufacturing activity is expected to contract in the third quarter of this year due to emergency restrictions. (Antara/Zabur Karuru)
F
actory activity is projected to contract in the third quarter of the year, ending an expansionary trend seen in the first two quarters, following the enactment of new COVID-19 emergency public activity restrictions (PPKM Darurat) that are also expected to hurt overall business activity.
Bank Indonesia’s (BI) Prompt Manufacturing Index (PMI-BI), a gauge of factory activity, is expected to drop to 49.89 percent in the July-September period this year, lower than the 51.45 percent and 50.01 percent recorded in the second and first quarter, respectively. A reading above 50 indicates expansion and below 50 indicates contraction.
The BI business activity survey’s (SKDU) net weighted balance (SBT) — an indicator used to project business sentiment — is also expected to drop to 9.77 percent in the third quarter, lower than the 18.98 percent recorded in the second quarter this year, as a result of PPKM Darurat.
“BI will continue to monitor the impacts of PPKM Darurat, which will potentially affect the PMI in the next quarter. The PMI-BI decline will likely be caused by a decrease in production volume, goods stock volume and manpower,” the central bank said in a press statement on Wednesday.
Most manufacturing subsectors are predicted to slow down, such as paper and printing, food and beverages, tobacco, transportation equipment, as well as machinery and equipment.
Last year, the PMI-BI fell to a historic low of 28.55 percent in the second quarter as a result of three months of large-scale social restrictions (PSBB), which forced factories to halt production and retail stores to close temporarily.
However, factory activity picked up in the third quarter of 2020 and the trend continued until June this year, BI data shows.
