Home News Indonesian Manufactures Constract to 28.55% in 2Q

Indonesian Manufactures Constract to 28.55% in 2Q

Indonesian manufacturing index during the third quarter (3Q) of 2019 did not indicate an improvement - Photo: Privacy

JAKARTA (TheInsiderStories) – Indonesian Manufacturing Industry sector records a deeper contraction phase in the second quarter (2Q) of 2020. This is reflected in the Bank Indonesia’ Prompt Manufacturing Index (PMI) of 28.55 percent, down from 45.64 percent in the first quarter and 52.66 percent in the same period last year.

“The contraction occurred in all components, with the deepest comes from the production volume component in line with declining demand as a result of the COVID-19 pandemic,” the central bank said in a statement today (07/13).

By sector, all subsectors recorded contractions in the quarter, with the deepest contractions in the Textile, Leather Goods and Footwear sub-sector, it said.

The central bank sees the improvement in the third quarter although it is still in a contraction phase. It’s predicted to reach 45.72 percent, supported by the index component of the total volume of orders and production volumes.

According to London-based IHS Markit, Indonesia’ PMI increased to 39.1 in June 2020, from 28.6 a month earlier, with business confidence soaring to the highest since January. The future output index, benchmark, and business sentiment climbed to 73 percent in June.

It demonstrates that the government’ policy for economic recovery was on the right track, particularly for the national industry, Industry Minister Agus Gumiwang Kartasasmita stated.

“The most important aspect pertaining to the increased PMI in June 2020 is the rising confidence of manufacturing industry operators. This has demonstrated that the government’s policy in the new normal era has run on the right track,” Kartasasmita noted in a statement in Jakarta.

“This is the highest index for the past five months, and this achievement would serve as a guideline for the government to issue policies that continue to encourage activities in the manufacturing industry in the new normal era,” the minister stated.

However, the government should take necessary precautionary measures to facilitate economic growth in the third and fourth quarter of 2020.

“These periods are important, so we have to take precautionary measures to this end. This is since it will determine the economic performance in 2021,” he stated.

Kartasasmita pointed out that the industry was the biggest contributor to the country’ gross domestic product, at 19.98 percent in the first quarter of the year.

“To maintain the manufacturing sector’s performance, the Industry Ministry has supported industries to continue operations by applying for the industrial operation and mobility license and adhering to the health protocols,” the minister noted, adding as of July, the ministry had issued over 17 thousand to ensure that five million workers could continue to work.

In addition to the economic stimulus for reviving the industrial sector amid the COVID-19 pandemic, the government has readied various incentives for investors.

“The government has planned to establish 27 new industrial zones by 2024 across the country,” he remarked.

A new industrial zone in Batang, Central Java, will be built to facilitate investors, including those relocating their plants from China.

“Investors can benefit from the four thousand hectares of land within the PTPN IX Siluwok area,” he stated, adding that it is strategically located, with access to the port, clean water, railway, and Trans-Java Toll Road.

Written by Lexy Nantu, Email: lexynantu@theinsiderstories.com