JAKARTA (TheInsiderStories) — Good morning! Bad economic news caused the Rupiah and the Jakarta Composite Index to slump again. The Rupiah started the week by depreciating 0.54 percent to 14,617 versus US dollar.
The Jakarta Composite Index fell deeper by 1.3 percent to 6,089.3, while several Asian markets closed in green territory. The Nikkei strengthened by 0.62 percent, TOPIX increased by 0.13 percent, and KOSPI even just a bit, grew by 0.08 percent. Some other markets such as Shanghai and Hang Seng seen weakening, but not as worse as Indonesia.
The impairment in Indonesian market is caused by the widening trade balance deficit and higher foreign debts. Indonesia trade balance deficit continued its shortfall and hit it’s worst point in the last five years, at $2.05 billion.
According to Finance Minister Sri Mulyani Indrawati Indonesia’s exports are affected by external pressures, including the diminishing demand from China, Indonesia’s main export destination. China’s economy is considered to be in a period of adjustment following the trade war with United States. Other than that, trade in Latin America and Africa is also being hit by the weak global economy.
Seeing the uncertainty, the government is trying to reinforce Indonesia’s export competitiveness by giving incentives to exporters. And to withstand import pressures, the authorities will assess the existing import reduction policy.
While, Bank of Indonesia urged export improvement, along with tourism enhancement, to fix next year’s trade balance. The central bank targets lower current account deficit at 2.5 percent in 2019.
Besides the widening trade balance, data on foreign debts is also not so satisfying. Until October, Indonesia holds foreign debts $360.5 billion, grew 5.3 percent compared to the same period last year. The debts consist of $178.3 billion from central bank and government, also $182.2 billion from state-owned enterprises and private companies.
The foreign debt ratio to Gross Domestic Product is around 34 percent. Central bank stated that the ratio is better than peer countries.
Moreover, to encourage infrastructure and economic equality, the government is accelerating special economic zone (SEZ) development outside Java. Next year, there will be 18 new SEZs.
Eight zones have recently been under construction while 10 others are still being planned. The SEZs that are under construction are located in Lhoukseumawe, Ladong, Medan, Tanjung Buton, Landak, Maloy, Tanah Kuning, and Bitung.
While the planning stage-zones are in Kuala Tanjung, Kemingking, Tanjung Api-api, Gandus, Tanjung Jabung, Tanggamus, Batulicin, Jorong, Buli and Teluk Bintuni. Development of all these special economic zones outside of Java is expected to have a positive impact on non-oil and gas processing, as it is projected to contribute 60 percent to the industry.
According to Industry Minister Airlangga Hartarto, the 10 SEZs that have been operating until November are in Morowali, Bantaeng, Konawe, Palu, Sei Mangkei, Dumai, Ketapang, Gresik, Kendal, and Banten.
In the commodity market, United States (US) crude oil price ended below the level of $ 50 per barrel for the first time in more than a year on Monday (12/17), amid growing concern over supply.
West Texas Intermediate (WTI) prices for the January contract closed down $1.32 at $49.88 per barrel on the New York Mercantile Exchange. The WTI oil contract in February dropped to as low as US $49.47 per barrel, the lowest level since September 2017.
While, the price of Brent oil for February delivery closed down 67 cents at the level of $59.61 per barrel on the ICE Futures Europe exchange in London. The global benchmark crude traded at $9.41 premium against WTI for the same month.
This decline began after data provider Genscape Inc. reportedly reported an increase in stockpiles in America’s biggest storage center and intensified after the US Department of Energy projected higher output in shale oil.
May you have a profitable day!
Written by Linda Silaen and TIS Intelligence Team, Please visit our new website to get more insight on Indonesia’s economy: www.tisintel.com