CSIS: Protectionism Undermines Indonesia's 2017 Export Performance
The Centre for Strategic and International Studies (CSIS) believes Indonesia's export performance can grow up to 3.2 percent year-on-year (y/y) in 2017 based on the most recent global growth projections. Yose Rizal, Head of the Economics Department within CSIS, said this 3.2 percent growth outlook is a modest one and Indonesia's export performance should actually perform better. In fact, for economic development of Indonesia, Rizal says export growth in the range of (at least) 4 - 5 percent (y/y) is required.
Rizal added that the 3.2 percent growth projection for Indonesia's export performance in 2017 has not "priced in" the possible protectionist measures that may be undertaken by US president-elect Donald Trump once in office (his inauguration is scheduled for 20 January 2017). If trade policies in the USA will indeed take a rather protectionist swing, then the 3.2 percent growth forecast of Indonesian exports in 2017 will need to be revised downward, perhaps to the range of 2 - 3 percent (y/y).
One key strategy to boost Indonesian exports this year is by focusing on maintaining its export capacity to the nation's main export markets. This is important because CSIS detects a trend that points at declining exports to the key export markets. For example, the United States (one of the largest export markets of Indonesia) used to account for about 1.2 percent of Indonesia's total exports. Currently, however, exports to the USA only account for about 0.9 percent of Indonesia's total exports.
Another strategy would be to tap new export markets. However, this should not be the main focus because new markets will not be able to replace Indonesia's traditional key export markets, simply because Indonesia's key export markets (USA, China, Europe and Japan) are the world's economic centers.
CSIS researcher Haryo Aswicahyono added that in times of protectionism (which specifically aims at curtailing multilateral trade), Indonesia should lobby to boost bilateral trade with specific countries.
Earlier this month the Indonesian Employers Association (Apindo) proposed two strategies to boost the nation's export performance in 2017, namely seeking new export markets and, secondly, boost exports of 'halal' products (which adhere to Islamic law) to the Middle East.
Indonesia's Trade Ministry revised down its export growth target for 2017 to 5.6 percent (y/y), or USD $136 billion, in 2017. However, the revised target is still significantly more optimistic compared to the CSIS forecast.
In the first 11 months of 2016 Indonesia exported USD $130.65 billion worth of products, down 5.63 percent (y/y) from the export value in the same period one year earlier. Non-oil and gas exports accounted for USD $118.8 billion of total exports in this period. Indonesia's overall trade balance posted a USD $7.79 billion surplus in January-November 2016.
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