Indonesia's Manufacturing Growth of 2013 is Revised Down to 6.5 Percent
About a week ago, Indonesia's highly optimistic minister of Industry, MS Hidayat, stated that Indonesia's non oil & gas manufacturing sector would grow around 9 percent in 2013. Now, however, the minister has felt the need to revise this figure down to 6.5 percent after meeting several other ministers. Issues that will limit growth of the manufacturing sector are higher minimum wages, the planned rise in subsidized fuel prices, and the lack of support through bank credits.
In the first quarter of 2013, Indonesia's non oil & gas sector grew 6.69 percent (YoY), clearly below the initial government target and slightly lower than the growth figure in 2012 (6.75 percent, full year). Analysts expect the sector to grow 7.14 percent in 2013.
Minister Hidayat still has high hopes for 9 percent growth in Q2-2013 as new investments have been realized, and productivity is expected to increase ahead of the Ramadan (fasting month) and the Idul Fitri holiday. However, he mentioned a number of issues that hamper growth in the manufacturing sector. These issues include uncertainty regarding the subsidized fuel policy, high interest rates, the level of efficiency in the sector, as well as higher minimum wages. Moreover, the current cabinet is entering its last year in office as in mid-2014 new legislative and presidential elections will be held. Lastly, Indonesia's lack of quality and quantity of infrastructure has been a problem that is hampering the country's economy to expand at a faster pace.