Steady Economic Growth in Q1, Thanks To Indonesian Exports

Steady Economic Growth in Q1, Thanks To Indonesian Exports

  • InCorp Editorial Team
  • 16 May 2023
  • 4 minute reading time

Indonesian Exports Contribute to Economic Growth

As the global COVID-19 pandemic continues to slow down, countries have loosened their restrictions, and lives have begun showing signs of normalcy. The year 2022 started slowly as the Omicron variant was still high in the air.

However, the country quickly recovered as the variant started to vanish. This resulted in steady economic growth in the first quarter of 2022 from the increasing prices of commodities. As the GDP took a drastic nosedive in 2020 by 2.07%, it is safe to say that the Indonesian economy was hit hard.

This is why the 5.01% rise in the economy is a breath of fresh air. With Indonesian exports playing a significant role in this growth, the global market continued to shop for Indonesia’s abundant natural resources like palm oil, nickel, and tin. This news is indicative of Indonesia’s economy reaching the government’s economic growth target going about 5% at the end of the year.

With most travel restrictions lifted in Indonesia, foreign tourist arrivals almost tripled between January and March. Combining Indonesian exports of natural commodities with the likes of the travel boom, it is no surprise that Indonesia is well on its way to a full economic recovery.

Indonesian Exports Rise in Switzerland

The Valuation Increase of Indonesian Exports to Switzerland

The increase in Indonesian export trade to Switzerland reached new highs compared to the first quarter of 2021. The total value of exports in early May 2022 was up to USD 1.2 billion, tenfold higher than the first quarter of 2021 of USD 115 million.

On the other hand, Indonesia’s imports in the first quarter of 2022 from Switzerland also increased compared to 2021’s amount. The 10% increase indicates that the economic relations between the two countries are positive, which resulted from EFTA CEPA from late 2021. With improved distribution channels, the optimism levels are also high for a continued business relationship between the two.

Plan to Strengthen Economic Relations

The EFTA CEPA, which took effect in 2021, saw about 7,000 tariff posts removed, making Swiss importing from Indonesia much easier. This contributed to the increase of Indonesian exports to Switzerland in 2022’s first quarter compared to 2021.

The main Indonesian export products that significantly increased were gold, organic chemicals, precious metals and jewelry, and furniture. However, some commodities declined, like turbine engines, spare parts, essential oils, and non-knitted textiles.

According to Ambassador to Switzerland and Liechtenstein, Muliaman Hadad, an overall increase in business transactions between the two countries will only improve in the future. As the world economy improves, both parties continue good trade practices and keep investing in each other’s countries.

The relationship between the two countries will get even stronger with the signing of the Bilateral Investment Treaty. With a good economic relationship between several countries, foreigners looking to build businesses in Indonesia to focus on exports can use services like InCorp to set up their companies.

Challenge on The Economic Growth

With a potential economic slowdown due to the position of the global economy, Indonesia’s exports see a threat in the coming months. The commodity price increase will only slightly impact the overall trade balance.

There will still be a trade surplus of around 1.5% of the GDP. However, the rebound of investment activities could mean a narrower surplus, only about 0.5% of the GDP. This means that keeping control of inflation and government policies is crucial in the coming months to determine rate hikes.

Even with the increase in Indonesian exports, there is still a bit of worry about the expected amount of exports due to rising energy and food prices in the US and Europe. This would lower the opportunity for exports to such countries.

The challenges are mainly caused by high inflation, which affects Chinese production demands and, in turn, reduces China’s demand for the export of raw materials. Keeping inflation in check, which will maintain this steady and positive growth, is parallel to the world food commodity prices.

The war going on in Ukraine is still affecting market prices and constantly reaching new highs. The central bank plans to remain consistent in keeping costs stable and strengthen policies to target inflation at an average of 3.01% in 2022.

This is an opportunity that foreign investors can take with connections to solid export destinations. By officially registering their export products in Indonesia through the help of market entry agencies like InCorp combined with their fixed distribution channel, there is a high potential for business success.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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