Head of the Fiscal Policy Agency (BKF) at the Ministry of Finance, Febrio Kacaribu, stated that Indonesia's manufacturing activity has continued its expansionary trend for 34 consecutive months as of June 2024, despite financial market turbulence. "Amid global economic stagnation and financial market volatility, Indonesia's PMI remains on an expansionary trend," Febrio said in Jakarta on Tuesday. Indonesia's Manufacturing Purchasing Managers’ Index (PMI) stood at 50.7, slightly down from 52.1 in May. This performance is driven by continued expansion in output and demand. Key trading partners such as China and the United States also recorded expansionary manufacturing activities, with PMIs at 51.8 and 51.7, respectively. Similarly, ASEAN countries like Vietnam and Thailand showed expansion with PMIs at 54.7 and 51.7. In contrast, European manufacturing activity remained in contraction, with the PMI at 45.6, including Germany and France at 43.4 and 45.3. "We hope Indonesia's manufacturing trend continues in the coming months with improving quality. The government is implementing various policy supports to foster growth and maintain national economic stability," Febrio added. Separately, Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies (CELIOS), recommended that the government temporarily relax the value-added tax (VAT) rate, currently at 11% and set to rise to 12% in 2025, to 7-8% to boost the manufacturing sector's contribution to the national foreign exchange.
"Support from the government is needed to maintain demand through VAT rate relaxation," he said in Jakarta on Tuesday. This recommendation comes in light of a report from S&P Global Market Intelligence indicating that Indonesia's manufacturing PMI weakened by 1.4 points to 50.7 in June compared to the previous month. Bhima suggested that this VAT relaxation should be temporary, specifically applied to the 2025 State Budget (APBN).
