Signals of Indonesia's economic recovery are increasingly felt in early 2021. This can be seen from Indonesia's manufacturing Purchasing Managers' Index (PMI) in January 2021, which was at the level of 52.2, an increase compared to the previous month's level of 51.3. The increase in Indonesia's manufacturing PMI indicates an accelerating expansion in the manufacturing sector. This condition also shows an increase in demand which in turn also affects the increase in production activity.
This means that Indonesia's manufacturing PMI has been increasing for the fourth consecutive month, with the increase at the beginning of this year being the fastest in the last 6.5 years. The index's achievement at the level of 52.2 is also the highest since the survey began in April 2011. "In the midst of these difficult times, the increase for four consecutive months shows that Indonesia's economic rebound will accelerate," said the Minister. Industry Agus Gumiwang Kartasasmita, Monday (1/2). Minister of Industry Agus also appreciated all industry players who remain optimistic and continue to produce, thus encouraging an increase in Indonesia's manufacturing PMI. "We will do our best to maintain this positive trend," he said. Andrew Harker, Director of Economics at IHS Markit, said Indonesia's manufacturing sector is still on a recovery path in early 2021, with output growth and new orders among the best in surveys for this decade. "This trend provides a further boost of confidence, the highest in four years at the start of the year," he said.
The increase in Indonesia's manufacturing PMI in January 2021 surpassed that of Vietnam (51.3), Thailand (49.0) and Malaysia (48.9). Meanwhile, the ASEAN manufacturing PMI at the beginning of this year was at the level of 51.4. In fact, China's manufacturing PMI decreased to the point of 51.3 compared to the previous month's 51.9. The brilliant performance of the domestic manufacturing sector is also seen in its largest contribution to the value of national exports. In the January-December 2020 period, the manufacturing industry recorded exports of US $ 131.13 billion, up 2.95% on an annual basis. "With the achievement value of US $ 131.13 billion, the industrial sector contributed dominantly up to 80.3% of the total national export value which reached US $ 163.3 billion in 2020," said Agus.
This positive performance made the manufacturing sector's trade balance throughout 2020 a surplus of US $ 14.17 billion. Agus said that this indicates that the performance of the industrial sector is getting better and industry players in Indonesia are still aggressive in penetrating the export market. The Minister of Industry also stated that the realization of investment in the industrial sector in the country grew 26 percent, from 2019 which reached IDR 216 trillion to IDR 272.9 trillion in 2020. Based on the records of the Investment Coordinating Board (BKPM), in January-December 2020, the industrial sector disbursed funds amounting to Rp 272.9 trillion or contributed 33% of the total national investment value which reached Rp 826.3 trillion. As a result, the realization of investment nationally last year exceeded the target set at Rp. 817.2 trillion or exceeded 101.1%. "This is an extraordinary achievement in the midst of a pandemic. In fact, investment in the industrial sector is able to grow double digits, "said the Minister of Industry.
Deputy Chairman for International Relations of the Indonesian Chamber of Commerce and Industry (Kadin) Shinta Kamdani said that industrial expansion cannot only depend on domestic market demand and the momentum of the big day. Therefore, to encourage manufacturing expansion and to restore the economy, a supply side is needed, for example by improving the business climate, inbound investment, facilitating business credit and so on. "Apart from that, it is also necessary to encourage external demand, such as through increasing export demand for national manufactured products. If these supporting factors do not exist and we only depend on the domestic market, it is possible that manufacturing expansion will slow down in 2021," said Shinta. Moreover, if the pandemic control and economic normalization processes take a long time or take more than half a year, it will be increasingly difficult to encourage industrial growth. Therefore, Shinta assessed that confidence in the expansion of the manufacturing industry is very dependent on recovery in demand or injection of working capital. Without significant demand and capital, it is certain that the manufacturing industry will continue to delay expansion. "Especially for labor-intensive industries whose business risks in 2021 are still very high due to increased business expenses, increased regional wages and massive cuts in fiscal and non-fiscal stimulus budgets for corporations due to this year's pandemic," he said.
