re low oil prices & Indonesia
Indonesia
The September trade surplus fell 6.4% year-over-year to $2.18 billion, as a result of sharp drops in both exports and imports. Indonesian goods heading overseas fell for the sixth consecutive month to $4.32 billion, a 25% on-the-year decrease, while imports sank 38% on the year to $2.14 billion. Unlike in neighboring Malaysia and Singapore, the smaller concentration of electronics in Indonesian exports has protected the economy somewhat from the slowdown in the US. However, the fall in oil and natural gas prices has been a problem, since they combine for more than 20% of total exports, and overseas sales dropped 28% in September. Textiles make up the biggest share of non-oil and gas exports, which fell 24% on the year, and the 0.4% drop in US Q3 GDP suggests that this sector will continue to suffer as Americans cut back on spending.
Exports and tourism are the two chief sources of foreign exchange, given the continued outflow of investment capital. Tourism receipts fell a monthly 3.7% in September, and will continue to decline as security concerns increase. This means the government will be even more dependent on foreign loans and aid, especially since Jakarta has failed to raise any significant revenue from the selling or privatization of state-owned assets and enterprises due to delays by vested interests and from political turmoil. Recently the Consultative Group on Indonesia offered $3.14 billion to shore up Jakarta's 2002 budget, however, so far this year the government has received only $2.6 billion of the $4.8 billion pledged by sovereign lenders last year.
All of this has caused the rupiah to weaken steadily, just after the battered currency received a considerable boost with the ouster of former President Wahid in July. Unfortunately the rupiah weakness now reflects the economic conditions more than just the political problems. Renewed and sustained currency weakness will again fuel inflation, further limiting monetary policy. October CPI rose 12.5% on an annual basis, which means the government will almost certainly miss its year-end target of 9.3%, especially as it further reduces fuel subsidies to ease its fiscal burden. With ineffective monetary policy and fiscal constraints there seems to be little Jakarta can do but to rely on the "goodwill" of sovereign lenders, who themselves are facing difficult times at home. While the situation is not yet a crisis, the potential for default increases almost daily.
ntrs.com |
