Indonesia gets downgrade

Agriculture, chemicals and ICT are amongst the most resilient industries in Indonesia despite a downgrade to economic recovery, reports trade credit insurer Atradius (www.atradius.co.uk).
 
In the new Indonesia Country Report, Atradius highlights how Indonesia’s GDP shrank 2.1% in 2020 because of the Covid-19 pandemic.  This was a smaller contraction compared to many other countries as Indonesia’s economy is fairly closed, making it less susceptible to global trade downturns.  

Indonesia’s GDP grew 7% year-on-year in Q2 due to surged exports, robust government spending and a rebound in investment and household consumption, but the resurgence of Covid-19 and subsequent lockdowns has led to a downward revision to 2021 GDP growth forecasts; to 3.3% from 4.7% in March.

Looking forward, Atradius forecasts Indonesia’s GDP will accelerate to almost 7% in 2022, contingent on containment of the pandemic and effective vaccine rollout.  This growth is expected to be fuelled by a rebound in private consumption, investments and government consumption; increasing more than 6%, 9% and 5% respectively.
 
With a ‘fair’ performance outlook, Atradius’ analysis of key industries in Indonesia reveals agriculture is one of the most resilient sectors amidst the pandemic, with rising output in 2021.  Also proving to be robust are the chemicals and ICT industries.  According to Atradius, demand for ICT products has rebounded since H2 of 2020 with an increase in projects supplying hardware and other IT infrastructure, leading to ICT wholesalers and project suppliers being able to retain the level of revenues and margins recorded in 2019.  Meanwhile, the construction sector will be boosted in H2 by new infrastructure projects supported by higher public spending.
 
However, Atradius reports recovery in the energy and mining industries has remained below expectations so far, despite increased commodity prices and the initiation of new smelting projects.  Similarly, the transport sector is weighed down by serious issues facing commercial passenger transportation with mobility affected by the pandemic.  In addition, lockdown measures and travel restrictions have led to many Indonesian service segments suffering heavily.  Thousands of hotels and restaurants have been forced to close while related businesses and tour operators have suffered major losses, and a rebound is currently not yet on the cards.

“While all global markets have the impact of Covid-19 as a common risk, the extent of that impact is unique to each – and, as we have seen in Indonesia, is subject to change,” comments Damien Dawson, Southern Regional Manager, Atradius UK.  

“The spread of Covid-19, the speed of vaccination campaigns and the nuances of each market all play a significant role in the future outlook meaning that the risks of global trade are as uncertain as they are acute.  As a trade credit insurer, Atradius provides real-time intelligence on overseas markets as well as individual buyers to help businesses maintain a reliable and accurate assessment of the risks and only when armed with the right information can businesses create robust trade strategies where they can seize opportunities while being prepared for whatever may come next.”
 
The full report can be found at 
atradius.co.uk/reports/country-report-slow-vaccination-rollout-affects-indonesian-gdp-2021.html