National Economic Recovery On The Track, Economists: Beware Of Global Inflation, Open New Export Markets

Illustration. (Photo: Doc. Antara)

JAKARTA - Domestic economic activity continues to show a recovery trend in the midst of ongoing global challenges. However, the government is considered to still need to be aware of global inflation.

Indonesia's Manufacturing Purchasing Managers' Index (PMI) in July 2022 was again at an expansive level at 51.3. The PMI position in July 2022 was also higher than the previous month (June 2022) which was 50.2. In fact, Indonesia's expansion level is still above some other ASEAN countries.

Coordinating Minister for Economic Affairs Airlangga Hartarto said this achievement could not be separated from the role of various parties in the process of accelerating the recovery of economic activity after the COVID-19 pandemic. Especially in encouraging an increase in domestic demand and supporting business activities

In response to this condition, Permata Bank Chief Economist Josua Pardede said that the trend of domestic economic recovery was driven by various government policies. Such as the easing of mobility restriction policies in various regions as well as various conditions that drive demand factors.

"Therefore, the demand for products, both durable goods, and non-durable goods, is increasing. Activity in the manufacturing industry also tends to increase compared to the conditions in the last few months," he said in Jakarta, Tuesday, August 2.

Josua said the increase in demand was also influenced by the increase in people's purchasing power in several parts of Indonesia due to commodity prices. For example, the people of palm oil centers in Sumatra who are helped by the rising prices of crude palm oil (CPO) and the people of Kalimantan who are helped by the rising prices of coal commodities.

Furthermore, Josua predicts the third and fourth quarters, until the end of this year, the level of public consumption will also tend to increase more than last year. Coupled with the impact of commodity prices in several areas, public consumption is helped by commodity prices, for example in Sumatra.

"Some provinces rely on palm oil, so their income also increases so that the desire to spend increases," he said.

Josua said, the upward trend was also driven by the policy of easing mobility restrictions which revived the tourism sector and normalized community mobility. This is because the potential for household consumption should still be able to support economic prospects in the short and medium term.

Nevertheless, Josua reminded the government to be aware of global inflation that was raised due to the Russo-Ukrainian war. The government is expected to be able to stabilize domestic commodity prices because they are very sensitive to public consumption.

“We see that the inflation rate is still something that the government must pay attention to. What's more, of course, is how government spending must be directed and productive," he said.

Not only that, but Josua said the government must also make appropriate and targeted spending, especially for programs related to micro-production activities and social protection programs. SMEs must also get the government's attention.

Indonesia Needs to Find New Export Markets

Meanwhile, Center of Reform on Economics (CORE) Economist Ina Primiana said Indonesia's PMI figures remained expansive in the next few months.

“The last two years have shown we are capable. It turns out that the previous strategy has worked, why are you afraid to face this one? In my opinion, PMI can increase by continuing to look for new markets, investors enter, it will move,” said Ina.

In history, since the pandemic Indonesia's PMI has always been high, even reaching 56 percent. This is driven by domestic consumption as well as exports. The threat of a world recession could actually be an opportunity for Indonesia to find new markets.

"With the global situation, we can learn which countries will get it and will experience a decline, recession, or which countries can be strong, we can learn, we can try to survive in existing markets, or look for new markets," said Ina.

While looking for new export markets, said Ina, the government must maintain domestic needs and minimize imports. In addition, efforts to increase added value from downstream must also continue to be strengthened.

"Indeed, we should provide added value in order to create job opportunities. We do not import raw goods but provide added value, the incoming will also be greater," said Ina.