Ministry Of Finance: Indonesia's Manufacturing Remains Expansive Even Amid The Gejolak Of The Financial Market

Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance Febrio Kacaribu. (Photo: Doc. Antara)

Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance Febrio Kacaribu stated that Indonesia's manufacturing activities continued an expansionary trend for 34 consecutive months as of June 2024 amid financial market turmoil.

"In the midst of global economic stagnation and financial market turmoil, PMI Indonesia is still in an expansive trend," said Febrio in Jakarta, quoted from Antara, Tuesday, July 2.

The Indonesian Manufacturing Purchasing Managers' Index (PMI) is at the level of 50.7, slightly sloping compared to May which is at the level of 52.1. Manufacturing performance is driven by the level of output and demand which is still expansionary.

Several Indonesian trading partner countries also recorded expansive manufacturing activities, including China and the United States at 51.8 and 51.7 levels, respectively.

PMI manufacturing countries in the ASEAN region such as Vietnam and Thailand are also expansive, respectively at levels 54.7 and 51.7.

On the other hand, the manufacturing activities of the European region are still in the contraction zone at the level of 45.6. Countries in the European region such as Germany and France have contracted to levels 43.4 and 45.3, respectively.

"We hope that Indonesia's manufacturing trend will continue to the following months with better quality. The government seeks various policy supports to encourage growth and maintain national economic stability in the future," said Febrio.

On a separate occasion, Executive Director of the Center of Economic and Law Studies (CELIOS) Bhima Yudhistira recommended that the government implement a value-added tax rate relaxation (VAT) which is currently 11 percent, and 12 percent in 2025, to 7-8 percent to further spur the contribution of the manufacturing sector to foreign exchange.

"It is necessary for support from the government to maintain demand side through relaxation of VAT rates," he said when contacted in Jakarta, Tuesday.

According to him, the recommendation was given considering the S&P Global Market Intelligence report which stated that Indonesia's manufacturing Purchasing Manager's Index (PMI) in June weakened 1.4 points to 50.7 compared to the previous month.