Strong Domestic Demand Supports Manufacturing Sector Remains Expansive

JAKARTA – Indonesia's manufacturing sector has consistently remained in the expansionary zone for 17 consecutive months amidst the uncertain dynamics of the world economy.

Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance Febrio Kacaribu said the increase in the manufacturing Purchasing Managers' Index (PMI) level at the beginning of this year gave a signal that the productive sector was still optimistic.

"The manufacturing sector which remains in the expansion zone shows the resilience of the Indonesian economy amidst the global turmoil and the manufacturing slowdown that has occurred in various countries," he said when giving a press statement quoted on Friday, February 3.

According to Febrio, Indonesia's manufacturing PMI in January 2023 of 51.3 was able to surpass Malaysia's 46.5, Vietnam's 47.4, South Korea's 48.5, Taiwan's 44.3, and the United States' 46.8.

Meanwhile, the expansive trend in January 2023 was also shown by several other countries in the ASEAN region, namely the Philippines 53.5 and Thailand 54.5.

"Output and new demand in Indonesia experienced the fastest growth in the last three months due to domestic demand which remained strong," said Febrio.

Even though demand from the export side was still somewhat restrained, the increase in domestic demand was able to encourage companies to increase purchasing activities for input goods.

"Overall, the optimism of business actors at the beginning of 2023 has increased compared to the end of last year. This is reflected in the increase in the stock of input goods. In addition, the price of input goods has decreased even though supply disruptions are still occurring," concluded Febrio.