Indonesia looks to conclude trade agreements with Canada, Tunisia, Peru this year

The government is looking to conclude free trade agreements (FTAs) with Canada, Peru and Tunisia, as well as other countries, to strengthen Indonesia’s trade relationships with new markets.  

Trade Minister Zulkifli Hasan said in a press briefing on Thursday that the government was looking to wrap up FTA negotiations with those three countries this year.  

“Africa, […] Eastern Europe, the markets are big,” said Zulkifli, after revealing that Indonesia was also planning to conclude FTAs with countries in said regions in 2024.  

Intended to remove trade barriers between the two countries, the Comprehensive Economic Partnership Agreement (CEPA) negotiations with Canada kicked off in June 2021.  

According to the Canadian government’s website, the two countries had gone through six rounds of talks, with the latest taking place in October 2023. A seventh round “is anticipated” to take place in early 2024.  

The CEPA negotiation with Peru, on the other hand, commenced relatively recently, in August of last year.  

Indonesia exported US$331 million worth of goods to Peru from January through November 2023, according to data from Statistics Indonesia (BPS), while it imported a mere $72.61 million worth of goods over the same period, translating into a trade surplus of $259 million.  

Meanwhile, negotiations on a Preferential Trade Agreement (PTA) with Tunisia kicked off in 2018, and the two countries have had six rounds of talks since, the last one taking place in 2022.  

Foreign Minister Retno Marsudi made a state visit to Tunisia last month, in which she pushed for progress on the PTA, according to a press statement released by her ministry on Dec. 22, 2023.  

Bilateral trade between Indonesia and Tunisia has been growing at an average rate of 29 percent a year since 2018, and the government hopes to strengthen “this trade trend” with the PTA, according to Retno.  

Furthermore, Zulkifli said, the government was aiming to wrap up trade agreement negotiations with Bangladesh, Russia, Belarus, Kazakhstan, Kyrgyzstan, Armenia and the European Union.  

CEPA negotiations with the EU have dragged on for nine years, but Zulkifli expressed confidence in concluding them this year.  

In November, Coordinating Economic Minister Airlangga Hartarto said the two parties targeted to finally conclude the CEPA in early 2024.  

Indonesia and the EU have held 16 rounds of negotiations and have been trading blows at the World Trade Organization over several restrictions, but Deputy Trade Minister Jerry Sambuaga told reporters on Thursday that these would not affect the trade talks.  

“There is no obstacle, the process is going well, but trade negotiations naturally take time,” said Jerry.  

The government has been pursuing new FTAs to enter new markets and thereby reduce Indonesia’s reliance on traditional key trade partners.  

That strategy involves trade missions to so-called nontraditional markets, such as the aforementioned South Asian and Eurasian countries as well as Mexico, Nigeria and South Africa, according to Zulkifli. 

 
Source: The Jakarta Post 

Indonesia's Dec inflation eases more than expected 

Indonesia's annual inflation rate cooled more than expected in December to 2.61%, within the central bank's target range, official data showed on Tuesday. 

The rate was below November's 2.86% and expectations in a Reuters poll for a December reading of 2.72%. 

The central bank's inflation target for 2023 was 2% to 4%, while its 2024 target is 1.5% to 3.5%. 

The core inflation rate, which strips out government-controlled prices and volatile food prices, also eased more than expected in December to 1.80%, the lowest level since December 2021, and compared with 1.85% predicted in the poll. November's core inflation was 1.87%. 

The central bank, Bank Indonesia, raised interest rates by a total of 250 basis points between August 2022 and October 2023 to fight inflation and maintain currency stability. 

DBS Bank economist Radhika Rao said December's lower-than-expected inflation rate would provide comfort for monetary policymakers. 

"We expect the policymakers to exhibit a lower urgency to shift towards an easing cycle in 1H24 to preserve finance stability," she said. 

Rao said headline inflation could rise above 3% in the first half of 2024 as price pressures build around religious holidays, such as Ramadan, which is expected to start in March. 

BI officials have predicted headline inflation may reach 3.2% this year due to higher global food and energy prices. 

Source: Reuters 

Indonesia's Manufacturing Sector Expands at Quicker Pace in December 2023

The headline seasonally adjusted S&P Global Indonesia Manufacturing Purchasing Manager’s Index (PMI) rose to 52.2 in December, up from 51.7 in November, to signal that manufacturing sector conditions continued to improve and at the fastest rate since September.  

This extended the current period of manufacturing sector expansion to 28 months.  

Higher new work intakes, including from overseas, supported faster production growth and a renewed accumulation of backlogged work.  

Headcounts also rose alongside purchasing activity, aided by improved optimism among goods producers regarding the year-ahead outlook.  Selling prices meanwhile rose at a slightly quicker rate despite softer input cost inflation.  

"December's PMI data indicated that Indonesia's manufacturing sector concluded the final quarter of the year on a positive note as incoming new orders and output both expanded at solid rates. This helped to bolster purchasing activity and led to a sustained increase in employment across the goods producing sector, supporting further improvements in economic activity," Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, said in a media release, Tuesday (2/1/2024). 

Overall sentiment in the Indonesian manufacturing sector improved again in the latest survey period as firms grew more hopeful that sales will continue to expand in 2024.  

Although remaining below the series average, the level of optimism was the second-highest recorded since October 2022. 

"Forward-looking PMI indicators, including the backlogs of work and future output indices, also trended positively. Overall business confidence notably rose to the second highest level in over a year, while a slight accumulation of backlogged work reflected improvements in demand conditions," Pan explained. 

"Finally, despite the rate of selling price inflation rising in December, it remained well below the series average to indicate muted price pressures," Pan concluded. 

Source: IDX Channel