This Week’s Headlines (March 30 – April 5, 2024)

05 Apr 2024

2024 Elections

RI manufacturing strongest in years thanks to domestic demand


Indonesia’s manufacturing purchasing managers’ index (PMI) rose to a 27-month high in March on the back of strong domestic demand, while export demand waned.  


The PMI report published by S&P Global on Monday showed that the index jumped by 1.5 points to 54.2 in March, the highest since December 2021, from 52.7 in February.  


That marks the 31st consecutive month in which Indonesia’s manufacturing PMI points to an expansion of factory activity, as marked by readings above the 50-point threshold that separates expansion from contraction.  


The report is based on a survey of purchasing executives from around 400 manufacturing companies across Indonesia to determine business conditions.  


The survey results detail that the upturn in total orders was driven by the domestic market, given that the subindex for new export orders slithered into contraction in March, after stagnating in the preceding month.  


"While firms were confident that demand will remain favorable in the coming months, some doubted that such strength could be sustained on a longer horizon,” reads the statement from Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.  


That doubt, she elaborated, was due to how several businesses “were prepared” to acquire inputs and rebuild inventories but were “less willing” to recruit extra workers, given that capacity pressures remained mild for the time being.  


The report points out that 94 percent of manufacturers surveyed opted to leave payroll numbers unchanged last month as they sought certainty on whether the robust sales trend could be maintained.  


One factor restricting job creation “was concern among some firms regarding whether the current trend of robust sales growth can be maintained,” according to the report, which added that the outlook subindex, while still in positive territory, was at its weakest in over a year.  


Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman Yukki Nugrahawan Hanafi told The Jakarta Post on Monday that two factors supported consumer spending, namely the February election and Idul Fitri.  


“The momentum of Lebaran and consumption during the post-election [period] were engines of domestic demand for goods and services, which pushed the March PMI [figure],” said Yukki. 


Likewise, Shinta Kamdani, chairwoman of the Indonesian Employers Association (Apindo), pointed to the Islamic festive season of Ramadan and Idul Fitri as the main driver behind strengthening household expenditure, as it “creates the largest consumption volume every year”.  


Shinta said businesses were optimistic that Indonesia’s manufacturing PMI would remain in expansion territory throughout the year, thanks to stable domestic demand. 


Source: The Jakarta Post 



Indonesia's Prabowo pledges fiscal prudence, eyes broader coalition, aide says


Indonesia's president-elect Prabowo Subianto will be prudent in fiscal management and uphold laws that limit public debt and annual budget deficits, the head of the biggest party backing Prabowo told Reuters on Thursday. 


Foreign investors have been monitoring details of the incoming government's fiscal stance, after ratings agencies warned programmes that Prabowo had pledged during his campaign would be costly and could undermine the country's hard-earned reputation of fiscal discipline. 


"We will manage the macroprudential side," said Airlangga Hartarto, chairman of Indonesia's second-biggest party Golkar, which is part of a coalition of four parties backing Prabowo. Airlangga is also the current chief economics minister. 


"We will follow the law: public debt cannot exceed 60% (of GDP), (annual budget) deficit ceiling at 3% (of GDP)," he said in an interview. 


The government's guidance for next year's fiscal gap is between 2.48% to 2.8% of GDP. This was decided in a meeting headed by outgoing President Joko "Jokowi" Widodo, with Prabowo in attendance, said Airlangga. 


While this year's fiscal deficit may swell to 2.8% of GDP, according to Airlangga, Indonesia's government typically manages deficits at around 2% of GDP, except for during the pandemic. 


Jokowi has included Prabowo in many economic meetings, such as policy discussions on food prices, to smooth the transition of power, Airlangga said, describing Prabowo's upcoming term as a continuation of Jokowi's 10-year tenure in office. 




Indonesia's strict rules on fiscal limits were introduced in the aftermath of the late 1990s Asian financial crisis to reform public finance management. 


Prabowo's flagship programme of free lunches and milk for students and pregnant women has been a particular concern among analysts. When fully implemented, the programme is expected to cost more than $28 billion. 


Prabowo's coalition won 48% of seats in parliament, but Airlangga said he is confident there would not be much opposition against his programmes. 


Prabowo may broaden his coalition and control more than 60% seats in parliament if NasDem, a political party currently backing losing presidential candidate Anies Baswedan, jumps ship, Airlangga said. 


Such a move is likely to come after the Constitutional Court rules on ongoing election disputes, Airlangga said. 


Talks of changing alliances and political jockeying have made headlines in Southeast Asia's largest economy after the election commission last month officially announced the outcome of presidential and parliamentary votes. 


Prabowo also has plans to meet the chairman of Indonesia's biggest political party PDI-P to talk about a possible coalition, according to media reports. 


"The way I see it, there is little chance of existing parties not to negotiate joining the government ... Most of political parties in Indonesia are used to working within the government," Airlangga said. 


Source: Reuters 



Minister Of Communication and Information: NVIDIA and Indosat Will Invest to Create Indonesian AI Nation


Minister of Communication and Information Budi Arie Setiadi said that NVIDIA and Indosat Ooredoo Hutchison (Indosat) plan to invest USD 200 million (IDR 3 trillion) for the establishment of an AI center in Indonesia. 


"There is a commitment from NVIDIA and Indosat to invest USD 200 million, aka IDR 3 trillion to build Indonesian AI Nation," Budi told the media at an opening with the Ministry of Communications and Informatics on Wednesday, April 3 in Jakarta. 


Budi also said that the Indonesia AI Nation will be built in Solo, precisely in Solo Technopark. This investment will be in the form of infrastructure and human resources. 


Talking about the reasons for the location selection, Budi said that Solo has readiness both in terms of human resources and existing infrastructure. However, it is possible that the AI center will be built in other cities in Indonesia in the future. 


"Earlier, we talked about the President Director of Indosat and also Mas Gibran, we will try the execution," said Budi further. "Yes, we'll see (other than Solo), which area do you want? Bali, Bandung." 


Deputy Minister of Communication and Information Nezar Patria also added that the development of the Indonesian AI Nation is a further step in the cooperation between the governments of Indonesia and NVIDIA and Indosat which has been going on for 2022-2023. 


"So this is a follow-up of NVIDIA's long-term commitment in Indonesia as well. So there is cooperation for about 5 years, now this is what is sharpened again with the Indonesian AI Nation," concluded Nezar. 


Source: VOI