Threat of Recession, Government Confident of Strong Exports as Manufacturing Continues to Expand

TEMPO.CO, Jakarta - The government claims to be optimistic about Indonesia's export performance even though the threat of a global economic recession is looming. The reason is that the Purchasing Managers' Index (PMI) is still recorded as expansive until September 2022.

Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance, Febrio Nathan Kacaribu, said that Indonesia's manufacturing PMI increased significantly again in September 2022 to a level of 53.7 compared to the index figure in August 2022 of 51.7.

"The increasing manufacturing expansion shows continued strength in domestic and export demand," said Febrio in a written statement, Wednesday, October 5 2022.

According to him, this index figure proves that Indonesia's manufacturing sector has consistently been in the expansion zone for thirteen consecutive months and has continued to strengthen in the last two months. According to Febrio, this condition should be appreciated because it occurs in the midst of global economic conditions which are full of inflation risks and tightening of central bank benchmark interest rates.

"This certainly deserves to be appreciated because it occurs in the midst of global risks which are still escalating. The Government's policy of absorbing global risks (shock absorber) has proven effective in maintaining the momentum for strengthening national economic recovery," he said.

However, it is important to remember that the strengthening trend in PMI is also experienced by several ASEAN countries, such as Thailand which has become more expansive to position 55.7 from August 53.7, and the Philippines to 52.9 from August 51.2. Meanwhile, China's manufacturing PMI contracted again to 48.1 from August's position of 49.5.

According to Febrio, continued strength in manufacturing sector activity is in line with decreasing pressure on input prices in the last two years. Overall, business sentiment in Indonesia's manufacturing sector remains positive, supported by expectations of an increasingly strong and sustainable recovery on the demand side.

"It is hoped that optimizing the APBN as a shock absorber this year and next year will continue to maintain the positive trend in public demand to support optimism in the business sector," said Febrio.

Previously, the Minister of Industry, Agus Gumiwang Kartasasmita, had also said that the strengthening of PMI was due to a number of factors, including efficiency due to the use of technology, increasing the capabilities of industrial human resources, and easy access to raw materials.