Indonesia's export growth is expected to slow sharply this year amid the global downturn, the trade minister warned on Tuesday, delivering a further blow to Southeast Asia's biggest economy during an election year. Trade Minister Mari Pangestu said growth in total exports will slow to just 1-2.5 percent this year, from about 20 percent in 2008.
The government had previously forecast total exports would grow 5 percent in 2009. The government has already proposed a 71.3 trillion rupiah ($6.12 billion) fiscal stimulus package to counter the effects of a global economic slowdown, and expects economic growth to slow to between 4 and 5 percent, from an estimated 6.2 percent in 2008.
While Indonesia's economy is less dependent on exports than some other Asian countries, millions of Indonesians are employed in export-related sectors and the spectre of big job losses is a major concern for the government ahead of the April 9 general election and July 8 presidential election.
Key Indonesian exports include palm oil, tin, coal, copper, and rubber, and prices for many of these commodities have slumped because of weaker global demand. Industry data on Tuesday showed that cocoa bean exports from Indonesia's main cocoa-producing island of Sulawesi plunged 47.9 percent in January from a year ago.
Earlier this month, Indonesia reported that exports plunged 20.6 percent to $8.69 billion in December from a year ago, the biggest fall in seven years. "Almost all countries are projecting contractions in their export growth this year," Pangestu told a news conference, adding that while Indonesia's total exports would rise only slightly, import growth would also slow to a similar level.
Economists expect the central bank, Bank Indonesia, to continue its monetary easing cycle this year in an attempt to boost economic growth in the face of weaker exports. Indonesia's central bank cut its key interest rate by 50 basis points to 8.25 percent in February, the third cut in three months, and indicated it may cut rates again to support growth.