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China Stimulus Important To Indonesian Growth


China is Indonesia’s largest export destination with 23% of total non-oil & gas exports going there in 2022. China’s reopening after Covid was expected to be a significant boost to its trading partners, but its growth has disappointed in 2023. Any support to China’s economy should be positive for Indonesia’s exports which have been soft in recent months.

  • There have been some modest policy steps with further support announced in the July Politburo meeting statement but there was no indication that large scale stimulus is imminent. However, some expect more measures over the rest of 2023.
  • In 2022, Indonesian exports to China were worth 4.9% of GDP, so they are an important source of growth. Despite the pandemic, export growth to China had been strong for around three years, but in June they fell 7.3% y/y 3mma, which while a lot softer was still better than Indonesia’s exports to its other major trading partners, but it is a non-negligible drag on growth. Bank Indonesia believes though that the economy can continue to grow at 5%.
  • Total June exports ex oil & gas fell 16.6% y/y 3mma. The US is Indonesia’s second most important partner and exports to the US have been falling since late 2022. They contracted 18.9% y/y 3mma in June which was a slight improvement on May’s -22.2%. Japan is the third largest destination and exports fell 17.6% y/y 3mma, while India, the fourth largest, shrank 31% y/y.
Indonesia exports ex oil & gas y/y% 3mma

Source: MNI - Market News/Refinitiv

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