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Ministry Of Industry: Policy Synergy Needed To Boost National Economic Growth Stability

Government policies play a crucial role in boosting the performance of the processing industry. Certain policies, especially those related to industrial gas prices, domestic market protection, and inflation, significantly impact the manufacturing landscape in Indonesia, alongside the manufacturing conditions of global partners like China and India.

According to the analysis from the Industrial Confidence Index (IKI) team at the Ministry of Industry, processing industries in trading partner countries continue to receive substantial subsidy support.

Similarly, in Indonesia, there's a recognition that the processing industry is a key pillar of the economy, providing a high multiplier effect through job creation (formal employment), increased purchasing power, and ultimately contributing to national economic growth, as stated by the spokesperson for the Ministry of Industry, Febri Hendri Antoni Arif, during the IKI release in Jakarta on Wednesday, July 31, 2024.

Currently, the global economic situation remains uncertain, even though the economies of the United States and Europe are showing signs of strengthening, backed by robust consumption and fiscal stimulus in those regions. On the flip side, China's economy is expected to grow at a slower pace in 2024, despite the International Monetary Fund (IMF) revising its growth forecast for China to 5% in its latest World Economic Outlook report, up from 4.6% predicted in April 2024.

This revision is mainly linked to improved private consumption and strong exports in the first quarter of 2024, driven by a rise in global demand. Global inflation trends show a decline in several countries, including South Korea, Turkey, and Germany. Inflation in the United States also slowed down in June 2024, dropping to 3.0% (year-on-year) from 3.3% (year-on-year) the previous month. The easing inflation rate in the U.S. has been positively received by market players, coinciding with the strengthening prospects of interest rate cuts by the U.S. Federal Reserve.

The Industrial Confidence Index (ICI) in July 2024 reached 52.4, or slowed down by 0.1 points compared to June 2024. However, this condition indicates that the industry is in an expansion phase amid the instability of the global economy and the decline in demand for domestic manufacturing products at present.

Looking into more detail, the slowdown in the ICI value is influenced by the decrease in the value of new orders and the continued contraction of the production variable. The ICI value of the new order variable decreased by 1.86 points to 52.92, while the production variable increased by 2.45 points to 49.44, or still in contraction. Furthermore, the ICI value of the product inventory variable increased by 0.48 points to 55.53. This condition indicates that currently, orders/sales in the manufacturing industry are still being met by product inventory. In addition, in some industries where new orders are contracting, production is carried out to increase the availability of their products. The majority of the manufacturing industry in Indonesia also still heavily relies on the domestic market. The decline in orders occurred in almost all subsectors of the industry. Out of 23 subsectors, 15 industrial subsectors experienced a decrease in new orders. This is due to the unstable global conditions and the decrease in purchasing power in the domestic market. Data from the Ministry of Manpower shows a decrease in the number of industrial sector workers or an increase in non-formal workers. Meanwhile, looking at the proportion of expenditure to income, there is an increase in consumption and a decrease in savings, so it can be concluded that the current condition of the society has used their savings for consumption.

This condition certainly has an impact on the pattern of purchasing goods that are price-oriented and a decrease in willingness to speculate in obtaining financing credit. Meanwhile, producers have issued policies to reduce production. This explains the still contracted value of the production variable in the ICI.

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Tag: Ministry Of Industry