German products are experiencing a powerful surge in demand in Indonesia. Imports from other EU countries are also increasing. China's share is shrinking for the first time.
German products are experiencing a powerful surge in demand in Indonesia. Imports from other EU countries are also increasing. China's share is shrinking for the first time.
Indonesia imported goods worth US$108.7 billion in the first half of 2023, according to statistics agency Badan Pusat Statistics (BPS). This corresponds to a decline of 6.4 percent compared to the same period last year, but is the second highest half-year value to date. Products from Germany, on the other hand, are currently experiencing a strong surge in demand. According to BPS, imports increased by 40 percent in nominal terms compared to the same period last year.
Machines, vehicles and steel pipes made in Germany in particular recorded an increase. Germany thus increased its import share from 1.6 to 2.2 percent and just missed a place among the top ten of Indonesia's most important goods suppliers. Many German machines are also manufactured in China, delivered from there to the ASEAN countries and are therefore part of Chinese foreign trade statistics. The increase in the German import share is all the more remarkable because all other important suppliers, with the exception of the USA, suffered losses.
Overall, machine imports to Indonesia increased by almost 5 percent in the first half of 2023 compared to the previous period. In addition, vehicle imports grew, which is likely due to catch-up effects after the previous crisis years. Indonesia's economic development is now at a normal level: in the first half of the year, the gross domestic product grew by 5.1 percent in real terms compared to the same period last year.
Significantly more goods from the EU
The regional analysis of Indonesian imports reveals an unusual development. Because in the first half of 2023, imports from China, East Asia and ASEAN fell significantly. Imports of goods from the EU, however, grew by more than a quarter. And this despite the fact that there is still no free trade agreement between Indonesia and the EU. Just over a third (35%) of all Indonesian imports from the EU came from Germany. Until now, there had been an opposite trend towards an ever-increasing share of imports from neighboring regions in Indonesia and a dwindling role for Europe.
Lower prices for petrochemical products provide relief
The reason for the slight decline in total imports is the decline in value of petrochemical products as well as the related plastics and industrial gases. World market prices have fallen here. However, oil is still expensive – to Indonesia's disadvantage because the archipelago is a net oil importer.
Energy costs remain high overall, keeping prices for imported industrial goods such as steel high. The same applies to food, as fertilizer and transportation are energy intensive.
Food is now Indonesia's second most important import good. Here, imports stagnated in the first half of 2023, after strong inflation-driven growth in the same period of the previous year. In the long term, demand is likely to increase because local agriculture is weak. At the same time, the demand for imported goods is growing due to a population growth of almost three million people per year and increasing prosperity.
For the article from GTAI, go here