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Thursday, 16 August 2018 00:00

To Overcome the Trade Balance Deficit

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According to the Central Statistics Agency -BPS, Indonesia's trade balance in July 2018 experienced a deficit worth $2.03 billion dollars, the biggest deficit over the last five years. This figure is the difference between the import value worth $18.27 billion dollars and the export value worth $16.24 billion dollars. The total trade deficit in January to July 2018 was recorded at $3.09 billion dollars.

In a press conference attended by Coordinating Minister for the Economy, Darmin Nasution, and Governor of Bank Indonesia –BI, Perry Warjiyo, after a limited cabinet meeting at the Presidential Office in Jakarta on Tuesday (14/8), Minister of Finance, Sri Mulyani Indrawati pointed out that the government would take drastic and decisive steps in import control related to the balance of payments conditions that are increasingly unhappy. 

Minister Sri Mulyani said that Indonesia's current account deficit in the first quarter of 2018 was only around 2%. But in the second quarter of 2018, it reached 3% of gross domestic product -GDP. Imports of consumer goods, raw materials and capital goods increased seriously in the second quarter of 2018.

Head of the Central Statistics Agency, Suhariyanto said in Jakarta on Wednesday (8/15) that one of the government's efforts to reduce the trade balance deficit is by reducing the import of commodities that can be produced domestically. There will be 500 commodities to be re-evaluated, especially commodities with high local goods compared to imported ones, such as palm oil, paper, rubber and plastic. 

Meanwhile, an economist at the Institute for Development of Economics and Finance (Indef), Bhima Yudhistira remarked that Indonesia's trade balance deficit could be depleted by the end of 2018 if the government seriously halts the import of raw materials for infrastructure projects, such as iron steel and power plant turbines. The government also needs to accelerate the implementation of 20% biodiesel utilization (B20) in the fuel content, so that oil and gas imports can be reduced.

Similarly, Coordinating Minister for Economic Affairs, Darmin Nasution at a Business Lunch event with the theme "Indonesian Economy Alert in Political Year" on Thursday (2/8) in Jakarta said that the expansion of 20% Biodiesel use (B20) could reduce the trade balance deficit, because with this policy, oil imports will be reduced. The oil and gas deficit during Semester I 2018 reached $5.4 billion dollars.

In addition to efforts to reduce imports, Bhima Yudhistira hoped that the government will again push the export performance of leading commodities such as palm oil and rubber. He urged the government to provide incentives for export-oriented industries.

It is expected that more quality local products can be exported abroad, and many Indonesian imports will be reduced. So, the value of exports will be much higher than the import value, and the trade balance deficit can be immediately overcome.

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