by Elisa Valenta
The most recent Business Survey conducted by Bank Indonesia showed the manufacturing sector and the trading; hotel; restaurant sector took the hardest blow from the COVID-19 outbreak. The central bank's first quarter of 2020 survey involved over 3,719 businesses from various industries in Indonesia, which overall showed slower growth compared with the previous period due to sluggish demand and disrupted supply chain. The slowdown was reflected by a decrease in the weighted net balance (WNB) of -5.56% in the reporting period from 7.79% in the fourth quarter of 2019.
Indonesian manufacturing output fell off a cliff in March as a mixed result from the COVID-19 impact and the seasonal downturn in demand post-festive seasons of Christmas and new year. The sector WNB fell to -3.6% from 0.76% in the previous quarter. Bank Indonesia’s Prompt Manufacturing Index (PMI), which measure manufacturing sector performance, also showed a contraction. PMI in the first quarter was 45.64% compared to 51.5% in the previous quarter. A reading below 50% means contraction. The contraction was seen in all components of the index except food, beverages and tobacco. Iron and basic steel (36.89%), cement and non-metallic mineral (40.26%), and transportation, machinery and apparatus are the hardest hit sub-sectors.
Research by Bahana Sekuritas in March also highlighted imports fell 5.11% YoY to $11.60 billion in February. Indonesia's overseas purchases of consumption goods, capital goods, and raw materials declined by 12.81%, 16.44% and 1.50% YoY, respectively. The decline is a possible supply-chain disruption due to the COVID-19 outbreak. The research added that deteriorating imports of crucial manufacturing goods could precede an investment slowdown.
The survey also confirmed the significant impact of the coronavirus pandemic on the tourism industry. Trading; hotel; restaurant sector business activities hit hardest by the coronavirus in the first quarter of 2020, as the deeper WNB contraction of -3.04% lower than 2.76% in the previous quarter.
Indonesia's travel industry took a massive blow, with mass cancellations of flight and hotel bookings, since January when news of the COVID-19 outbreak spread. The government effort to kickstart the industry by subsidizing airplane tickets failed and even gained widespread criticism. Trouble in the travel industry is likely to contribute to the declining activities in the transportation and communication sector. The sector WNB fell to -0.53% from 1.06% in the previous quarter.
Other sectors that slowed down are the services sector (down to 0.59% from 2.51%), the financial; real estate; corporate services sector (down to 1.13% from 3.01%), and the construction sector (down to -0.08% from 0.66%).
On the other hand, the agricultural; livestock; forestry; fisheries sector still managed to book growth in the first quarter of this year. The increasing demand for food crops along with the harvest season occurred in several regions such as West Java, East Java, South Sumatra, South Sulawesi, and Gorontalo have boosted the sector's WNB to 0.40% from -2.03%.