Economy: Agribusiness Sector Becomes Savior During Crisis

Press Release
Indonesian Palm Oil Association (IPOA)

Economy: Agribusiness sector becomes savior during crisis

JAKARTA – The Indonesian economy will still be haunted by uncertainty next year. But the government policy that only applies partial restriction has saved the economy from recession threat.

Based on data from the International Monetary Fund (IMF), the Indonesian economy in 2020 saw a contraction of (minus) 1.5 – 3.3 percent. “The contraction is seen still normal if compared to other countries like Malaysia and the Philippines which respectively saw a minus growth of 6.4% and 10%,” Dr Chatib Basri, an economist of the University of Indonesia (UI) said during the IPOC (Indonesian Palm Oil Conference) 2020 New Normal which was organized virtually on Wednesday (2/12).

Chatid Basri predicted that in 2021 investors will still hold their investments due to two reasons. First, the government’s capability in controlling the Covid-19 pandemic and in implementing the health protocol. Second, the local demand and exports are predicted to be still very weak.

“Due to the Covid-19 pandemic, the private sector cannot operate normally, so that the economy cannot reach its full capacity. Then the economy will not fully recover next year and it is only expected to return to normal condition in 2022,” said Chatib Basri.

Chatib said that in the near future it will be difficult for several industries to reach breakeven points, especially those businesses that rely on consumers’ in-person experiences, such as hotels.

“Indonesian exports are very dependent on China, while China relies on Europe. The European economy will not be recovering sooner than 2022. So, the domestic market should be strengthened to support Indonesian economy,” Chatib asserted.

During the same occasion, professor of agriculture economy at the University of Lampung, Prof Dr Bustanul Arifin said that despite economic recession, there have been several sectors that saw positive growth.  Among them are the agriculture sector, which saw a growth of 2.15 percent during the third quarter 2020, water suppliers at 6.04 percent, communication at 10.83 percent and financial services at 1.05 percent.

“The COVID-19 pandemic has also triggered a short term rural phenomenon as city workers return to villages and work in agriculture,” said Bustanul.

He said that policy change is the key factor in reviving the economy. The agricultural sector is believed to become a buffer line in facing the threat of economic recession by supporting the farmers.

“If we talk about the agriculture sector, then we have to realize that its main pillar is the palm oil industry. But the palm oil industry is still facing the uncertainty of export market and the mandatory program of B-30 has saved the palm oil industry,” he said. (*)

Jakarta, 2 December 2020
Indonesian Palm Oil Association (IPOA)

For further information, please contact:

Tofan Mahdi
Head of Communication Division of IPOC 2020
Mail: [email protected]