INDEF: Manufacturing Growth Throughout 2018 Will Grow Stagnant at 5 Percent

INDUSTRY.co.id - Jakarta - The manufacturing industry is still the largest contributor to the national economy. This is evident from the growth of several manufacturing industry sectors that exceeded the economic growth in the third quarter of 2017.

However, based on Indonesia's Manufacturing Purchasing Managers Index (PMI) from Nikkei in December 2017 fell to 49.3, compared to November's 50.4. This decline is the first time PMI has been recorded below 50 neutral points, since July 2017.

The decline below 50 PMI was partly due to a drop in production for the first time in three months. Moreover, the rate of decline is the fastest since July.

This could affect the Indonesian economy in this year. Moreover, manufacturing became one of the biggest contributors to Indonesia's gross domestic product (GDP).

Under this condition, Bhima Yudhistira Adhinegara, Institute for Development of Economics and Finance (Indef) researchers estimates that manufacturing industry growth in 2018 will grow stagnant at 5 percent.

"The main cause of the domestic demand side has not fully recovered, especially the middle class," said Bhima in Jakarta (4/1/2018).

He added, in addition, the share of manufacturing industry to GDP continues to decline below 20 percent. "This portion is considered the lowest since the reform era," explained Bhima.

Furthermore, he said, exports are still a mainstay, but more dominated export of raw goods rather than industrial products. Another challenge is the rise in non-subsidized fuels that could have implications for the high cost of production.

"Large-scale manufacturing industry will still be the oldest in efficiency," Bhima added.

On the other hand, he added, there are still industries that will survive. For example, beverage and textile foods, due to activities throughout 2018, from elections to Asian games.

For the textile industry, he continued, this year began to grow positively as American and European demand improved. Opportunities for the domestic industry is to continue to expand overseas with the improvement of quality and market expansion.

Bhima stressed, the most important and precarious is now the decline in gas prices for industry by pushing the gas infrastructure. "The reason is that the most significant production burden this year is in energy costs," he said.

Meanwhile, the Ministry of Industry (Kemenperin) projects the subsector that will spur the national manufacturing growth in 2018, namely steel and automotive industries, electronics, chemicals, pharmaceuticals, and food and beverages.

This subsector is expected to achieve the target of growth of non-oil and gas processing industry in 2018 which has been set at 5.67 percent.

The Ministry of Industry believes that the manufacturing sector is still the largest contributor to the national economy, among others through increasing the added value of domestic raw materials, the absorption of local labor, and foreign exchange earnings from exports.