Weak global prices of palm oil, Indonesia’s largest foreign exchange earner, has contributed to the country’s historic US$2.5 billion trade deficit in April, the largest monthly deficit since 2013, The Central Bureau of Statistics (BPS) said.
The BPS highlighted that while crude palm oil (CPO) exports had increased in volume, they lost a lot in value because of price volatility. Data showed that the country’s CPO export value in April decreased by 27.86 percent month-on-month to US$919 million from $1.27 billion in March.
“The export value [of CPO] to a few countries improved, such as to China, but the value decreased in other countries like India, Pakistan, Bangladesh, and Egypt. It decreased even further [in shipments] to Russia and Spain,” BPS head Suhariyanto told a press briefing after the announcement of the country’s current account deficit.
INDEF economist Bima Yudhistira told The Palm Scribe that the mix of CPO oversupply, low global demand, and discrimination against palm oil, has resulted in the current gloomy situation. He added, however, that there were still many things that the government could do to pull out itself out from the world’s current sluggish economy.
“The oversupply and low demand should become an impetus for the government to start engaging its state-owned enterprises (BUMN) such as Pertamina and PLN to do more in processing biofuel for energy purposes. It should be much easier since they are both under government control,” Bima said. He also said that the government should have had prepared for the glut in this commodity following the palm oil boom in the 90s that attracted so many people to this lucrative sector.
“This is something that backfired that they should have predicted earlier,” he said.
According to data from the Indonesian Palm Oil Producers Association (Gapki), CPO prices averaged US$530 per metric ton in April, a slight increase from the $528.40 per metric ton in March but still much lower than the February average of $556.60 per metric ton. This year’s CPO exports would also depend on the production of the commodity, which is expected to rise by 2 million tons, or 4.65 percent, from 2018’s 43 million tons.
“The government should also push the downstream business more, such as for oleochemicals and other derivatives, and look for importing countries other than the European Union and China,” Bima said, adding that North Africa presented a growing market with huge opportunities for both CPO and its derivatives.
“As an IMF forecast said, the global economic situation will be cloudy until 2022, so the government should act now by giving incentives to the downstream industry,” Bima said.