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JOURNAL MONITOR VOL.2 NO.15 : CONTRIBUTION OF PALM OIL FOREIGN EXCHANGE IN INDONESIA’S TRADE BALANCE

Publication Date : April 22, 2021
KEYWORDS : covid, Foreign exchange, Palm Oil
AUTHOR : PASPI MONITOR

Abstract

The palm oil industry is showing its important role and contribution to Indonesia’s trade balance. Apart from being exported, palm oil is also used to produce import substitution products is biodiesel. The performance of the palm oil industry, both through palm oil exports and its derivative products as an export commodity, as well as palm biodiesel production as an import substitution commodity, will affect the trade balance through the non-oil and gas trade balance and the oil and gas trade balance.

Export foreign exchange from palm oil and its derivative products have had an important contribution to Indonesia’s non-oil and gas trade balance for at least the last 10 years. Without palm oil exports, the non-oil and gas balance generally experiences a deficit. On the other hand, with the existence of palm oil exports, the non-oil and gas balance always surplus.

Apart from palm oil exports, palm oil foreign exchange also comes from saving foreign exchange due to the role of biodiesel as import substitution commodities of fossil diesel. Savings foreign exchange from import substitution of biodiesel can reduce the oil and gas balance deficit. The contribution of palm oil foreign exchange from import substitution and exports contributed to Indonesia’s trade balance surplus.

The existence of the palm oil industry has also been increasingly tested in 2020, when a pandemic and economic recession occurred globally including in Indonesia. With palm oil foreign exchange, the non-oil and gas balance surplus is getting bigger and the oil and gas balance deficit is getting smaller. This condition caused Indonesia’s total trade balance to experience a surplus of USD 21.7 billion, where this surplus was the highest record that ever achieved by Indonesia’s trade balance. The greater contribition of palm oil is not only beneficial for economic stability but also has a greater multiplier effect for the domestic economy.

citation

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