JOURNAL MONITOR EDITION 33 : EXPORT OF PALM OIL PRODUCTS AND IMPLEMENTATION OF MANDATORY B30 POLICY MORE INCREASING INDONESIA’S NET TRADE SURPLUS IN Q3-2020
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The Central Bureau of Statistics (BPS) was released Indonesia’s economic growth (GDP) in Q3-2020 against the third quarter of the previous year, which was contracted by -3.49 percent (YoY). This shows that the Indonesian economy has broken records, where the its first recession after 22 years ago since financial crisis was occurred in 1998. Although Indonesia’s GDP (YoY) has contraction, but the economic growth in the third quarter against the previous quarter (q-to-q) has increased. The growth in export performance is one of the components affecting the positive quarterly economic growth.
Palm oil products are Indonesia’s leading export products that contribute to Indonesia’s exports which have increased in Q3-2020. The export value in Q3-2020 increased to USD 5.44 billion, after experiencing a decline in the previous quarter. Their foreign exchange also contributed to the additional net trade surplus in the non-oil and gas sector in Q3-2020 of USD 9.13 billion. This is due to an increase in China’s demand for palm oil products by 65.9 percent, as a result of fast economic recovery due to the pandemic.
Not only contributing to the creation of a net trade surplus in the non-oil and gas sector, but palm biodiesel with its mandatory B30 policy also contributes to saving foreign exchange. Even though there was a decrease in domestic absorption as a result of the Large-Scale Social Restrictions policy that was implemented in the second quarter, along with the re-opening of economic activity by implementing the New Normal protocol by the Indonesian Government, it caused an increase in the absorption of biodiesel. It’s implication is that the oil and gas net trade deficit in Q3-2020 was successfully reduced to USD 1.1 billion, as a result of the implementation of B30 which was able to saving foreign exchange of USD 792 million.
Thus, foreign exchange for palm oil product exports and the implementation of B30 was able to save Indonesia’s total net trade from a deficit such as what happened in Q1 and Q2-2020 and were able to increase the total net trade surplus to USD 8.03 billion in Q3-2020. If the contribution of palm oil industry through creating foreign exchange in non-oil and gas sector and saving foreing exchange in oil and gas sector are excluded from the net trade calculation, the total net trade surplus in this quarter will be lower only around USD 1.8 billion.
Accumulatively during Januari-September 2020, the contribution of palm oil through creating of export foreign exchange and saving of oreign exchange due to the implementation of B30 was able to create a total trade balance surplus of USD 13.51 billion which is equivalent to IDR 198 trillion or more than three times the Covid Pandemic handling fund from the State Budget which is only around IDR 75 trillion. This further shows the large contribution of the palm oil industry to Indonesia’s trade balance and economy and is expected to be a strength booster in order to improve the economy to get out of economic recession during the pandemic.