JOURNAL MONITOR EDITION 25 : PALM OIL PRODUCTS ARE STILL THE HEROES OF THE FOREIGN EXCHANGE TO INCREASE THE TRADE BALANCE SURPLUS AMID THE PANDEMIC
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In 2020, WHO implemented a pandemic status as a result of increasing Covid-19 cases and the Covid-19 viruses more widespread in 215 countries. Apart from causing hundreds of thousands of fatalities, the Covid-19 and policies in the context of preventing the spread of the virus also affects all aspects of economic and social life of all people in the world. One of them are international trade (export-import) of palm oil products. The declining of trade (export) performance of palm oil products will be worried because will affect Indonesia’s trade balance, considering that these products are included in Indonesia’s superior export products which also provide a large contribution to the trade balance.
It’s confirmed with the declining of export volume of palm oil and its derivative products from 20.73 million tons in the January-July 2020 period to is 18.63 million tons in the same period in 2020. The largest decling of export volume of palm oil products in that period compared to the previous year occurred in the destination country of China, amounting to 1.64 million tons (38.7 percent). Its caused the impact of the decline in demand for palm oil industries consumer in this country due to the Covid-19 pandemic, considering that China is the first country to experience an outbreak. In addition, the decline in RPO exports to China was also caused by a large enough increase in soybean crushing activity so that China’s soybean oil supply increased, which means that demand for palm oil has decreased. Meanwhile, export volume of palm oil products to other countries such as India, Pakistan and United States have increased.
On the other hand, the foreign exchange generated from exports of palm oil products in this period has actually increased from USD 11.1 billion to USD 11.9 billion at the sampe period. The increase in the export value of palm oil products came from an increase in the export value of CPO, its corelated with the CPO CIF Rotterdam also has increased. In addition, the export value of palm oil-based oleochemical products also increased because the volume also has increased in to fulfill demand (imports) of oleochemicals due to the increasing need for oleochemical processed products, namely surfactant products needed during the pandemic such as hand sanitizers, hand wash soap, soap, etc.
The amount of foreign exchange generated from the export of palm products was also able to increase the trade balance surplus in the non-oil and gas sector by USD 12.6 billion. And the non-oil and gas trade balance surplus was also able to increase Indonesia’s total trade balance surplus by USD 8.7 billion, while the oil and gas trade balance experienced a deficit of 3.8 billion. This shows that palm oil products are capable of being heroes that generate export foreign exchange so that they can nourish Indonesia’s trade balance.
In terms of aggregate demand, the injection of “fresh blood” from palm oil product’s exchange reserves in the economy will increase aggregate demand so that it will increase the power to increase domestic consumption and investment. Meanwhile in terms of aggregate supply, its expected that the “economic machines” in the oil palm plantation centers will accelerate and infect the urban “economic machines” which are experiencing a rotating slowdown due to the pandemic. The sparkle of palm oil foreign exchange generated from palm oil center districts, which is the “new fresh blood”, will be an important force to prevent and pull the economy out of economic recession.