Indonesia More Vulnerable Today Than During Last Global Downturn: Report

https://jakartaglobe.id/business/indonesia-more-vulnerable-today-than-during-last-global-downturn-report

Jakarta. Indonesian top business executives must take significant actions to deal with an anticipated global downturn if they want to emerge as winners, since the country is more vulnerable now than during the last crisis a decade ago, a report released on Thursday said.

A recent survey of chief executives in Southeast Asia by Singapore-based consulting firm Bain & Company found that 77 percent of them expect a downturn in the region within the next two years, but only 20 percent have significant actions or plans in place.

“These executives may not recognize how the region has become more vulnerable relative to its position during the last global downturn,” the report says.

While Indonesia is less reliant on export as an engine of growth compared to other countries in the region, “some of the traits that cushioned Indonesia during the global financial crisis a decade ago offer less of a buffer today,” the report says.

Since 2006, the share of Indonesia’s exports that goes to China has increased by 7 percentage points, leaving the country more exposed to the Chinese market, where growth has almost halved.

The ongoing US-China trade war could further slow China’s growth.

Commodities’ contribution to Indonesia’s GDP has also dropped from 29 percent to 22 percent, while corporate and household debts have risen significantly as a share of GDP, from 25 percent to 39 percent.

The research also suggested that well-prepared companies had emerged winners during and after the past downturns, “yet, many senior executives in Indonesia have not begun to seriously prepare for [another one].”

“Indonesian businesses could take lessons from ‘winners’ in the past downturns, that they had made four common moves,” Nader Elkhweet, a partner in Bain & Company, said in a discussion with the Jakarta Globe on Thursday.

“What you should do is focus on cost productivity and put your financial house in order so you are able to extract value,” Elkhweet said.

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