AmCham Update Vol. 5 #37

Import Restrictions Eased for Carry-On Items, BI Moves to Stabilize Rupiah As Dollar Strengthens, Energy Ministry Preps for Oil Price Volatility, Dengue Warning

Apr 17, 2024

Gov’t Eases Import Restrictions for Carry-On Items

The government has officially revoked limitations on personal items brought into Indonesia from abroad — previously regulated in Minister of Trade (MoT) Regulation 36/2023 and MoT Regulation 3/2024 concerning Import Policies and Regulations — due to widespread protests.

The decision was taken during a limited coordination meeting involving the Coordinating Ministry for Economic Affairs, Indonesian Migrant Workers Protection Agency (BP2MI), Ministry of Trade, Ministry of Industry, and Directorate General of Customs on April 16. Provisions on imports will refer back to MoT Regulation 25/2022, Head of BP2MI Benny Rhamdani said.

Meanwhile, goods brought or delivered by migrant workers (PMI) can be subject to a tax relaxation of up to $1,500 annually, and the issuance of technical recommendations for certain commodities are to be postponed considering the readiness of regulations and systems in related ministries and agencies. Further discussions will be promptly addressed in a technical coordination meeting involving all ministries, Secretary of Coordinating Ministry for Economic Affairs Susiwijono Moegiarso said.

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BI Moves to Stabilize Rupiah Amid Strengthening Dollar

Bank Indonesia (BI) has implemented a series of strategic interventions aimed at stabilizing the rupiah in response to its weakening against the US dollar. The central bank's measures include balancing the supply and demand of foreign exchange in the market, enhancing the attractiveness of rupiah assets to foreign investors, and coordinating closely with relevant stakeholders.

The rupiah recently declined by 2.23 percent, opening at Rp 16,201.50 on April 16 against the US dollar, and the offshore Indonesian Rupiah Non-Deliverable Forward (IDR NDF) market saw a notable increase to around Rp 16,100 during the Eid holiday, said BI Monetary and Securities Asset Management Department Head Edi Susianto. He attributed the US dollar's rally to unexpectedly robust US economic data and escalating geopolitical tensions in the Middle East.

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Energy Ministry Prepares for Global Oil Price Volatility

Indonesia’s state budget (APBN) could experience an inflated energy subsidy by up to 50 percent due to the increasingly volatile geopolitical conditions in the Middle East, although the government has no plans to adjust oil and liquefied petroleum gas (LPG) prices, said Ministry of Energy and Mineral Resources Director General of Oil and Gas Tutuka Ariadji.

The Indonesian Crude Oil Price (ICP), averaging $83.78 per barrel on April 16, could see a minimum increase of $5-10 per barrel with the potential to reach $100 per barrel.

Total fuel and LPG subsidies could jump from Rp 224.18 trillion to Rp 356.14 trillion, based on government simulations with state-owned oil company Pertamina, with an assumed ICP of $100 per barrel and exchange rate of Rp 15,900 per US dollar. While acknowledging the potential impact of heightened tensions between Israel and Iran on the global oil price, Coordinating Minister for Economic Affairs Airlangga Hartarto said it was decided during a cabinet meeting in mid-February there would no fuel price hikes until June 2024.

Former Minister of Trade and ex World Bank Managing Director of Development Policy and Partnerships Mari Elka Pangestu said oil price volatility may spill over to other commodities and put inflationary pressure on the rupiah, posing the risk of a higher deficit in the state budget.

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Inflation to Fall in 2024-2025: ADB

The Asian Development Bank (ADB) predicts Indonesia's inflation rate declining from 3.7 to 2.8 percent in 2024-2025, in its latest Asian Development Outlook report. Enhanced supply management and stable inflation expectations are expected to maintain low inflation, with the Central and Regional Inflation Control Team (TPIPD) continuing to play a pivotal role.

Favorable global oil prices, ample fiscal space, and the smooth conducting of the 2024 general elections are also expected to bolster business confidence and stimulate investment.

The ADB also says the likelihood of the US Federal Reserve raising interest rates again is low, anticipating a more favorable and stabilized global situation in 2025. The bank also expects slightly stronger growth across Asian countries this year compared to 2023, driven by robust domestic demand in many economies. This growth compensates for the property-driven slowdown in China, with Indonesia poised to achieve 5 percent GDP growth.

However, the bank cautions about persistent challenges, such as increasing geopolitical tensions, which could disrupt supply chains and trigger inflation resurgence. It also acknowledges Indonesia's ongoing challenges in price controls, particularly commodities such as rice, while highlighting promising prospects in the tourism sector post-Covid-19.

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Dengue Fever Warning for Travelers

The Ministry of Health has issued an early warning to both local and foreign tourists about rising cases of dengue fever in Bali. The Ministry is disseminating dengue fever awareness through various media channels and to all healthcare facilities, in response to heightened attention from foreign media following a tourist's social media post revealing their contraction of the illness, said Director of Infectious Disease Prevention and Control Imran Pambudi. The ministry is also ensuring hospital bed availability and medicine for dengue fever patients in Bali.

Dengue fever deaths in Indonesia have surged by 179.4 percent this year, at 475 deaths compared to 170 in 2023. The number of dengue cases also rose significantly to 62,001, a 174.9 percent surge from the 22,551 cases reported during same period in 2023. Bandung District has the highest number of deaths at 25, followed by Jepara District with 21 deaths.

Tangerang District has reported the highest number of cases at 2,540, followed by West Bandung District with 1,422 cases, said Head of Communication and Public Services at Ministry of Health Siti Nadia Tarmizi.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Lydia Ruddy and written by the AmCham Staff. Paul L Goddard is the Managing Editor.

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