Crude palm oil (CPO) moved up to US$620 per ton (CIF) in Rotterdam last Friday, representing 21.6% gain from its recent bottom. Other than lifted by 120% jump of crude oil, the commodity, second largest export product for Indonesia, regained grounds because of reopening of social-economic activities in most part of the world.
The price is still far from ideal, but should be enough to ensure going concern of Indonesian planters and farmers. We’re talking about millions of Indonesian families working in the plantation sector.
Improvement in crude oil price will also help the State Budget’s revenue side, especially tax and non-tax income from oil and gas. It is unfortunate, however, that thermal coal, the largest export commodity, has only gained 4.4% from its low. That would significantly affect the State budget’s revenue side (corporate income tax and non-tax revenues/royalties).
Other export commodities are more promising. Gold, for example, gained more than 20%, while tin advanced by nearly 28%. As shown in the table, other mineral products have gained significantly, which could support domestic recovery.
We also expect higher government spending in the second half would support the recovery. Construction works of major infrastructure projects will be faster in the period. Patimban Port project in West Java, which will support manufacturing industry’s import-export activities, for example, will start commercial operation for automotive products in fourth quarter.
Stronger recovery of the economy, however, is subject to the country’s handling of Covid-19 outbreak. As of Tuesday, Indonesia managed to cut further its fatality rate to 5.3%. It is still the highest in the region, but recovery rate has increased significantly to above 40%, wherein Jakarta already surpassed 50%. Some provinces reported above 60% recovery rate, which includes West Nusa Tenggara, West Sumatra, West Kalimantan, East Kalimantan, North Kalimantan, Yogyakarta, Central Sulawesi, Jambi, etc.
Testing capacity has averaged at 20,000 tests/day in the past few weeks, but still not able to push further up to 30,000 tests per day. Good thing, test rate (number of confirmed cases per number of tests) reached only 7.2%, way below Pakistan (16.4), Mexico (38.1%), and Brazil (45.9%). In the past 81 days, average death per day in Indonesia is 29, way below Pakistan (45), Russia (103), India (178), Mexico (288), and Brazil (647).
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