Indonesia

Market overview

Indonesia is grappling with the need to balance restrictions necessary for public health and the need to keep the economy moving.  The impact of COVID-19 has already been widely felt, with fluctuations in the rupiah's exchange rate, reduced consumer spending and a decline in foreign investment levels.  

Large-scale social restrictions, known domestically as PSBB, have been on and off to varying degrees throughout the country, with the areas of Jakarta and Surabaya hit the worst.

For more information on doing business in Indonesia, visit myNZTE - our free online portal for curated, in-depth information and guidance.

Video insights

Export support
Video
4:20
Last updated: 22 Jun 2020
COVID-19 Market Realities: Indonesia overview, 22 June

NZTE Trade Commissioner, Diana Permana, speaks with NZ Ambassador to Indonesia, Dr. Jonathan Austin, about COVID-19 impacts on Indoensia.

Watch now

Economy and trade

Indonesia's economy grew at its weakest pace since 2001 in the first quarter, hitting consumption, investment and vital commodity exports, although the pace of growth was still higher than some countries in the region.

Indonesia's imports fell for 10 consecutive months to April 2020 as manufacturing companies cut production output while consumer demand continues to shrink amid the pandemic, hinting at further cooling economic activity in the future. There were US$12.54 billion in imports in April, an 18.58% drop from the same period last year. Imports of consumer goods decreased 16.6%, while incoming shipments of raw materials and capital goods dropped 19.1% and 17.1% respectively.

Indonesia's Ministry of Finance has readjusted GDP growth estimates down to -0.4% this year. Private consumption (which accounts for over 50% of GDP) is predicted to slump to 0% growth this year.

A recent survey from McKinsey on Indonesian consumer sentiment during the coronavirus crisis stated: "About 40 percent of Indonesian consumers are optimistic about a quick economic rebound, a sentiment that has remained stable over the last month. Although consumers feel slightly less impact on their livelihoods, they remain cautious about their spending e. g. , becoming more mindful of how they spend their money, looking for ways to save money, and trading down. The strong shift to purchasing via online channels is expected to prevail even once COVID-19 subsides, with close to 60 percent of consumers having tried a new digital shopping method. Most Indonesians are waiting for milestones beyond the release of government restrictions, before engaging regularly in out-of-home activities. Consumers have adopted new low-touch alternatives to behaviors such as remote learning, telemedicine, online fitness and wellness, which may last beyond the crisis."

The Public Works and Public Housing Ministry will suspend a number of infrastructure projects following the ministry's decision to re-allocate a large part of its budget funds to efforts to mitigate the impact of the COVID-19 pandemic.

Tax revenue is expected to reach Rp 1.25 quadrillion in 2020, according to the Government's latest projection, down 23.65% from the 2020 state budget target.

Value-added tax (VAT), the largest tax contributor, grew by more than 10% year-on-year (YOY) to Rp 51.63 trillion in the first quarter, while personal income tax grew by nearly 5% to Rp 36.58 trillion.

Indonesia has imposed a new 10% VAT on digital products sold by non-resident internet companies with a significant presence in the Indonesian market, including streaming services, applications and digital games from 1 July. Services such as Spotify and Netflix are subject to the tax.

Supply chain, logistics & freight

Supply chains and logistics services remain open to ensure goods mobility.

Government support

Indonesia has announced a series of stimulus packages to cushion the impact of COVID-19:

  • The first stimulus package of NZ$1.1 billion announced on 25 February focused on staple needs and housing subsidies, as well as a six-month tax break for hotels, restaurants and airlines serving Indonesia's priority tourism destinations.

  • The second package of NZ$2.6 billion was announced on 13 March. The package offers further support and details on the first package, including income, value-added tax and import tax breaks.

  • The third package of NZ$3.2 billion was announced on 18 March to help fund the healthcare system.

  • The fourth package of NZ$41.6 billion announced on 31 March is focused on health care, social safety nets, tax incentives and small business.

  • The fifth package of NZ$26.2 billion announced on 16 May is focused on capital support for state owned enterprises, additional spending for regional administrations, and further support for small and medium enterprises through fund placement at certain banks and capital investment.

Through a Presidential Regulation, Parliament has approved the widening of the Government’s budget deficit to fund the COVID-19 response packages. In order to accommodate the two most recent packages, the Government widened its self-imposed budget deficit limit to 6.27% of gross domestic product (GDP) from 3%.

Bank Indonesia (BI), Indonesia’s Central Bank, injected an additional NZ$18.5 billion in May to stabilise the currency and financial system, projecting the rupiah to strengthen to pre-pandemic levels.

Travel

Indonesia has temporarily banned foreigners from visiting and transiting Indonesia, with a few exemptions including KITAS/KITAP visa holders and accredited diplomats. All returning Indonesians (or foreigners who meet the criteria for an exception from the ban) must provide a health certificate with a negative PCR test result on arrival.

A health check will be carried out on arrival and travellers must also now sign a form on arrival, stating that they are willing to go into a Government-run quarantine facility if they display any COVID-19 symptoms. Travellers with no symptoms are still required to self-isolate for 14 days.

NZTE recommends all New Zealanders travelling in or out of Indonesia or domestically within Indonesia contact the airlines they are considering for guidance on what documentation is required prior to booking travel.

Useful links

Advice to exporters

New Zealand exporters that already operate in Indonesia should ensure supplies continue to reach the market.

New Zealand exporters with contract discussions underway may experience a slowdown and potentially an end to discussions, and those with existing contracts may see price negotiations or delayed payments.

Tradeshow and event information

Numerous international tradeshows and events are being postponed or cancelled in response to the COVID-19 pandemic.

Make sure you proactively check with organisers for any tradeshow or event you're scheduled to attend – conditions and regulations are changing rapidly overseas, and events may be postponed or cancelled at short notice.


sector insights

As is to be expected, numerous sectors have been impacted by the COVID-19 pandemic. Below you’ll find information on any COVID-19 effects across important sectors and industries in Indonesia.

Agriculture

The Indonesian Government has slowly shifted attention to the domestic agriculture industry. Increasing food scarcity and a disrupted supply chain during this pandemic are the main drivers.

This is a great timing for New Zealand agribusinesses to tap into the Indonesian market and start to explore the possible opportunities.

Additional resources

Below you can find information and contact details for other New Zealand government and international agencies regarding their response to COVID-19.

New Zealand Government agencies

Covid19.govt.nz
COVID-19 helpline for businesses
Business.govt.nz
New Zealand Customs
Ministry for Primary Industries (MPI)
New Zealand Export Credit (NZEC)
MFAT Export Helpline
MFAT Safetravel
Callaghan Innovation
Immigration
Ministry of Health
WorkSafe New Zealand
myNZTE

Global agencies

World Health Organization (WHO)
Centers for Disease Control and Prevention (CDC)

Contact NZTE

We're available to talk to you about any issues your export business is facing due to COVID-19.

For existing NZTE customers, please contact your New Zealand-based Customer Manager.

If you're unsure who to contact or haven't worked with us before, you can call NZTE on 0800 555 888 or email below and one of our Customer Advisors will help you.