Indonesian retailers have urged the government to speed up infrastructure projects to improve the purchasing power of consumers, as a central bank survey on Wednesday (09/08) pointed to a bleak sales outlook.
Southeast Asia’s largest economy recorded second-quarter growth of 5.01 percent this week, below expectations, as private consumption remained sluggish and government spending contracted.
Central bank surveys show that despite rising consumer confidence Indonesian retailers are seeing slow growth in sales.
Retail sales rose 6.3 percent in June on a yearly basis, up from 4.3 percent in May but down from 16.3 percent growth in June 2016, a Bank Indonesia (BI) survey showed on Wednesday.
Retailers expect a 3 percent decline in July sales because of weaker demand after the Eid al-Fitr holidays at the end of the Muslim fasting month, according to the survey. This would be the first contraction in years.
BI will release an updated survey for July retail sales next month.
“This isn’t an apocalypse, but it’s important that we find a solution,” Tutum Rahanta, deputy chairman of Indonesia’s retailers association, told reporters. He said sales among middle-low consumers were weak, while the more affluent ones seemed to have held back on spending.
Rahanta said the government could help boost purchasing power by accelerating infrastructure projects or by attracting investment in labor-intensive industries.
Echoing Tatum, Suryanto, a director at retailer Ramayana Lestari Sentosa, said government projects could create jobs and increase purchasing power. Ramayana’s sales growth slowed to 14 percent on a yearly basis in January-June, almost half of the 27 percent growth a year ago.
“If economic growth steadily improves, retail businesses will do just as well,” said Suryanto, predicting flat sales growth this year.
The government is targeting 2017 economic growth at 5.2 percent, but some economists have said achieving that is going to be hard after a soft April-June reading.
Coordinating Economic Affairs Minister Darmin Nasution on Tuesday said to help aid growth, the government plans “a big program” to tackle problems investors are facing in opening new businesses in the country. He declined to elaborate.
Separately, Bank Indonesia Governor Agus Martowardojo on Wednesday reiterated his view that growth would pick up in the third and fourth quarters and top 5.2 percent. Last week he flagged the possibility of monetary easing to help growth.
Indonesia’s largest noodle maker, Indofood CBP Sukses Makmur, remains confident sales will improve in the second half in line with better commodity prices.
Indofood director Werianty Setiawan said the company is still committed to expanding its production capacity for noodles and milk this year, though yearly sales growth slowed to 2 percent in the first half of 2017 from 12 percent a year ago.
“The economy will get better. In the second semester, consumption in commodity-based regions will improve and this will lift the market,” Werianty said.