E-commerce could widen Indonesia's trade-current deficit and hurt the rupiah, analysts warn

SEPTEMBER 24, 2018 - 11:04 AM

E-COMMERCE, coupled with fuel subsidies, could be driving Indonesia’s widening trade and current account deficit, a research team from Maybank Kim Eng has said. The analysts warned that it may be difficult to rein these forces in.

With a surge in cross-border business-to-consumer Web sales, the fear is that consumer demand can drive up imports even as companies fail to raise exports.

There is a high chance that the deficit could further widen and put more pressure on the rupiah, the analysts said, floating the possibility that online retail may destabilise an emerging economy.

This is even as the e-commerce boom lifts digital transactions involving both state-owned banks and tech companies, as well as logistics activities such as storage and support, postal and courier services.

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The divergence in Web and bricks-and-mortar sales can be seen in the contrast between soaring consumer goods imports and a weak retail sales index, they noted. Imports rose by 44 per cent year on year in July and August but retail receipts notched growth of under 3 per cent.

But the analysts said that moves such as the recent hike in import taxes might in fact worsen troubles, if the price gap between online and offline items widens.

“We think online retailers may be able to circumvent the import duties and taxes, putting into question whether the latest taxes will help curb import growth and reduce the trade deficit,” they wrote.

The Maybank Kim Eng analysts added that putting the screws on e-commerce “could hurt one of the most dynamic and fast-growing parts of the economy”, as startups such as Tokopedia and Go-Jek draw hefty foreign capital investments.

“The government will have to try to encourage e-commerce to become more of a ‘two-way’ street, not just where the traffic is largely one-way, where Indonesia exports can also increase more significantly via e-commerce,” they concluded.