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Indonesia introduces export restrictions

Riding on the global energy transition, Indonesia is aiming to limit exports of the country’s raw minerals in order to encourage investment in locally based processing facilities. So far, this strategy seems to be yielding the desired results, with foreign investment rising strongly. However, the move will cause higher costs for other countries in the region to pivot away from traditional energy sources, and could intensify tensions between Indonesia and its trading partners.

Politics and policy

Indonesia’s new round of commodity export bans will take effect on June 10th. Although the government will still allow some firms to export copper, iron ore, lead, zinc and anode mud from copper concentrates until May 2024, a ban on all bauxite shipments will proceed. The export bans are aimed at luring investment into the country’s downstream sectors and allowing it to move up the resource value chain. However, Indonesia’s exports will take a hit in the immediate term. 

Exports have started to weigh on Indonesia's real GDP growth

Geopolitics and strategy

The US, the Philippines and Japan are holding joint naval drills on June 1st‑7th. The drills will include maritime exercises in the South China Sea, marking the first time the three countries have co‑operated in this manner. The US is deepening its security alliances with Japan and the Philippines amid concern about China’s intentions in the region. However, growing military presence and activity on both sides will increase the risk of unintentional clashes.

South Korea will hold an international maritime defence exhibition on June 7th‑9th. The gathering will bring together defence companies and foreign delegates, with a wide range of maritime defence systems on display. South Korea has emerged as a major defence exporter, supporting the government’s efforts to expand its diplomatic, defence and economic network.

Economics and markets

Central banks in Australia and India will hold monetary policy board meetings. We expect both central banks to keep their policy rates unchanged. Consumer price inflation in both countries has remained above-target but is on a moderating path.

China, Thailand, the Philippines and Indonesia will release consumer price index figures for May. Headline inflation is decelerating on a year-on-year basis in most markets. Tepid consumer demand has kept inflation weak in China, but we expect a moderate acceleration in May, owing to the holiday effect.

Highlights from last week

Sri Lanka faces mixed progress on reforms and a slow recovery. Although the IMF deal has helped to stabilise Sri Lanka’s economy, the country faces a long road to recovery.

The G7 summit will have implications for Japan. The country will brace itself for more strained relations with China and a snap general election this year.

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the economic, political and policy outlook for nearly 200 countries, helping organisations identify prospective opportunities and potential risks.