Jokowi’s Teething Problems Show Up in Dentist’s Chair

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Joko Widodo
Indonesian President Joko Widodo. Photographer: Dimas Ardian/Bloomberg

Since the economic downturn in Indonesia began to take its toll, patients waiting to see dentist Deasy Kusdiandi increasingly have one thing in common: pain.

“They’re coming only if they need to,” said Kusdiandi, 38, whose 14-year-old practice in central Jakarta has seen a 50 percent drop in patients in the past two months as people cancel routine work like checkups, whitening and polishing. “Lately, the reason they come is for toothache.”

Clinics, motorbike sellers, food companies and department stores are grappling with a decline in private consumption, which accounts for more than half of the economy. The nation’s 250 million people are caught between soaring food prices and a slump in earnings from plantations and mines.

“The squeeze is being felt,” said Gundy Cahyadi, an economist at DBS Group Holdings Ltd. in Singapore. If everyone thinks the economy is going to keep sliding, “nobody will spend, no one will invest.”

With monetary policy hamstrung by Asia’s highest inflation and no sign of an export recovery, it’s up to President Joko Widodo to jump-start a recovery by fulfilling his promises to spend more than $400 billion on infrastructure projects. Gauging whether he’s succeeding in overcoming the red tape and land disputes that have held up some of those projects for years, will revolve around key data sets over the next six months, according to banks and economists.

Spending Plans

One is the monthly government construction contracts awarded to state-owned companies, according to a report by Jakarta-based brokerage PT Danareksa Sekuritas. Figures between now and August “will potentially provide the first indication of the government’s plans to boost infrastructure spending,” the report said.

Loan applications from state building companies will show whether the work is beginning, said Wisnu Wardana, an economist at PT Bank CIMB Niaga in Jakarta.

Monthly import data are another indication. Imports fell 21 percent in May from a year earlier, partly hit by the 7 percent slump this year in the rupiah. That should reverse by the fourth quarter if the president, known as Jokowi, spends his budget soon and people start buying more foreign goods again, said Cahyadi at DBS.

Food inflation, the rupiah’s depreciation and fuel-subsidy cuts have skewed retail sales figures as an indicator of consumer behavior over the past two years, economists say.

Motorbike Indicator

If sustained spending does pick up, one place that will show it is the motorbike showroom. Indonesia is still largely a nation of two wheels, with nearly 90 million bikes on the road, or about 10 times as many as in the U.S. That makes new bike sales a weather vane for the economy.

“Sales are dropping,” said Hazurli, 35, a salesman at a Honda showroom in the city of Palembang on the island of Sumatra. A year ago, the shop was selling at least 20 bikes a month. “Now if we sell 10 units we’re very happy.”

Instead, folks are heading down the street to Muhammad Hasyim’s second-hand dealership, where sales have gone from one or two units a month to five. “People say used motorcycles are cheaper and not much different from new ones. I’m very happy.”

Motorbike sales fell in May to their lowest since August 2012.

“We are now almost entering a recession,” said Herwidayatmo, chief executive of PT Bank Pan Indonesia, who expects profit to be flat this year because of slower business from individuals and companies. “The most important thing for us is to keep surviving.”

Boom Years

Even if Jokowi does manage to inject capital into the economy, the nation is still heavily reliant on a global recovery in resources. Palm oil, metals and fossil fuels accounted for about half the country’s exports in 2013.

During the boom years, Indonesia’s economy was clocking growth of more than 6 percent a year. The World Bank forecasts growth will drop to 4.7 percent this year, crimped partly by lower earnings from mines and plantations.

“We work hard but end up getting very little,” said rubber planter Masna in South Sumatra, who sells melons and apples from a market stall to help feed his three children after earnings from his rubber trees fell to a quarter of what he used to get a few years ago. “I don’t know what to do.”

As farmers and miners tighten their purse strings, retailers suffer, especially in the regions away from the capital Jakarta on Java island. Adhi Lukman, chairman of the Indonesia Food & Beverage Producers Association, says it’s worse than during the global financial crisis.

“We saw volumes drop in 2008, but it was not as bad as it is now,” said Lukman, whose group counts PT Unilever Indonesia and the local unit of Coca-Cola Co. among its 410 members.

A rise in consumer confidence last month from its lowest level since September 2013 indicates consumption may pick up later in the year, Bank Indonesia said on Thursday.

In the meantime, shops are pinning their hopes for a temporary boost on the Muslim month of Ramadan, which started on Thursday. Employers are mandated to give workers a double salary, and the nation’s 205 million Muslims buy clothes and gifts and prepare nightly feasts.

“This is the moment for us to recover some of the losses,” said Tutum Rahanta, vice chairman of the Indonesian Retail Merchants Association. “If it doesn’t, then we really are in trouble.”

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