Recession impacts Indonesian footwear industry

13 Diciembre 2022

Next year, Indonesia will face a perfect storm in the form of a global economic slowdown, high inflation and geopolitical tensions. [Bank Indonesia strategy for perfect storm 2023 - The Jakarta Post].  According to the president of the Indonesian Footwear Association (Aprisindo), Eddy Widjanarko, the current economic conditions will impact the footwear industry  . [Ketua CIFA Eddy Widjanarko Ungkap Tantangan Bisnis Persepatuan- iNews.id]

 

 

Next year Indonesia will face a perfect storm in the form of a global economic slowdown, high inflation and geopolitical tension. In its World Economic Outlook October 2022 report, the International Monetary Fund (IMF) again lowered its 2023 global economic growth projection to 2.7 percent, from 2.9 percent in July 2022 and 3.8 percent in January 2022.

The IMF also predicted that 31 countries representing 43 percent of the world economy would experience an economic recession in 2023. Other prominent international institutions such as the World Bank and OECD conveyed the same message.

The Indonesian economy has been affected through both trade and financial channels. The impact through the trade channel can be seen in massive worker layoffs in textile and footwear companies due to the weakening global demand. Meanwhile, the impact through the financial channel can be seen in the capital outflows as foreign-portfolio investors unloaded their rupiah assets as government bonds.

The impact on the footwear industry

The Chairman of the Indonesian Footwear Association (Aprisindo), Eddy Widjanarko, was elected as the Chairman of the Confederation of International Footwear Association (CIFA) 2023 at the 39th International Footwear Conference (IFC) in Hong Kong, mid-November.

According to Eddy, with the current economic conditions, including the threat of recession that many predict, the impact will be felt in the footwear industry.

"Due to the economic slowdown, consumers will limit their spending. Thus causing overstock in stores," said Eddy, Friday (25/11/2022).

Therefore, he said, the last month of this year and next year is a big challenge to deal with the economic conditions predicted by the recession.

Currently, Eddy said that several major brands have stated that they will reduce orders to all countries where they produce by almost 50 percent. At least three major brands of shoes for sports purposes have stated this.

"The order reduction will take effect in the next 5-6 months with the hope that the stock that is still piling up in the store has been sold and then they will add more orders and can even increase by up to 30 percent," eddy explained.

From these orders, he continued, Indonesia is estimated to be able to absorb around 80 percent of existing orders when compared to before the pandemic. The footwear industry in Indonesia will certainly not be separated from the impact of the global recession.

"Exports will definitely go down. But for the domestic market, the hope is that it can return to good because the pandemic atmosphere in Indonesia has been under control, shops are open, schools have also returned to normal. Therefore, we believe that the domestic market is experiencing an increase in demand," said Eddy.

However, he said, the lockdown in China due to the pandemic, since 2020, has succeeded in increasing Indonesia's footwear exports.

"It was recorded that in 2020, shoe exports increased by 8.97 percent, in 2021 it increased by 28.3 percent and in the January - September 2022 period, there was already an increase of 35.57 percent," he said.

 

 


Paese: Indonesia
Aprisindo| Recessione| Calzaturifici

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