COMPANY INFORMATION – PT Bank Rakyat Indonesia (Persero) Tbk. noted that the MSME sector is still showing business growth despite the challenges of rising inflation. The positive growth of the MSME business in the third quarter of 2022 is illustrated by the MSME business index score which managed to score 103.2.
The score achieved is interpreted in an optimistic phase because it is higher than the 100.0 level. Scoring results were obtained from a survey involving 7,090 MSMEs surveyed across all economic sectors in 33 provinces.
BIS chief director Sunarso said MSMEs have multiplier effect strong impact on the Indonesian economy. Therefore, it is committed to BIS continuing to focus on MSME growth amid the current rise in inflation through comprehensive empowerment and financing.
“Up to 60.51% of Indonesia’s GDP is contributed by the MSME sector and this is our concern to keep MSME able to continue growing in the face of various economic challenges, including inflation. BIS continues to allocate resources possessed to empower and develop MSMEs,” he said.
A number of factors support MSME business growth in Q3 2022. First, the COVID-19 pandemic tends to be under control. Secondly, face-to-face activities as well office work (WFO) and increase face-to-face learning (PTM). Thirdly, the fuel oil subsidy policy (BBM) has positive implications for inflationary pressures and people’s purchasing power, so that the turnover of MSMEs is still able to increase.
However, the MSME Business Index in the third quarter of 2022 decreased from the previous quarter with a score of 109.4. This was caused by a decrease in sales volume post-Idul Fitri and an increase in subsidized fuel prices in September 2022. Hence, this survey revealed that some MPMI players have reduced their raw material purchases due to the prices increased, so production volumes decreased.
In addition, the relatively high rainfall has caused crop failures for horticultural crops, prevented fishermen from going to sea, and hampered day-to-day mining and construction activities. Nearly all components making up the MSME Business Index for Q3 2022 declined. The biggest thing happened to the production/sales volume component because the overcoming of the Eid period brought demand back to normal levels.
Furthermore, the average selling price increased, although not as high as in the previous quarter, considering that some MSMEs did not increase the selling price so as not to further reduce the sales volume. With limited sales volumes and minor increases in sales prices, sales turnover also decreases.
In addition, with rising commodity prices and declining sales, the growth of orders and inventories of input goods and inventory of goods slowed down.
Seen from a sectoral point of view, the MSME business is still able to grow to a limited extent, with the exception of the agricultural sector. The decline of MSME activity in the agricultural sector has been caused by the relatively high and difficult price of inputs, bouts of livestock disease and plant pests, unfavorable weather factors, and falling prices for various plantation products such as rubber and palm oil.
Meanwhile, the hotel and restaurant sector has experienced a slowdown in growth due to the return to normal levels of sales after the end of the Eid period and the decline in people’s purchasing power.
Expectations index in an optimistic phase
Even though the growth of the MSME business has slowed down, the majority of MSME players remain optimistic about the company’s performance in the fourth quarter of 2022. This is reflected in the MSME Business Expectations Index which is at the level of 126.5 o in an optimistic stage.
Findings from this survey say that the effect of rising subsidized fuel prices tends to be temporary, so MSME players are optimistic that their business could be more expansive in Q4 2022. This was supported by MSME Business Sentiment Index Expectations survey results, which remained at a high level of 134.6, well above the 100 mark.
In line with the slowdown in MSME business growth, MSME entrepreneurs’ sentiment towards the economy and business in general has also declined, but is still supportive. This is reflected in the MSME Business Sentiment Index (ISB) from 126.1 in Q2 2022 to 114.6 in Q3 2022. Even so, the UMKM ISB in Q3 2022 was still able to outperform the threshold of 100.00 so that we could indicate that it was still favorable.
This decrease was caused by a decrease in their assessment of the general economic conditions, the sector of activity and the current activity, as evidenced by the Current Situation Index (ISS), which went from 109.2 to 94.7. MSME players see a rise in subsidized fuel prices which has slowed the growth of the MSME business.
Concerning the government’s ability to carry out its core tasks, most MSMEs remain confident that the government will be able to manage it well, as reflected in the MSME Actors’ Confidence Index in Government (IKP), which remains at a high level, i.e. 127.2 in the third quarter of 2022. SME actors especially give a high assessment of the government’s ability to create a sense of security, peace, and provide and maintain infrastructure.
As many as 70 percent of MSME actors believe that the government has done well in tackling the COVID-19 pandemic. However, this IKP result decreased from the previous quarter to 133.9.
Meanwhile, higher subsidized fuel prices have caused inflation to rise and dampen the growth of MSME assets, but this component index is still quite good or is still far above the 100 threshold, which it is 111.4 in the third quarter of 2022.
Furthermore, the increase in subsidized fuel prices tends to have an impact on the economic performance of MSMEs. While a large proportion (41.6%) of MPMI players reported that the selling price of their products had increased, 67.7% of MPMI players reported an increase in total business costs.
Then there were 30.3 percent who said their production or sales volume had decreased and 36.1 percent said the value of their sales had decreased, so that there was 41, 2 percent of MPMI players who said their business profits had also declined.
This led 36.6% of MSMEs to report that their household income had also decreased. Meanwhile, 75.4% of MSMEs reported an increase in household spending due to rising prices.
For information, a survey conducted by BRI in 33 provinces and involving 7,090 MSME respondents used the method stratified systematic random sampling, so that it can represent the business sector, province and enterprise scale. This survey was conducted by the BRI Research Institute from 27 September to 17 October 2022. The interviews were conducted by telephone with rigorous quality control so that the data collected valid And reliable.
The information collected in this survey is the perceptions of entrepreneurial actors of MSMEs on general economic developments and prospects, the respondent’s sector of activity and the development and projection of the respondent’s business performance. This information is used to compile the Business Activity Index (IAB), Business Sentiment Index (ISB) and MSME Business Actor Trust Index (IKP) for government.
