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Thursday, February 22, 2024

High interest rates impact the Indonesian textile & garment sector

There will be a continued decline in the performance of the textile and garment sector, which continues to be influenced by the still high-interest rates.

According to the Indonesian Textile Association (API), the Bank of Indonesia raised its interest rate twice in January and October 2023, each by 25 basis points, and maintained it at 6 percent in December 2023.

Jemmy Kartiwa Sastraatmaja, Chairman of API, expressed his concern over the high-interest rates being detrimental to the textile and apparel industry, which is hesitant about expanding through loans.

“In addition, existing loans are becoming difficult to repay. When interest rates are high, entrepreneurs tend to wait to make new investments, which happens globally,” Sastraatmaja said.

The benchmark interest rate in the United States is expected to remain above 4 percent until the end of 2024, and there are expectations that the US Federal Reserve will reduce rates at the end of 2024.

According to the API Chairman, the industry feels its strategy to increase production needs to be improved, even though the sector needs financial stimulus to strengthen the domestic market.

He also highlighted the weakening of people’s purchasing power, which has led to a decline in domestic demand while exports continue to decline for the same reason.

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