According to the Indonesian Textile Association (API), investments in the textile industry are expected to contract next year as the economic slowdown is anticipated to continue in its central export countries.
“The global economy is still not in good shape, and we anticipate it to remain weak while interest rates will continue to remain high,” said API Chairman Jemmy Kartiwa Sastraatmaja.
Media reports quoted him as saying that new investments, whether domestic or foreign, will continue to remain slow or shrink due to this factor.
“The US Federal Reserve rates have been revolving between 5.25-5.5 percent, and we expect that the US Central Bank will start decreasing rates by the end of the second quarter of 2024,” he stated.
“The impact of this rate cut by the US Central Bank will be visible only from 2025, due to which purchasing power of several importing countries will be negatively impacted,” Sastraatmaja added.
The API Chairman expects that the impact of this would fall on the capacity utilization rates of the textile sector of various exporting countries, including Indonesia.
As per Sastraatmaja, the production capacity utilization rate of the Indonesian textile sector is presently at 50 percent, which has been at its lowest level since 2020.
The export slowdown in 2023 severely impacted the Indonesian textile industry, which has made thousands of jobs redundant, as factories have either closed down or are running partially.