17/04/2012 (Jakarta Globe) - The International Monetary Fund says commodity-exporting countries such as Indonesia could face a tough time in the short-term, with global commodities prices forecast to decline.

The IMF, in its recent “World Economic Outlook,” said that weak global economic activity and substantial looming risks — including conflict in Iran that could harm access to oil and imperil a vital trade route — meant that commodity exporters could be set for a downturn.

“If downside risks to global economic growth materialize, there could be even greater challenges facing commodity exporters, most of which are emerging and developing economies,” the report said.

A steep increase in global commodity prices in 2008 resulted in economic and political instability in several poor countries.

IMF world economic studies deputy chief Rupa Duttagupta said many developing countries were rebalancing growth in their economies toward less commodity-intensive activities.

“It would lead to less demand for commodities,” Duttagupta said at a forum in Jakarta on Monday co-hosted by Globe Asia magazine, which is affiliated with the Jakarta Globe.

She said that in the past couple years, the rise in commodity prices could be attributed to the actions of suppliers, “and now we see that supplies are starting to pick up.”

John Bluedorn, an IMF economist, said commodity-exporting countries would benefit from a price upswing in many ways, including a rise in opportunities for public spending and a decline in public debt.

“Commodity-exporting countries should introduce a counter-cyclical policy of saving more in good times and boosting spending when times are bad to reduce the volatility that can be caused by commodity price swing,” he told the gathering. “It’s like leaning against the wind.”

Wijayanto, managing director of Paramadina University’s Public Policy Institute, said that a downturn in prices would hurt Indonesia, where commodities constituted 35 percent of exports and a similar percentage of government revenue.

Supporting the IMF policy suggestions, he told the Jakarta Globe that a sudden price fall could also widen the gap in development between Java, which focuses on manufacturing activity, and commodity-reliant economies in the rest of the country.

Indonesia’s strong economic performance, in which growth hit 6.5 percent last year, has been largely a result of robust domestic consumption, which constituted 56 percent of the country’s $813 billion economy in 2011.

But the export of commodities, in particular palm oil and coal, still represents a significant portion of the nation’s economy, with exports and production continuing to rise.

Indonesia, the world’s top thermal coal exporter, produced 370 million tons of coal in 2011 to meet to strong demand from India and China. Indonesia is also the world’s largest producer of crude palm oil, with production of about 23 million tons last year.

The IMF will release its economic outlook report on Indonesia today.