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Indonesia posts US$1.01b Oct trade surplus, above expectation

Monday, November 16, 2015 - 13:02
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A food seller prays at his stall near Sudirman Business District in Jakarta in this Dec 19, 2012.

[JAKARTA] Indonesia posted its 11th straight monthly trade surplus in October, which should guarantee its first annual surplus since 2011 but also shows how weak imports remain.  

Monday’s trade data is not seen impacting a central bank policy meeting on Tuesday. Twelve of 13 analysts in a Reuters poll expect Bank Indonesia (BI) to again hold the benchmark rate at 7.50 per cent, to support the rupiah ahead of a possible December hike in the United States interest rates. 

BI officials have said it has its eyes on the US rate strategy and China’s economic slowdown.  

Gundy Cahyadi, an economist with DBS in Singapore, said that from the October trade data “the most important thing to note is the sustained weakness in exports”.  

For 13 consecutive months starting in October 2014, both exports and imports have contracted from year-earlier levels.  

Last month’s drop in exports, 20.98 per cent, was the biggest since October 2012, while that for imports was 27.81 per cent, the second biggest fall since July 2009.  

Analysts say the continuing import plunge shows how soft consumption and investment remain.  Earlier, BI was concerned about Indonesia’s current account deficit. But the deficit shank in the third quarter, due to the trade surplus, to a level the central bank called “healthy”.  

SUSTAINED RECOVERY NEEDED

Mr Cahyadi said the current account gap remained higher than net foreign direct investment, which means Southeast Asia’s largest economy still has some external financing risks on the table when the US raise its interest rate.  

He said he remains cautious of the outlook for external balances in 2016 “until we see a sustained and significant recovery in exports”.  
Falling commodity prices and weakening demand from foreign buyers have hit Indonesia’s exports for years, and last year were the main cause of a US$2.2 billion trade deficit.  

For January-October this year, the surplus reached US$8.16 billion. Ahead of Monday’s trade announcement, ING Financial Markets said it forecast a US$12 billion surplus for full-year 2015. That translates to a current account deficit of 1.8 per cent of gross domestic product (GDP) in 2015, below BI’s 2 per cent target. 

To try to boost exports, President Joko Widodo is pursuing trade liberalisation and changing policies many have deemed protectionist.  

Trade Minister Thomas Lembong, in office since August, has simplified some foreign trade rules while continuing talks for a trade agreement with the European Union. Widodo has said he wants Indonesia to join the Trans Pacific Partnership (TPP).

REUTERS

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