Indonesia defies analysts with US$207.6m trade surplus in May

Jakarta

INDONESIA'S foreign trade surprisingly swung back to a surplus in May, against market expectations of a US$1.38 billion deficit, spurring some hopes for improvement in the country's trade outlook despite the Sino-US trade war.

South-east Asia's largest economy had a US$207.6 million surplus for May, the statistics bureau said on Monday, as imports dropped near the end of the Muslim fasting month.

This followed a trade gap in April that was the widest in Indonesia's history, at US$2.44 billion, partly due to rising demand for imported consumer goods ahead of Ramadan, the fasting month, which began in May and ended in early June.

"The trend of billions of dollars of trade deficit is behind us," said Satria Sambijantoro, Bahana Sekuritas economist and the only one of 11 analysts in the Reuters poll who expected a May surplus.

He said that last month's decline in exports was not as sharp as initially expected due to better sales of manufactured goods, while the pace at which imports declined did not indicate a major economic slowdown.

In May, exports dropped 8.99 per cent from a year earlier to US$14.74 billion, versus the poll's forecast of a 14.7 per cent fall. May's decline reflected falling earnings from mining products as well as oil and gas.

On a monthly basis, exports picked up 12.42 per cent on higher sales of processed food, including palm and coconut oils, jewellery and clothes.

Imports slid 17.71 per cent in May from a year earlier to US$14.53 billion, compared to the 13.9 per cent drop predicted in the poll. Purchases of everything from consumer goods, raw materials to capital goods fell.

The May trade data did not move the rupiah.

Indonesian exports and imports have been falling for months, in line with global trade amid the US-China trade war.

Mr Sambijantoro said there could also be a trade surplus for June as imports usually drop further during the holiday season at the end of Ramadan.

However, statistics bureau chief Mr Suhariyanto warned that slowing economic growth in Indonesia's main trading partners, like China, poses a risk to export expansion.

"There are real challenges in boosting exports," he said, adding that commodity prices are also volatile.

Bleak growth outlook, due to the trade war, has shifted many central banks to more dovish policies, including in Indonesia.

Last week, Bank Indonesia Governor Perry Warjiyo said one of the main indicators it was monitoring to determine the timing of an interest rate cut is the current account, which covers trade in goods and services. REUTERS