Indonesia, Malaysia see record trade surplus in March on back of high commodity prices and impact of Ukraine war

[JAKARTA] Asean neighbours and commodity exporters Indonesia and Malaysia enjoyed strong export earnings in March as commodity prices continued to rise as a result of the impact of the ongoing war in Ukraine.

Indonesia saw record highs in both exports and imports last month with exports totaling US$26.5 billion, up 44.36 per cent on a yearly basis. Imports rose 20.85 per cent to US$21.97 billion.

As a result, Indonesia recorded a US$4.53 billion (S$6.1 billion) surplus last month, the largest since October last year, according to the country’s Statistics Bureau.

Enrico Tanuwidjaja, economist at UOB Indonesia, said that while the surplus was in his calculations, he was not expecting it to be this high. The skyrocketing commodity exports had a major part to play. "Additionally, the strong surplus was also due to the relatively underwhelming import growth,” he added.

He said that although imports were picking up pace, they were not as strong as expected. The increase in imports was an indication of a pick up in domestic consumer demand as the economy starts to emerge from the Covid-19 pandemic.

“The trade surplus is a bonus and the overall current account position is more critical to external macro stability than trade position per se,” Tanuwidjaja noted. “I expect that the trade surplus may continue perhaps for the next seven months or so, but the trend should be narrowing as commodity prices and exports wane off and possibly (due to) higher import growth in the latter half of the year.”

Prices of Indonesia’s top exports such as coal, natural gas, palm oil, tin and nickel, which were already high, have surged further following Russia’s invasion of Ukraine.

Among the most dramatic increases were Indonesia’s coal exports, which rose 150 per cent on a yearly bases to US$3.9 billion. By volume, coal shipments were up about 22 per cent annually to 35.3 million tonnes.

Malaysia has also been riding the commodity boom but the country’s exports were also boosted by robust growth in electrical & electronics products.

Exports rose by 25.4 per cent year on year to a new high of 131.64 billion ringgit (S$42.1 billion) in March. This was above the 10. 4 per cent that the market had expected, and better than February's 16.8 per cent growth. Imports also accelerated to 29.9 per cent year on year to an all-time high of 104.93 billion ringgit, bringing the trade surplus to 26.7 billion ringgit (S$8.9 billion).

Exports were also lifted by growth in commodity products as palm oil, petroleum products, LNG, and crude petroleum.

“Given the export strength to date, we have raised our full year export growth to 8 per cent, from 2 per cent previously, albeit mindful of prevailing risks from geopolitical risks, China’s zero-Covid policy, ongoing supply chain disruptions and tighter global financial conditions” a report by UOB Global Economics and Market Research said.

“The risk of second order impact on Malaysia from the Russia-Ukraine conflict has emerged following the expansion of sanctions on Russia and potential escalation of the Ukraine conflict,” it added.