Indonesia’s trade surplus beats forecast in August

[JAKARTA] Indonesia recorded a US$2.9 billion trade surplus last month, bolstered by stronger exports, based on data from the Statistics Bureau on Tuesday (Sep 17).

The surplus exceeded July’s US$470 million and surpassed market expectations of US$2 billion, as projected in a Reuters poll.

Exports from South-east Asia’s largest economy rose 7.1 per cent year on year to US$23.6 billion last month, driven by increased shipments of non-oil and gas commodities such as gold and jewellery, fossil fuels, and electrical machinery, equipment, and their components.

On a month-on-month basis, exports rose 6 per cent, compared to the previous month.

The Statistics Bureau noted that this performance marked the fifth consecutive month of export growth and the fastest rate in 19 months, despite earlier pressure from weaker commodity prices this year.

Since April, the country’s shipments have grown each month, bouncing back after a year of sharp declines in export values following the post-pandemic commodity price surge.

Meanwhile, Indonesia’s imports were worth US$20.7 billion in August, up 9.5 per cent from the previous year.

Though this represented a slight slowdown from the 11.1 per cent growth seen in July, Fithra Faisal, senior economist at Samuel Sekuritas, noted that the import figures reflected stockpiling of raw materials and inputs for manufacturing and infrastructure, driven by hoarding tendencies as the rupiah strengthened to below 16,000 per US dollar.

In the first eight months of 2024, Indonesia posted a cumulative trade surplus of US$23.7 billion.

“Looking ahead, this better-than-expected trade surplus is likely to be disrupted by the ongoing appreciation of the rupiah, which could potentially drag down export growth in the short run,” Faisal noted.

Analysts pointed out that while Indonesia’s exports are beginning to recover, the country remains vulnerable to the negative effects of simultaneous economic slowdowns in the US and China, two of its main trading partners.

With its purchasing managers’ index already falling below 50 for two consecutive months due to deteriorating external demand, Indonesia may require a policy response to mitigate the further slowing of its manufacturing activities.

The August trade data will be a key economic indicator reviewed by the central bank during its two-day policy meeting, which will announce its rate decision on Wednesday.

Satria Sambijantoro, head of research at Bahana Securities, stated that Bank Indonesia (BI) has the room to ease its policy due to several factors: declining oil prices, domestic deflation, weak global data – especially from China – and the potential for a dovish surprise from the US Federal Reserve.

He said: “We are now pencilling in a 25-basis-point rate cut in BI-rate this Wednesday to 6 per cent, followed by cumulative 50-basis-point policy easing in Q4 to bring BI-rate at 5.5 per cent by year-end.”