Indonesia’s shrinking trade surplus may erode rupiah’s defences

INDONESIA’S shrinking trade surplus risks undermining support for an already weakening currency.

Exports exceeded imports by just US$1.3 billion in July, a US$2 billion drop from the previous month and falling short of all economist forecasts in a Bloomberg survey. 

“Our commodity windfall era is over,” Amalia Adininggar Widyasanti, acting head of the nation’s statistics office, said in a briefing on Tuesday (15 Aug). Shipments across all commodity sectors were down in July compared with a year ago as prices eased, leading overall exports to fall 18 per cent. Imports shrank 8 per cent.

With less dollar earnings coming into South-east Asia’s largest economy, the rupiah could come under further pressure. The government’s new exports earnings rule has yet to lend much support, despite estimates that it could bring in about US$60 billion a year. The currency touched a five-month low of 15,358 a dollar on Tuesday.

The rupiah could depreciate further in coming months as the current account is set to slip into a deficit of 0.4 per cent of gross domestic product by year-end, said PT Bank Danamon Indonesia economist Wisnu Wardana. He expects the currency to average 15,352 a dollar this quarter. BLOOMBERG