May 16, 2024
JAKARTA – Indonesia’s trade surplus narrowed in April as exports dropped more than imports from the preceding month, partly because of fewer working days and partly because of a fall in prices for some export commodities, notably crude palm oil (CPO).
The trade balance remained in surplus for the 48th month in a row as exports exceeded imports by US$3.56 billion, according to Statistics Indonesia (BPS) data published on Wednesday.
However, the trade surplus dropped by more than a fifth when compared to the preceding month and came in almost 10 percent lower than in April last year.
Josua Pardede, chief economist at private lender Bank Permata, noted in a statement on Wednesday that the trade surplus was continuing to shrink amid normalizing global commodity prices and heightened global uncertainty that had hampered world trade and demand.
“This April, both exports and imports saw declines, particularly due to fewer working days amid the Idul Fitri festivities,” Josua said.
The country exported $19.62 billion worth of goods last month, which marks a decline of 13 percent from the previous month but still represents an uptick of 1.72 percent year-on-year (yoy).
The drop in exports was mainly attributed to reduced shipments of manufacturing products, such as jewellery, gold, electrical equipment and textiles, while CPO, which accounts for the third-largest share of exports, also plunged more than 10 percent month-to-month (mtm) this April.
An almost 2 percent monthly increase outgoing shipments of coal as well as of iron and steel, the two largest export contributors, failed to make up for the drop in exports of other goods.
On an annual basis, the value of coal shipments was down almost 20 percent, but exports of iron and steel as well as CPO were up on the year, albeit by less than 1 percent.
Meanwhile, overall imports declined by 10.58 percent in April but were still up 4.64 percent yoy at $16.06 billion.
Incoming shipments of raw materials, which accounted for 75 percent of overall imports, dropped 9.28 percent mtm, while capital goods imports declined 8.1 percent mtm.
However, both saw increases from same period last year, rising by 3.27 percent and 13 percent, respectively.
“Monthly imports declined less than exports because we saw a hike in oil demand during the festive period in April. Meanwhile, global oil prices increasing amid escalation in the Middle East conflict,” Josua said.
Private lender Maybank economist Myrdal Gunarto told The Jakarta Post on Wednesday that thanks to solid demand from trading partners, including China, India, the United States and ASEAN, Indonesia still maintained a sizable surplus.
According to BPS, manufacturing activity was in expansion territory in those foreign markets last month, which supported demand for products shipped from Indonesia.
“Meanwhile, the commodity price trend was not too bad,” Myrdal said, adding that he believed Indonesia could maintain solid exports throughout the year, allowing the country to achieve 5 percent economic growth.
BPS also noted that the rupiah’s exchange rate had weakened to Rp 16,125 per US dollar in April from Rp 15,711 in the preceding month.
A weaker exchange rate generally supports exports, because Indonesian goods become cheaper in the currencies of foreign buyers, but imported goods become more expensive for Indonesians.
David Sumual, chief economist with private lender BCA, told the Post on Wednesday that he expected both exports and imports to rebound in May thanks to an increased number of working days when compared to April.
However, he warned that the country should be wary of the potential impact of US tariffs on Chinese goods in the long term.
“This could lead to a decline in Chinese electric vehicle exports that would lead to decline in steel demand from Indonesia,” David said.
“If China counters this with import tariffs on soybean, this could have an impact on the CPO price as well,” he added.
Permata’s Josua expected Indonesia’s current account deficit to swell to 0.75 percent of GDP this year from 0.11 percent of GDP last year.
This was in line with the smaller trade surplus of $10.97 billion in the first four months of this year, compared to $16.05 billion in the same period last year.
“But it will remain under control this year,” Josua said.
A swelling current account deficit implies that a country requires more foreign currency than it can secure through trade in goods and services. A large gap is often perceived as a risk for currency exchange rate stability.
Pranjul Bhandari, chief economist for India and Indonesia at HSBC Global Research, wrote on April 24 that Indonesia would need $2.8 billion of trade surplus per month on average to overcome deficits elsewhere.
This was also needed to avoid relying on portfolio inflows or Bank Indonesia’s foreign exchange reserves.
“Obviously more is needed in the near term if there is a concentration of outflows,” she said.