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Low oil price yields trade balance surplus
Indonesiaâs trade balance posted a larger-than-expected surplus of US$709
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Indonesia's trade balance posted a larger-than-expected surplus of US$709.4 million in January as imports weakened, particularly on lower oil prices.
Monthly imports plunged by 15.59 percent to $12.59 billion from a year earlier, primarily triggered by a sharp drop in oil imports of 40.42 percent to $2.11 billion, the Central Statistics Agency (BPS) announced Monday in its first trade data release with only one-month gap with actual transactions.
Exports declined more moderately by 8.09 percent to $13.3 billion, with the biggest contribution from lesser shipments of its key commodity, coal, which were down by 13.66 percent to $1.52 billion.
BPS chief Suryamin said that as this year began on a positive note, the situation might be sustained throughout the year. He compared a $443.9 million deficit booked in January last year, ending with a $1.89 billion deficit for the full year.
'We expect the surplus will continue until the end of this year. Some supporting factors will include soft oil prices and the government's effort to push up non-oil and gas exports,' he said.
Global oil prices have halved in the past half a year to around $50 per barrel in January as US shale oil production resulted in a global glut while other producers in the Organization of Petroleum Exporting Countries (OPEC) declined to cut output.
The largest bulk of exports from Southeast Asia's top economy still came from palm oil ($1.54 billion), coal ($1.52 billion), machinery and electrical equipment ($690.9 million), rubber ($458.6 million) and machinery and mechanical engines ($426.9 million).
The most significant shares of outbound shipments derived from West Java with vehicles, electronics and textiles; followed by East Kalimantan with oil and gas, coal and fishery products; East Java with gold and silver jewelry as well as copper; and Riau with oil and gas as well as coal.
Raw materials and intermediary inputs still dominated imports with a 78.28-percent share, followed by capital goods (17.48 percent) and consumption goods (6.24 percent).
Indonesian Institute of Sciences (LIPI) economist Latif Adam said that the early-year surplus could not serve as a guarantee of whether the trade performance would improve in the upcoming months. The surplus was largely driven by a considerable drop in imports instead of by an increase in exports, which would be strongly affected by commodity prices.
'It will be more difficult to fix our trade balance from exports. However, to reduce imports will be similarly tough as they are the engine behind [direct investment],' Latif told The Jakarta Post.
Importation of capital goods as well as raw materials might climb in coming years along with a rise in investment realization, while prices of Indonesia's primary export contributors such as palm oil and coal would still be weak in line with the downward trend in oil prices, thereby posing threats for trade deficits throughout this year, he further said.
Barclays economists Wai Ho Leong and Angela Hsieh, however, maintained a more positive outlook on the country's exports, saying that exports would grow more on the back of manufactured goods.
