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Jakarta Post

Imports plunge as economy cools

Indonesia’s trade balance booked its fourth straight month of surplus in April, while the current-account deficit improved in the first quarter as imports plunged along with the country’s slowing economy

Linda Yulisman (The Jakarta Post)
Jakarta
Mon, May 18, 2015

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Imports plunge as economy cools

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ndonesia'€™s trade balance booked its fourth straight month of surplus in April, while the current-account deficit improved in the first quarter as imports plunged along with the country'€™s slowing economy.

The country booked a US$454.4 million surplus in April, as imports dipped 22 percent to $12.63 billion during the month from the past year, the Central Statistics Agency (BPS) reported Friday.

Exports also dropped, albeit at a more moderate level at 8.46 percent to $13.08 billion on a yearly basis, caused by a 45 percent fall in oil and gas exports to $1.46 billion amid low global oil prices.

Slower imports were seen across some sectors '€” raw materials, intermediary goods and capital goods. Imports of machinery and mechanical equipment suffered the most, slumping by 186 percent to $1.87 billion from the past year.

Overseas purchases of vehicles and auto parts also fell steeply by 80.8 percent to $469.4 million in line with the weak domestic sales of four-wheelers and two-wheelers.

Sales of cars and motorcycles, both an indicator of domestic consumption, shrank sharply in the first quarter by 14.05 percent to 282,345 units and by 19.10 percent to 1.61 million units, respectively.

The economy, which is more than 50 percent driven by domestic consumption, saw its growth shrinking to 4.7 percent in the first quarter of this year, a level unseen since 2009.

'€œIf economic growth continues to drop, imports will continue to slow down ['€¦] the current account will be manageable,'€ Bank Indonesia (BI) statistics department director Endy Dwi Tjahjono said. '€œIf the economy picks up, the current-account deficit will increase because imports will be first to rise.'€

BI reported narrowing the current-account deficit '€” the nation'€™s broadest measure of external balance and a major worry among investors that put the rupiah under pressure in the previous year '€” in the first quarter of this year to 1.8 percent of gross domestic product (GDP) from 2.6 percent in the previous quarter.

'€œThe improvement in current-account performance was primarily driven by an improvement in the oil and gas trade balance as oil imports dropped due to low global oil prices and a drop in fuel consumption as a positive impact from the government'€™s subsidy reform,'€ the central bank said in a release on Friday.

It remained '€œvigilant'€ over a possibility of risk of a higher current-account deficit in the future as imports were expected to rise in the lead up to Lebaran and the time for companies to repatriate dividends and pay out foreign exchange debts.

But the BPS remained upbeat that the trade surplus could be maintained despite a seasonal import hike until June, said the deputy head for distribution and service statistics, Sasmito Hadi Wibowo. Surging imports would occur as manufacturers prepared for peak consumption around the Idul Fitri holiday in the country with the world'€™s largest Muslim population.

'€œThe surplus will likely be sustained as the value of imports will be lower as producers worldwide engage in a price war, while we may see a rise in the exportation of manufactured goods in coming months,'€ Sasmito said.

A price war, according to Sasmito, would come about as a result of tighter competition in the production of some consumer goods, such as cellular phones and various electronic items, engaging countries like Vietnam, China and South Korea.

The weak import data is in line with the slow manufacturing activity measured earlier this month by HSBC Indonesia'€™s Purchasing Managers Index (PMI), which indicates the health of the manufacturing sector.

The index stayed at a low level of 46.7 in April on declining output, with a decrease in new orders and fewer new purchases by overseas buyers. The report also highlighted that new orders from overseas buyers dropped at the sharpest pace in the 49-month survey, with Indonesian firms reporting decreasing demand from foreign countries.

Atma Jaya economist A. Prasetyantoko said there was an urgent need for Indonesia to boost the exportation of more manufactured goods as the commodity booms seen in the past decade seemed to have ended.

'€œAs commodity prices have tumbled to the level we see now, we cannot rely on commodity exports to drive economic growth. Manufactured goods must replace the commodities,'€ he said. (foy/ind)

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