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Import restrictions start to bear fruit
After months of suffering a deficit, Indonesia has finally seen the light, as it recorded a surplus in its trade balance in September, albeit only a small amount
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After months of suffering a deficit, Indonesia has finally seen the light, as it recorded a surplus in its trade balance in September, albeit only a small amount.
Statistics Indonesia (BPS) announced on Monday that Indonesia recorded a trade surplus of US$230 million in September following a monthly deficit of $1.02 billion in August and $2.03 billion in July.
“In September, monthly export and import figures decreased. However, the fall in imports was bigger than the decline in exports, thus, the trade balance still managed to be in surplus,” BPS statistics distribution and service deputy Yunita Rusanti said at a press conference.
Total exports decreased 6.58 percent from $15.82 billion in August to $14.83 billion in September. Meanwhile, total imports in September dropped 13.18 percent from $16.81 billion in August to $14.60 billion.
Yunita said the government’s measures to control imports, such as by imposing a higher import tax on consumer goods, might begin to pay dividends as imports had risen sharply in the previous months.
“However, we do not yet know how effective the government’s strict policy is in reducing the imports. We will see its real impact on the trade balance next month,” Yunita said.
Bank Central Asia (BCA) chief economist David Sumual told The Jakarta Post over the phone on Monday that the government’s policy to impose a higher import tax on 1,147 consumer goods in Sept. 13 was one of the factors that caused the decline in imports that month.
“The decline in imports was pretty significant. Aside from the fall in imports of oil and gas, which were quite notable, imports of consumer goods also declined because of the higher import tax,” he said.
David added that the fall in imports was also due to other factors, such as economic patterns and global economic conditions. “In the months after the Idul Fitri holiday, which this year took place between June and July, imports usually fall before rising again at the end of the year. Aside from that, the weakening of the rupiah exchange rate against the dollar also naturally led to the decline in imports,” he said.
In September alone, oil and gas imports, which were blamed for last month’s trade deficit, decreased 25.2 percent from $3.05 billion in August to $2.28 billion.
Meanwhile, non-oil and gas imports decreased 10.52 percent. Imports in consumer goods declined 14.97 percent to $1.32 billion. The largest drop was recorded in imports of commodities such as rice, beef, fresh grapes and powdered milk.
David said the government’s decision to increase the import tax and mandate the use of 20 percent blended biodiesel (B20) beginning September was the right strategy to improve the trade balance. Coordinating Economic Minister Darmin Nasution said earlier that the B20 policy could reduce diesel oil imports by $2.3 billion until year-end.
However, Bahana Securities said, despite the trade surplus, which came as a result of liquidity-tightening measures that were implemented by the government, policymakers should closely monitor the export figure as it was slowing down.
Bahana Securities analyst Satria Sambijantoro said the decline in exports in September should be treated as a warning for policymakers.
“What is particularly worrying here is the fact that oil and gas exports declined both by volume and value despite high oil prices,” he said in a written statement.
In September, exports in the oil and gas sector and non-oil and gas sector declined 15.81 percent and 5.67 percent respectively.
Bahana Securities said the import restriction policy might take a toll on the country’s exports of industrial goods, as many had a high import content in their manufacturing process.
With the latest trade data, Bahana Securities predicted the decline in exports would bring the current account deficit in the third quarter of 2018 to approximately S$9.6 billion or 3.6 percent of the gross domestic product.
Yunita of the BPS said that, despite the September surplus, Indonesia suffered a trade deficit of $3.78 billion from January to September.
“Cumulatively, the deficit is still pretty big because, as we know, we suffered a deficit in trade for several months prior to this. Indeed, the September surplus was small, but hopefully it is a good sign for the months ahead,” she said.
