The Jakarta Post
Bank Indonesia (BI) has forecast the country's trade balance will post at least a US$500 million surplus in March in a prediction that, if realized, would lift the currency and boost the attractiveness of rupiah assets.
'Our initial forecast shows that the trade surplus trend will continue, with the trade balance likely recording the surplus in March,' BI Deputy Governor Perry Warjiyo said on Monday.
He noted that the negative impact from a decline in commodity exports due to the recent economic slowdown in China ' Indonesia's largest trading partner, having absorbed 14 percent of the archipelago's total exports, mostly commodities ' had been so far weathered by the rise in exports of Indonesia's manufactured goods. 'The steady increase in exports of manufacturing goods has compensated the decline in [exports of] primary commodities, as well as the effects of the mineral export ban,' the BI deputy governor said.
Indonesia's trade balance posted a $785 million surplus in February, with the country recovering from a $430 million deficit a month earlier. The official trade balance figure in March will be announced by the Central Statistics Agency (BPS) next month, as export-import data always come with a one-month lag.
Finance Minister Chatib Basri has predicted that the latest string of trade surpluses will narrow the current-account deficit ' the broadest measurement of a country's international trade that includes services and transfers, in addition to exports and imports ' to below 2 percent of gross domestic product (GDP) in the first quarter this year.
The current-account deficit, the major worry among foreign investors last year, shrank to 2 percent of the GDP in the fourth quarter last year, as compared to 3.8 percent a quarter earlier.
Economists have attributed the latest improvement in Indonesia's external balance to BI's move to deliberately depreciate the rupiah, as the weaker currency succeeded in making exported goods more competitive overseas, while imports became more expensive locally.
'The increase in manufactured goods exports is bolstered by the rupiah's depreciation, with local machinery and electronics industries expanding their production because of that,' Edimon Ginting, the deputy country director of Asian Development Bank (ADB) in Indonesia, said Monday in a phone interview.
'Meanwhile, imports are declining as industries have now switched to local products,' he added.
The rupiah was Asia's worst-performing currency last year, having depreciated by 26 percent throughout 2013.
However, thanks to improvement in Indonesia's economic fundamentals, such as the narrowing current-account deficit, the rupiah is now heading for a reverse course, with the currency's year-to-date appreciation of 6.6 percent the highest among emerging currencies. The rupiah traded at 11,430 per dollar on Monday, according to the Jakarta Interbank Spot Dollar Rate (JISDOR).
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