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Jakarta Post

BI predicts $500m trade surplus in March on exports of manufactured goods

  • The Jakarta Post

    The Jakarta Post

  /   Tue, April 22, 2014   /  11:11 am

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.

'€œOur 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. '€œThe 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.

'€œThe 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.

'€œMeanwhile, 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).

JP/Satria Sambijantoro

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