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Jakarta Post

Trade balance posts surplus following slowdown in imports

  • Linda Yulisman

    The Jakarta Post

Jakarta   /   Tue, September 2, 2014   /  09:10 am

Indonesia'€™s trade balance tilted back into positive territory again in July after pressure from soaring imports was eased by slower production activities as the world'€™s largest Muslim-majority country observed Ramadhan and Idul Fitri.

The nation'€™s trade balance posted a slim surplus of US$123 million, in contrast to a deficit of $305.1 million in June.

Imports plunged by 19.31 percent to $14.05 billion in July from the same period last year, while monthly exports dropped 6.03 percent to $14.18 billion during the same period.

'€œThe main factor is reduced work time. We lost around 30 percent of normal production time throughout July,'€ Central Statistics Agency (BPS) deputy head for distribution and service statistics Sasmito Hadi Wibowo told reporters during the trade-data announcement on Monday. Factories were closed for at least a week during the Ramadhan fasting month and Idul Fitri holidays in July.

On a month-on-month basis, imports tumbled by 10.47 percent while exports declined by 7.99 percent.

  • Trade balance posted $123m surplus in July vs $305.1m deficit in June
  • Imports plunged 19% as Idul Fitri holiday reduced manufacturing activities, demand

Non-oil and gas imports were the main reason behind the significant drop in imports in July, as they declined 19.5 percent from June to July, enough to offset a 22.4 percent rise in oil and gas imports that had been straining the country'€™s trade balance and external accounts in the previous months.

Non-oil and gas imports accounted for 70 percent of July'€™s total imports, while the remaining 30 percent came from oil and gas products.

The dramatic drop in imports in July was seen in 10 key import elements, particularly capital goods, raw materials and intermediary inputs.

Imports of machinery and mechanical equipment declined by 21.36 percent to $1.9 billion, while inbound shipments of machinery and electrical tools shrank by 13.26 percent to $1.21 billion in July
from June.

Sasmito said the slowdown in imports might not be sustainable and they, as well as exports, were expected to pick up in the upcoming months, as the historical pattern showed higher overseas purchases at the end of the year.

Trade balance January-July 2014
(in billions of US dollars)

                 Jan-July 2013    Jan-July 2014
Total exports        106.16              103.00
Oil and gas            18.61                18.23
Non-oil and gas      87.55                84.77
Total imports        111.83              104.01
Oil and gas            26.24                25.95
Non-oil and gas      85.58                78.06
Deficit                     5.67                  1.01

Cumulatively from January to July this year, the trade balance registered a $1.01 billion deficit, compared to the $5.67 billion gap recorded during the same period last year.

Bank Danamon economists Dian Ayu Yustina and Anton Hendranata projected a more gloomy outlook, saying the prospect for exports remained subdued as overseas demand for manufactured goods, particularly from advanced countries, had yet to recover, and would thereby be unable to offset persistently weak commodity exports.

'€œOne of the positive sides of the exports outlook is the agreement reached by the government and the large mining corporations that has allowed exports of mineral concentrates to resume. We may see some impact from this in the coming months,'€ they said in their research note.

A law banning the export of raw mineral ores took effect earlier this year and has led to suspended production by miners here, which has reduced exports from the country.

But the miners have recently agreed with the government to build domestic processing facilities in order for them to be able to resume exports.

Standard Chartered economist Eric Sugandi said any increase in export revenue might remain limited due to weak commodity exports, while the gains from mineral shipments would also be moderate.

Recovery in the country'€™s trade balance, he added, would rely heavily on a slowdown in imports.

'€œImports may further decelerate in the upcoming months although the decline may not be as steep as seen in July, notably because manufacturers already imported massively in April,'€ Eric explained.

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