The government has vowed to ensure that its current policies will help reduce the country’s trade deficit, which reached a record-breaking US$2.05 billion in November, the highest since 2013.

Finance Minister Sri Mulyani Indrawati told reporters on Monday that the government would keep on intensifying the implementation of its current policies in combating the trade deficit, such as Finance Ministerial Regulation No. 110/2018, which imposed higher import taxes for 1,147 consumer goods.

“As for other sectors in both oil and gas and non-oil and gas, we need to take into account the domestic capability to come up with [import] substitutions, so we will focus on it,” she said in Jakarta.

Sri Mulyani argued that the trade deficit was caused by external factors, saying that the economic slowdown in some of Indonesia’s trade partners, such as its largest one, China, had affected their demand for Indonesian products.

“We have to look at it carefully. China’s economic growth is being adjusted both because of its internal policies and the trade war [with the United States],” she said. “New markets [such as Latin America and Africa], meanwhile, in this current economy, probably tend to be sluggish, so they have limited capability to absorb exports as well.”

Her claim is backed by Statistics Indonesia (BPS) data showing that Indonesia’s non-oil and gas exports to China had dropped by $153.8 million in November, whereas in October, the figure increased by more than $243 million.

Nevertheless, the Asian giant remains Indonesia’s main export destination with year-to-date (ytd) exports reaching $22.7 billion in November, along with the US and Japan at $16.2 billion and $15.1 billion, respectively.

The BPS announced on Monday that the November deficit had surpassed other big blows to the trade balance, such as in July and October when the balance hit negative $2.03 billion and $1.82 billion, respectively, bringing the ytd deficit to a staggering $7.52 billion as of last month.

The oil and gas balance is also taking blame for the deficit despite the decline in global oil prices, BPS head Suhariyanto said in a press briefing.

He pointed out that in line with the global oil price indexes, Indonesia Crude Price (ICP) was recorded at $62.98 per barrel in November, much lower than $77.56 per barrel the month before.

While month-to-month (mtm) oil and gas imports declined 2.8 percent to $2.84 billion, ytd oil and gas imports had increased by 22.16 percent to $173.3 billion compared to last year.

“The cause of the deficit is not much different [than the previous months], because there was a ytd oil and gas deficit of $12.21 billion, whereas non-oil and gas actually recorded a $4.6 billion ytd surplus,” Suhariyanto said.

The deficit is likely to put more pressure on Indonesia’s current account deficit, which has swelled to 3.37 percent against gross domestic product (GDP) at $8.85 billion in the third quarter of 2018, the highest for four years.

The heavy depreciation of the rupiah over the past few months had worsened the swelling current account deficit. On Monday, the rupiah strengthened slightly to Rp 14,580 per US dollar, from Rp 14,581 per US dollar a day earlier.

Overall, imports decreased 4.47 percent mtm to $16.88 billion, while mtm exports declined 6.7 percent to $14.83 billion last month. Year-on-year, meanwhile, exports declined 3.3 percent and imports went up 11.7 percent.

Bahana Sekuritas economist Satria Sambijantoro said in a research note on Monday that the latest trade deficit was mainly export-driven, rather than import-caused, adding that Indonesia might need higher interest rates to lure inflows and recover the current account deficit as well as the balance of payment.

However, he expected that Bank Indonesia (BI) would keep its interest rate unchanged at 6 percent this week.

Popular

To my horror, it’s just a movie!

RI, Australia strengthen partnership on taxing crypto assets

Pentagon chief congratulates Prabowo on being elected President