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RI books another trade surplus as oil imports fall
Indonesia recorded a trade surplus for the second consecutive month in March but economic analysts warn that it will be difficult to maintain the positive performance in the coming months as imports are likely to continue to swell
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span>Indonesia recorded a trade surplus for the second consecutive month in March but economic analysts warn that it will be difficult to maintain the positive performance in the coming months as imports are likely to continue to swell.
The trade surplus reached US$540 million last month as exports grew by 11.71 percent month-on-month (mom) to $14.03 billion although imports grew by 10.31 percent to $13.49 billion over the same period.
It was the second surplus recorded in the first quarter of the year after the $330 million surplus in February. However, if compared to the same month last year, exports declined by 10 percent
Statistics Indonesia (BPS) head Suhariyanto said in Jakarta on Monday that the increase in exports was primarily driven by non-oil and gas exports as double-digit mom growth was recorded in exports of agriculture, manufacturing and mining products. Among the commodities that recorded the biggest mom gains last month were minerals, iron and steel, and ores, slag and ash.
Increases in imports, meanwhile, were driven by a 13.49 percent mom growth in consumption goods as well as a 12.34 percent mom growth in raw materials and auxiliary goods. The upturn in imports was led by increases of electrical machinery and equipment, mechanical appliances as well as iron and steel imports, among others.
The latest data brought the trade deficit during the first quarter of the year to $193 million, in contrast to the $314 million surplus recorded over the same period last year.
Bank Central Asia (BCA) chief economist David Sumual said the monthly trade surplus in March was beyond the expectations of economists, many of whom previously projected the trade balance during the month would slide back into deficit.
He cited the government’s program mandating the wider use of 20 percent blended biodiesel (B20) to reduce diesel imports as one factor that contributed to the downturn in oil and gas imports, which is one of the major causes of the trade deficit in Indonesia’s trade balance.
Oil and gas imports were down by 31.25 percent year-on-year (yoy) to $1.54 billion in March, BPS data revealed. The government has implemented a wider mandate to use B20 since September last year in a bid to lower diesel imports as part of a concerted effort to bring down the current account deficit.
While saying that the relatively stable non-oil and gas exports had helped to bring the trade balance into a surplus, David said it would be difficult to maintain the trade surplus at least in the short term due to seasonality factors.
“There are challenges ahead of Ramadan and the Idul Fitri holiday period, during which the imports of consumer goods and raw materials increase,” said David, adding that Indonesia’s manufacturing index had increased in March, therefore signaling that domestic industries have started to expand their production, which could in turn lead to a further increase in imports.
Center of Reform on Economic (CORE) Indonesia executive director Muhammad Faisal echoed David’s view, saying that the trade balance in 2019 would perform better than last year’s.
“Our trade deficit in 2019 could potentially be smaller [compared to 2018],” said Faisal, arguing that signs that the United States and China would be able to settlle their trade conflicts would contribute to the positive outlook.
Indonesia booked a $8.57 billion deficit last year, the largest since 1975, as imports outgrew exports.
Faisal, however, noted that challenges also remained as Indonesia’s crude palm oil (CPO) exports were still unable to fully penetrate European Union markets.
He said March’s trade balance data was considered “healthier” compared to February as non-oil and gas exports were growing mom, while double-digit growth in raw materials and auxiliary good imports also indicated an increase in activities from the domestic manufacturing industry.
Commenting on the latest BPS data, Coordinating Economic Minister Darmin Nasution said the March trade balance would help bring down the current account deficit. As the trade war between the US and China was beginning to de-escalate, it would also have a positive impact on Indonesia’s capital inflow, he added.
