Indonesia’s trade surplus narrows in May

Indonesia has released mixed data of its trade figures for the month of May. The country’s exports failed to rebound as projected, while imports recovered significantly above forecasts. Indonesia’s exports dropped 9.75 percent on a year-on-year basis as compared with consensus expectations of a drop of 7.8 percent.

Meanwhile, imports declined 4.12 percent on a year-on-year basis, as compared to the consensus expectations of a decline of 5.83 percent. Indonesia’s trade surplus has narrowed to IDR 370 million in May from IDR 667 million in April.

The surprising improvement in imports appears to have been due to price effects. A series of commodity and food prices aligned with the Asian consumption basket have been recovering sharply in terms of US dollar since the beginning of 2016.

Also, the high realisation of the Jokowi ‘stimulus’ measures announced in the past year has also supported the dynamic performance of imports, said ANZ in a research report. This is likely to have resulted in a slight increase in the value-added content of the imports mix. Exports are possibily reacting to the recent signals of stability in China’s economic activity. But, China is currently a lower source of demand structurally for the region, added ANZ.

The reaction of exports and the expected move to a higher value-added content of the imports mix indicate that Indonesia’s trade surplus will continue to narrow going forward, noted ANZ.