Indonesia’s trade surplus raises the probability for another rate cut from BI

Indonesia's January trade balance recorded a minor surplus of 50 million USD, as compared to market expectation of 241million USD deficit. However, the overall trade activity remains subdued as exports declined 20.7% y/y against market estimate of -15.2%. This improvement in the trade balance comes in as energy trade registered a 114 million USD deficit, while the non-energy trade balance recorded 165million USD surplus.

Commodity exports remained fragile as non-oil and gas shipments declined 16.8% y/y versus its previous print of 13.7% y/y decrease in December. Similarly, imports also fell 17.2% y/y against markets consensus of an 8.7% y/y decline. The import growth is likely to pick up momentum on the back of infrastructure spending, despite slump in January.

The economic conditions are likely to improve in 2016, with initiation of several public infrastructure projects, further aided by government disbursements and additional monetary policy stimulus.

"Bank Indonesia (BI) cut its policy rate 25bp, to 7.25%, in January, and with today's report showing the trade deficit remains under control, we believe the probability of another rate cut from BI this week has risen at the margin" says Barclays in a research note