Indonesia has again logged a trade surplus in a trend that began in May last year as commodity prices have picked up while the COVID-19 pandemic has battered demand for imported goods. According to data published by Statistics Indonesia (BPS) on Monday, Indonesia booked a surplus of US$1.96 billion in January. While the surplus is the lowest since June, with both exports and imports down from the previous month, the figure marks a stark contrast to a trade deficit of $640 million registered in January last year. Exports fell to $15.30 billion in January, down 7.48 percent from $16.54 billion in December 2020, which was the highest figure since 2013. Despite the monthly drop, exports in January are up 12.24 percent from the same month last year as major trading partners like China have re-emerged from the pandemic. Imports in January, however, were down both from the previous month and from January last year, falling by 7.59 percent month-to-month (mtm) and 6.49 percent year-on-year (yoy) to $13.34 billion amid low demand for raw materials and capital goods for manufacturing. “One thing that has to be our concern is imports that are still declining,” BPS head Suhariyanto said in a virtual press conference on Monday, adding that the imports remained “below expectations.” Like global trade, Indonesia’s trade has suffered from the pandemic, which has caused logistical disruptions and declines in domestic demand and purchasing power as a result of social restrictions implemented to curb the virus spread.

Last year, Indonesia booked its second-highest trade surplus in history at $21.74 billion, mainly driven by a steep decline in imports while exports took a less severe hit.

Indonesia’s gross domestic product (GDP) shrank by 2.07 percent last year as almost most GDP components fell. That marked the country’s first annual contraction since the 1998 Asian financial crisis. Suhariyanto said the rise in exports had been driven not only by increased demand from trading partners, but also by higher prices of commodities including coal, copper, nickel, tin and gold. “Coal prices, for example, rose by 4.58 percent from December, and if we compare it year-on-year, coal prices rose by quite a significant 24.56 percent,” said Suhariyanto. Mining products booked the highest increase in exports, rising by 16.92 percent yoy, due to an increase in shipments of copper ore. Exports of manufactured goods, which accounted for around 78 percent of total exports, rose by 11.72 percent yoy to $11.99 billion, driven by higher shipments of palm oil. Exports of agricultural products jumped by 13.91 percent to $337 million, driven by rising exports of bird nests, while exports of oil and gas products were up by 8.3 percent at $883.9 million.

Meanwhile, although the pandemic has led to declines in most imports, Indonesia’s imports of pharmaceutical products rose more than twofold to $259.7 million in January from December, the highest monthly increase among all categories. The increase was driven largely by imports of vaccines as the country gears up for mass inoculation against COVID-19. Vaccines imports accounted for 67.65 percent of all pharma imports in January. Imports of capital goods led the decline by 10.72 percent yoy to $1.99 billion in January, while raw material imports dropped 6.10 percent yoy to $9.93 billion. Imports of consumer goods showed a less severe decline to $1.42 billion, down 2.92 percent yoy. “The fall in capital goods imports was quite steep,” Andry Satrio, an economist at the Institute for Development of Economics and Finance (Indef), told The Jakarta Post in a voice note. “This is because the current utilization of [business] capacity has been able to meet existing demand since economic activities remain restricted,” he said. “This means, with the current capacity, domestic demand has been met, so there are no signs of adding more [capacity] unless economic activity recovers.”

However, IHS Markit's Manufacturing Purchasing Managers’ Index (PMI) for Indonesia continued its upward trend, by rising from 51.3 in December to 52.2 in January, reaching a six-year high. A reading above the 50-point threshold reflects an expansionary trend in the sector from a month earlier. With signs of recovery, the country was forecast to see another trade surplus this year, but the figure was expected to be smaller than last year’s, said Mohammad Faisal, executive director of the Center for Reform on Economics (CORE) Indonesia. Imports were expected to pick up “slowly but surely,” while growth in exports would remain high. “Although the pandemic is still prevalent and there are the PPKM, their [weak] implementation barely brings about a reduction in mobility, especially in goods and services transactions,” Faisal told the Post in a phone interview, referring to the government’s public activity restrictions imposed in Java and Bali. Faisal added that, with the trade surplus narrowing, the country’s current account deficit was expected to widen this year. Bank Indonesia has forecast a current account deficit between 1 percent and 2 percent of GDP for this year. In the third quarter of last year, the country booked its first surplus in the current account since 2011 at $1 billion, equal to 0.4 percent of the GDP.

With Indonesia’s economy expected to rebound this year, Fitch Solutions has estimated 6 percent yoy growth in goods and services exports and 5 percent yoy growth in goods and services imports, according to its report released on Feb. 5. “Import growth continues to lag behind that of exports; however, as investment activity increases, we see the potential for capital imports to pick up pace over the course of 2021,” the report reads.
Source: https://www.thejakartapost.com/news/2021/02/15/indonesia-books-trade-surplus-again-amid-concerning-import-decline.html