Analysts caution that keeping the momentum could become an uphill battle amid mounting pressure from Trump’s tariff threats.
Indonesia recorded an unexpectedly large trade surplus of US$3.5 billion in January, fuelled by weaker-than-expected imports, based on the country’s statistics bureau.
The figure, released on Monday (Feb 17), far exceeded Bloomberg analysts’ forecast of a US$1.9 billion surplus and marked the country’s 57th consecutive month of surplus.
Analysts cautioned however that sustaining this surplus could become an uphill battle amid escalating trade tensions. Indonesia is facing mounting pressure as US President Donald Trump ramps up tariff threats against countries with trade imbalances with the United States.
Indonesia’s export growth lost momentum in January, rising just 4.7 per cent year on year – falling short of market expectations of 7.4 per cent year on year.
Amalia Adininggar Widyasanti, acting head of Statistics Indonesia, said the slowdown was broad-based, with declines in both oil and gas as well as non-oil and gas exports. The deceleration was particularly seen in the mining sector.
Key commodities took a hit, as shipments of coal, iron and steel, as well as crude palm oil weakened.
The downturn was driven by a double blow. Both prices and volumes of these key exports trended downwards, underscoring the challenging trade environment.
Meanwhile, imports took an unexpected dip in January, contracting 2.7 per cent year on year – sharply diverging from market expectations of a 9.9 per cent increase.
The decline was largely driven by weaker demand for consumer goods and raw materials, while capital goods imports managed modest growth at 1.7 per cent year on year, albeit at a slower pace.
Josua Pardede, chief economist at Bank Permata, sees this downturn as temporary, attributing it to seasonal factors typically observed at the start of the year.
Uncertainties ahead
David Sumual, economist at Bank Central Asia, believes that while Indonesia’s trade surplus may continue in the near future, it is likely to weaken due to the uncertainty surrounding Trump’s tariff policies and the lack of new catalysts to drive commodity prices higher.
Having recently joined the Brics bloc, Indonesia now finds itself in the crosshairs of Trump’s tariff policies. Brics is an alliance of emerging economies comprising Brazil, Russia, India, China and other nations.
Recently, the US president signed a memorandum outlining a “Fair and Reciprocal Plan”, which calls for imposing reciprocal taxes on partner countries that engage in unfair trading practices.
Analysts at Nomura predicted that trade tax threats will continue to challenge Indonesia, which has long been flagged by the US Trade Representative as a trading partner with non-tariff barriers, including complex import licensing, unclear pharmaceutical product regulations, feed-corn import restrictions, strict standards for consumer goods, as well as mandatory halal certification.
The statistics bureau indicated that Indonesia’s substantial trade surplus was driven by strong trade with key partners such as the US and India.
The surplus with the US reached a notable US$1.6 billion in January, while with China, Indonesia recorded a trade deficit of US$1.8 billion.
Little room for cuts
The latest trade data will be among the key economic indicators under the Indonesian central bank’s microscope as it meets for its monetary policy review on Wednesday.
Despite shifting trade dynamics, analysts widely expect Bank Indonesia to keep interest rates unchanged, seeing little room for further cuts after its surprise reduction in January.
Pardede anticipates that Indonesia’s current account deficit will widen modestly in 2025, growing from 0.2 per cent to 0.7 per cent of gross domestic product, with further expansion expected to reach 1.2 per cent by the end of the year.
“We see the widening current account deficit to limit the room for Bank Indonesia rate cuts, especially amid global uncertainty that hampers capital inflow, highlighting the importance of monetary policy in maintaining the rupiah’s stability and curbing imported inflation,” he said.
Source: The Business Times
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
