Indonesia: Exports bounce back in December; imports continue to decline
January 15, 2020
According to Statistics Indonesia, the country posted a trade deficit of USD 28 million in December, markedly smaller than the USD 470 million deficit expected by market analysts and the USD 1.1 billion deficit a year prior. Over 2019 as a whole, the trade deficit narrowed sharply from USD 8.7 billion to USD 3.2 billion.
The smaller-than-expected shortfall in December was driven largely by a rebound in exports, which recorded the first annual expansion in 14 months (December: +1.3% year-on-year; November: -6.1% yoy) thanks to higher non-energy shipments. In contrast, imports continued to fall (December: -5.6% yoy; November: -9.2% yoy) amid the government’s import substitution policies designed to rein in the current account deficit.
Analysts at Nomura commented that the lower trade deficit: “supports our view that the CAD remains on an improving trajectory. We reiterate our forecast for the CAD to narrow to 2.8% of GDP in 2019 and 2.6% in 2020 from 3% in 2018. This narrowing has been helped in part by import-substitution policies, which have continued to take effect and are in fact being intensified. Beginning in January 2020 the government will implement a B30 biofuel policy, which we think will help reduce fuel imports. That said, we expect the narrowing of the CAD to be only modest.”
Author: Oliver Reynolds, Economist