Indonesia: Indonesia records a trade deficit in September, decline in exports and imports softens
According to Statistics Indonesia, the country recorded a trade deficit of USD 0.2 billion in September, contrasting with market expectations of a surplus and driven by a much slower fall in imports. September’s reading also contrasted the USD 0.3 billion surplus recorded in the same month last year.
While exports and imports both declined in September (-5.7% year-on-year and -2.4% yoy respectively), both contractions were weaker than in August and softer than markets had expected. The decline in exports came on the back of lower oil and gas, and non-oil and gas exports, while a rise in non-oil and gas imports partially offset a further decline in oil and gas imports. Lower non-energy exports can likely be linked to weak global economic momentum, while the fall in energy imports can be explained by government import substitution policies designed to rein in the current account deficit.
Regarding the implications of the September trade figures for the current account deficit, analysts at Nomura comment: “We maintain our view that the CAD remains on a gradually improving trajectory after a deterioration in Q2, partly due to seasonal effects. The September trade data bring the accumulated trade balance to just -USD112mn in Q3, a substantial improvement from the USD1.77bn deficit in Q2. W?e reiterate our forecast that the CAD will narrow to 2.8% of GDP in 2019”.
Looking forward, exports and imports should return to growth next year on a more supportive base effect, while in the case of imports, capital goods imports could ramp up as part of the government’s infrastructure drive.