Indonesia: Indonesia records a trade surplus in October; exports and imports continue to decline
According to Statistics Indonesia, the country recorded a trade surplus of USD 0.2 billion in October, contrasting market expectations of a deficit and driven by a softer-than-expected fall in exports. October’s reading also contrasted the USD 1.8 billion deficit recorded in the same month last year.
Exports and imports continued to decline in October (-6.1% year-on-year and -16.4% yoy respectively). The decline in exports came on the back of lower oil and gas, and non-oil and gas exports, amid low commodity prices and a challenging external environment. The sharp fall in imports can likely be explained in part by government import substitution policies designed to rein in the current account deficit, as well as muted oil prices.
Regarding the implications of the results for the current account deficit, analysts at Nomura comment: “We maintain our view that the CAD will remain on a gradually improving trajectory after it narrowed moderately in Q3, mostly due to a higher trade surplus.”
Looking forward, exports and imports should return to growth next year on a more supportive base effect, although the recovery is likely to be modest. In the case of imports, capital goods imports could ramp up on stronger infrastructure spending.