Indonesia: Indonesia records small trade deficit in July; exports and imports decline
August 15, 2019
According to Statistics Indonesia, the country recorded a trade deficit of USD 0.1 billion in July, contrasting June’s USD 0.3 billion surplus. However, July’s reading beat market expectations of a USD 0.4 billion deficit and was below the USD 2.0 billion deficit recorded in the same month last year.
July’s reading came amid a softer decline in exports (July: -5.1% yoy; June: -8.9% yoy). However, this was due in large part to a 275% increase in refined oil products, which could prove temporary. Non-oil and gas exports were down sharply, against a backdrop of sagging global trade. Meanwhile, imports sank (July: -15.2% yoy; June: +2.0% yoy) amid government measures to narrow the current account deficit.
Regarding the implications for the current account, which is a cause for concern for the government and the Central Bank, economists at Nomura commented: “Overall, the July trade deficit remains consistent with our view that the current account deficit (CAD) is on a gradual path of improvement this year and that the deterioration in Q2, which is partly seasonal, is the low point for the year. In addition, we think that the government’s import substitution policies are going to be increasingly effective in reducing the CAD”.
Exports and imports are likely to remain soft in the months ahead on trade tensions and import substitution policies respectively.
Author: Oliver Reynolds, Economist