JAKARTA: Hopes that Indonesia in July would end a long streak of declining exports and imports were shattered, as both tumbled on an annual basis during the holiday-shortened month. A Reuters poll of analysts had expected July to show the first growth of exports and imports in 22 months because of a low base effect from last year. But Indonesia’s statistics bureau on Monday said exports and imports were even worse than last year, falling by 17.02 percent and 11.56 percent respectively.
July export and import values were at their lowest in any month since 2009, which the bureau attributed to only 16 effective working days in the month due to Eid al-Fitr celebrations after the Muslim fasting month. “We think that aside from Eid al-Fitr, global demand was also low. If we look at China, its imports from all over the world were down 12 percent in July,” bureau chief Suryamin told reporters. China is among Indonesia’s biggest trade partners. Oil and gas exports in July were particularly weak, plunged nearly 30 percent from a year earlier. Indonesia reported a $598.3 million trade surplus for July.
Rangga Cipta, a Samuel Sekuritas economist in Jakarta whose 5.90 percent export contraction forecast was the lowest in the Reuters poll, said July trade data would affect Bank Indonesia’s (BI) strategy to manage the rupiah exchange rate. “In the middle of large (portfolio) inflows, BI will want to maintain the rupiah weaker than it should,” he said, adding that the central bank would probably want to build its foreign exchange reserves.
A weaker rupiah should help boost exports of manufactured products. But last year, a weak currency did not aid exports as a large portion of Indonesia’s products were commodities. BI is due to conclude a two-day policy meeting on Friday to review its monetary stance. It has cut its benchmark rate four times totalling 100 basis points this year.
Due to large portfolio inflows, the rate cuts have not weakened the rupiah. Instead, it has gained about 5 percent so far this year. BI has previously said it was comfortable with the rupiah exchange rate around 13,100 per dollar. The rupiah traded at 13,120 against the dollar at 0530 GMT on Monday. July trade data also suggests exports could continue to be a drag economic growth in the third quarter, Cipta added. On Aug. 4, Indonesia reported stronger-than-expected second quarter annual growth of 5.18 percent, due partly to a moderation in how much export earnings contracted, as global commodity prices inched higher.
