JAKARTA: Indonesia posted a small trade surplus in January, confounding expectations for a third monthly deficit, due largely to a slump in imports from persistently weak domestic consumption.
Sliding prices for oil, gas and other commodities have led to a sharp drop in export earnings for Southeast Asia’s largest economy, and deteriorating global demand could push the central bank to cut rates again this week, some economists said.
Exports plunged 20.72 percent in January to $10.50 billion, the weakest shipment by value since September 2009 and the 16th straight month of decline. Economists surveyed had expected a 15.40 percent drop. Imports fell 17.15 percent, sharper than economists’ estimates of 8.14 percent, data from the statistics bureau showed. Imports of raw material and capital goods were all down, the bureau said, but imports of consumer goods rose.
Weaker than forecast exports and imports led to a $50.6 million surplus in January. A Reuters poll of analysts had expected a $360 million deficit for the month, following a revised $161 million deficit in December.
“It’s a disappointing import number,” said Gundy Cahyadi, DBS’ economist in Singapore. “For GDP growth to return to 5 percent this year, the economy needs stronger domestic demand, particularly investment. And the monthly import numbers are a good proxy for the strength in domestic demand,” he added. Indonesia’s trade balance moved back into surplus in 2015, after three years of deficits, largely due to a fall in imports as consumption and investment stayed weak.
The government is targeting 5.3 percent GDP growth this year after the economy grew at its slowest since the 2009 financial crisis last year. Some economists expect bigger government spending on infrastructure to lead to a recovery in imports this year while pressure on its exports from sliding commodity and oil prices will continue to hamper a turnaround in the economy.
Economists say the country must transition to stronger manufacturing as commodity exports stay under pressure amid weak global demand and weak currencies. ANZ said Indonesia will face more downward pressure from falls in commodity prices and Monday’s data reinforces its view for a rate cut this week.
“The weakness in imports in particular, aligns with soft domestic demand, and reinforces our conviction that Bank Indonesia will be cutting rates this week,” said Glenn Maguire, ANZ’s chief economist for South Asia, ASEAN and Pacific. Bank Indonesia cut interest rates for the first time in nearly a year at its most recent meeting in January and is scheduled to meet again on Feb. 17-18.
