Indonesia Records Large Trade Surplus in June

Citing an article published by Reuters, regional newswires including Channel News Asia are reporting that Indonesia recorded a large trade surplus of USD 3.46-billion in June, as imports fell more than expected and exports also remained weak, official data showed on Monday, adding to the case for possible rate cuts before year-end.

A Reuters poll of economists had expected a surplus of USD 1.35-billion last month. The country recorded a surplus of around USD 440-million in May.

However, the resource-rich country’s overall trade surplus in the first half of 2023 remained some USD 5-billion below last year’s. Indonesia’s January-June trade surplus stood at USD 19.93-billion, data from the statistics bureau showed.

Analysts expect the surplus in merchandise trade for Southeast Asia’s largest economy to narrow this year as exports soften amid declining prices of its top commodities, including palm oil, coal and nickel, and weakening global demand, say Channel News Asia.

Exports fell 21.18-percent on a yearly basis to USD 20.61-billion in June, deeper than the 18.85-percent fall expected in the poll.

Shipments of coal and palm oil suffered the biggest drop while imports were down 18.35-percent on a yearly basis to USD 17.15-billion, compared with the poll’s forecast of 7.75-percent contraction with purchases of raw materials falling the most.

Channel News Asia say the data suggest the central bank has room to cut interest rates before the end of the year, said Fakhrul Fulvian, economist with Trimegah Securities.

Trimegah predicts Bank Indonesia (BI) will cut rates by 50 basis points this year, assuming Indonesia runs a current account surplus equivalent to 0.3-percent of GDP in 2023.

BI raised rates by 225 basis points between August to January to fight rising inflationary pressures.

Inflation has since cooled to within the bank’s target range, prompting calls from some economists for policy easing, but nearly two-thirds of respondents in a mid-June Reuters survey of analysts still predicted BI will keep rates steady for the rest of the year.

BI’s next policy review is scheduled for July 24-25.

Source: Channel News Asia, Reuters

Image by Tom Fisk on Pexels

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