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ECONOMIC UPDATE - External trade review - Highest export in 2020



Unexpected trade performance 

Statistics Indonesia recorded trade surplus at USD2.61 bn in Nov-20. The surplus is higher than our and consensus estimates at USD1.61 bn and USD2.60 bn, respectively. Nov-20 trade performance is special as it recorded the highest export growth since Oct-19 and successfully maintained its seventh monthly trade surplus in a row. The export increased by 6.36% MoM (9.54% YoY) or recorded USD15.3 bn of total export. Besides, import decreased by 17.4% MoM (-17.5% YoY) resulting USD12.7 bn of total import. The global economic recovery, higher global public mobility index as well as worldwide positive sentiment from the vaccine will lead to the better trade performance in Dec-20. 


Highest export since last 13 months

Good news comes as Nov-20 recorded the highest export growth since Oct-19 or the last 13 months. Prices hike on some important commodities such as ICP, palm oil and coal supported the higher export where it increased by 6.83% MoM, 12% MoM and 7.57% MoM. On the other hand, as the consequence of the global recovery, gold slipped down by 1.79% MoM. Based on its sector, all of sector grew positively (OG, agriculture, manufacture and mining) in monthly basis. From non-OG sector, the biggest contributor came from Animal/Vegetable Fats and Oil (HS 15) where it grew by 23.6% MoM to USD2.35 bn. 


Indonesia international vehicle test site

In Dec-20, Ministry of Transportation (MoT) mentioned about finishing the Rp1.64 tn (USD116.5 mn) of international standard motor vehicle "proving ground" within the next 4 years. This biggest proving ground in ASEAN aims to support Indonesian automakers in capturing the ASEAN market. Association of Indonesian Automotive Manufacturers (Gaikindo) recorded 180,903 of completely built up (CBU) vehicles in Oct-20. Optimistically, Gaikindo aims to export 1 million units by 2025. This brings positive sentiment for Indonesia future trade performance, as vehicles are high value added exports.


Expansion of manufacturing sector

The higher import was triggered by the better domestic manufacturer performance. The IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) rose from 47.8 in Oct-20 to 50.6 in Nov-20. The index signifies the economic recovery, supported by the loosening of PSBB in mid-October. All of imported goods based on its usage increased in monthly basis; consumption goods (25.5%), intermediary goods (13%) and capital goods (31.5%). Based on the goods classification, Machine and Mechanical Equipment (HS 84) was the highest contributor of import where it increased by 8.3% MoM to USD1.91 bn as it contributed 17.2% of total import. 


Room for rate cut

The relatively high trade surplus in Nov-20, low inflation at 1.59% YoY in the same month and other indicators provide room for BI to trim policy rates further. However, we still expect that BI is unlikely to cut BI-7DRRR as the domestic economic recovery especially household’s purchasing power continues at slow pace. Thus, we see BI will keep the rate unchanged at 3.75% in a move to safeguard the country’s macroeconomic stability amid recessionary risks from the pandemic.