Better trade performance
Sustaining the previous trade surplus at USD1.96 bn, Statistics Indonesia reported the trade surplus at USD2 bn in Feb-21. The surplus is lower than our and consensus estimates at USD2.12 bn and USD2.29 bn, respectively. The surplus successfully maintained its 10th monthly trade surplus in a row. The export decreased by 0.19% MoM (+8.56% YoY) or recorded USD15.3 bn of total export. Besides, import slipped by 0.49% MoM (+14.9% YoY) resulting USD13.3 bn of total import. We see this is a good sign because the deceleration on import gets smaller over time. The higher import means a growing domestic manufacture as the imported intermediary goods for production has the biggest share at 74.6% of total import. Thus, we see the economic recovery may lead to the smaller trade surplus ahead as the import grows due to the higher demand of imported input for domestic production.
Higher price on major commodities
Some important commodities show higher price such as ICP, palm kernel oil and rubber where it increased by 13.5% MoM, 2.73% MoM and 2.12% MoM respectively. The price hike on commodity played a significant role to boost the export performance. Based on its sector, all of sector (OG, agriculture, manufacture and mining) slipped in monthly basis, except manufacture that grew at 1.38% MoM, but all grew positively in yearly basis. The highest growth came from manufacture sector as it grew by 9.0% YoY. From non-OG sector, the biggest contributor (14.2% of total export) came from Animal/Vegetable Fats and Oil (HS 15) where it decreased by 27.1% MoM to USD1.72 bn. From the top export commodities, the highest growth came from Organic Chemicals (HS 29) which grew by 33.7% MoM to USD239 mn while Ores, Slag and Ash (HS 26) contracted the most by 43.8% MoM to USD181 bn.
Domestic manufacturer plays part
The IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) slipped from 52.2 in Jan-21 to 50.9 in Feb-21. The index moved above the 50-threshold anyway, signifying the economic recovery but weaker as the pandemic still disrupted the business operations. Based on the usage, all of them decreased in monthly basis except capital goods (+9.08%): consumption goods (-13.8%) and intermediary goods (-0.50%). Based on the goods classification, Machine and Mechanical Equipment (HS 85) was the highest contributor (15.2% of total import) where it decreased by 10.0% MoM to USD1.89 bn. From the top import commodities, the highest growth came from Residues and Waste from Food Industries (HS 23) which grew by 61.6% MoM to USD341.1 mn. Meanwhile, Airplane Parts (HS 88) contracted the most by 77.6% MoM to USD18.8 bn.
Expecting unchanged rate in Feb-21
As the Covid-19 emergency stroke earlier in some countries back then in Feb-20, this bode well for Indonesia trade balance figure in Feb-21 on low base effect. Actually, the improvement is relatively small in Feb-21 but the low initial trade figure translates to a large percentage change. Despite of the high trade surplus, we see that Bank Indonesia (BI) will hold the BI-7DRRR as the rate cut just has been done in Feb-21 amid the big room for rate cut. However, BI still uses the wait and see approach as the FOMC Meeting will be held one day earlier before the next BoG Meeting in Mar 17th - 18st 2021.