21th straight month of surplus
Statistics Indonesia reported a thin trade surplus at USD932.9 mn in Jan-22. The surplus was higher than our estimate and consensus at USD35 mn and USD199 mn, respectively. This is the smallest trade surplus since Apr-20 where it recorded a USD372.1 mn of trade deficit. In Jan-22, export rose by 25.3% YoY to USD19.2 bn, while import rose by 36.8% YoY to USD18.2 bn. However, both export and import slipped on monthly basis by 14.3% and 14.6% respectively. The trade figure underperformed due to the export ban on coal in Jan-22.
Commodity price ticks up
Despite of the commodity prices normalization trend, some Indonesia’s important commodity prices ticked up in Jan-22 such as ICP (16.7%), palm kernel oil (17.9%), nickel (11.7%) and aluminum (11.5%) on monthly basis. Based on sector, all of them showed decrease on export in monthly basis. The top laggard was mining and others sector that plummeted by 42.9% MoM due to the export ban on coal. On the selected non-OG sector, the biggest contributor (13.3% of total export) came from Animal and Vegetable Fat (HS 15) where it decreased by 18.5% MoM to USD2.42 bn. As for the selected top export commodities, the highest growth came from Ores, Slag and Ash (HS 26) at 66.2% MoM to USD951.6 mn.
Expansive domestic manufacturer
IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) inched up from 53.5 in Dec-21 to 53.7 in Jan-22. The index moved above the 50-threshold for fifth straight month, signifying the expansion. The notion of international trade recovery is proven, as there was a rise in new orders supported by the stronger foreign demand on Indonesia manufacturers’ products. Manufacturing sector is significant as the import of raw material/intermediary goods is 75.9% of total import. All of imported goods based on the usage decreased on monthly basis: consumption goods (-36.6% MoM), raw material/ intermediary goods (-11.4% MoM) and capital goods (-13.5% MoM). On the selected non-OG sector, the biggest contributor (15.9% of total import) came from Machinery (HS 84) where it decreased by 15.8% MoM (+42.9% YoY) to USD2.56 bn. From the highest growth, it was Cereals (HS 10) at 60.7% MoM (55.2% YoY) to USD345 mn.
Impact of coal export ban
In Jan-22, the government banned coal export after the supplies at domestic power plants fell to critically low levels. As consequence, the coal export by volume dropped by 59.1% MoM alongside with the coal price drop by 0.81% MoM. This is significant as coal export makes up around 14% of Indonesia’s total export. However, the ICE Newcastle Exchange noted that the coal contract in Feb-22 had strengthened 5.90 points to USD245 per metric ton. The increase occurred amid the increasing demand from coal for power plants in the global market. We are expecting the better trade surplus in Feb-22 as the export ban has been lifted in the end Jan-22. Especially, the Ministry of Energy and Mineral Resources has set higher reference coal price (HBA) to reach USD188.38 per metric ton for Feb-22 (vs USD158.5 per metric ton in Jan-22).
Unchanged policy rate
Although Indonesia recorded a thin trade surplus, it still provides liquidity and stronger external resilience for Indonesia. As we expected before, Indonesia has to say goodbye to thick trade surplus due to the normalization of commodity prices although in Jan-22 there were several increases on commodity price. Then, we expect the trade balance to go back to deficit in 2Q22. Thus, we expect export and import will form GDP with 5.2% and 6.1% of growth only by the end of 2022. All in all, amid the thin trade surplus, we see that Bank Indonesia (BI) will hold the BI-7DRRR at 3.5% in the next BoG Meeting in Mar, 16th – 17th 2022 as there is no fundamental uptick in inflation so far.