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ECONOMIC UPDATE – External trade review – Trade surplus beat expectations on lower imports



Thicker trade surplus in February

Indonesia's trade surplus widened from USD3.87 bn in January to USD5.48 bn in February (41% MoM), boosted by an unexpected drop in imports, beating our and consensus estimates of USD3.23 bn and USD3.28 bn, respectively. It was the largest trade surplus since last November, On a yearly basis, data showed remarkable performance rising by 42% YoY from USD3.83 bn in the same month of the previous year. Indonesia extended the positive run of international trade since May 2020 or 34 straight months of trade surplus.


The windfall commodity price is over

The windfall commodity price starts to dim due to the global economy slowdown. In Feb-23, the price of leading commodities such as CPO and coal plunged by -44% YoY and -28% YoY to USD4,184/MT and USD196/Ton, respectively. On a monthly basis, CPO rose by 8% MoM but coal dipped by -26% MoM.  Indonesia has maintained the trade balance in surplus since the start of the pandemic, as  global commodity price surge boosting this number.  However, we believe  the easing commodity prices could result in narrowing surplus in the coming months.


Non-oil and gas exports slip on weaker commodity shipment value

Exports as a whole went down by -4.15% MoM to USD21.4 bn in Feb-23. To be specific, the non-oil and gas export contracted by -3.00% MoM to USD20.21 bn, while oil and gas tumbled by -20.26% MoM to USD1.19 bn. Based on the commodities group from 2-digits HS, the contributors toward weaker exports came from mineral fuels at -6.51% MoM (-USD277 mn); precious metals and jewelry/precious stones at -30.07% MoM (-USD244 mn); machinery and mechanical appliances and part thereof at -11.93% MoM (-USD68 mn); footwear at -13.78% MoM (-USD78 mn); and ores, slag, and ash at -29.86% MoM (-USD178 mn). 


Imports and PMI fall amidst Ramadan preperation

Indonesia will face the Ramadan season this month. Nevertheless, this moment did not significantly trigger imports and PMI a month before. The total import in February decreased by -13.68% MoM to USD15.92 bn in Feb-23 with oil and gas, and non-oil and gas import fell by -17.19% MoM and -13.03% MoM to USD2.41 bn and USD13.51 bn, respectively. The import was dominated by raw/intermediary goods (75% of total import). From the selected non-OG sector, the biggest contributor (16% of total import) came from machinery/mechanical appliances and part thereof (HS 84) where it also slipped by -7% MoM to USD2.28 bn. Moreover, the IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) slightly slipped from 51.3 in January to 51.2 in February. But it was above the 50-threshold, signifying the expansion. 


Positive sentiment toward GDP growth in 1Q23

We see February’s trade surplus bringing positive sentiment for GDP growth in 1Q23. Furthermore, Ramadan and Eid seasons in March and April will trigger higher consumption and support GDP growth in this quarter. On the other hand, the normalization of commodity prices and the global economic slowdown will weigh on sentiment. We maintain our forecast of GDP growth in 1Q23 at 4.9%. Meanwhile, we expect GDP growth in FY23 to be 5.0%, with export and import growth decelerating this year by 5.4% YoY (2022: 16.3%) and 5.1% YoY (2022: 14.8%), respectively.