Trade surplus drops to the lowest level since May-23
According to Statistics Indonesia (BPS), Indonesia's trade surplus dipped by -1.27% MoM and -1.87% YoY to USD2.02 bn in Jan-24 (vs. USD3.31 bn in Dec-23), marking the lowest trade surplus since June-23. Furthermore, the the trade surplus was lower than our projection at USD3.23 bn and the consensus estimate of USD3.00 bn. Nevertheless, Indonesia's foreign trade has continued to trend positively since May 2020, producing a 45-month trade surplus. Looking forward, we anticipate a further decline in annual export performance due to moderating commodity prices and an expected economic slowdown in Indonesia's two major export partners, China and the United States. The World Bank forecasts China's economic growth to slow from 5.6% YoY in 2023 to 4.6% in 2024, while the United States is expected to decrease from 1.1% YoY in 2023 to 0.8% YoY in 2024. Conversely, imports of consumer goods and raw materials are projected to rise due to robust household consumption and expansion in manufacturing. Consequently, our projections indicate a continued contraction of the trade surplus. Currently, we expect the current account balance to potentially show a further deficit of -0.4% of GDP in 2024.
China demand and coal price hit the export
Total exports slumped by -8.43% MoM and -8.06% YoY to USD20.52 bn in Jan-24, marking the lowest figure since April-23. Moreover, total exports fell short of our projection at 0.76% YoY and the consensus estimate at -2.51% YoY. Breaking down in detail, oil and gas (OG) exports shrank by -5.49% MoM and -6.07% YoY to USD1.40 bn, while non-oil and gas (NOG) exports decreased by -8.54% MoM and –8.20% YoY to USD19.13 bn. The decrease in exports can be attributed to a drop in export demand from China and Japan, totaling USD-1.19 bn and USD -0.14 bn, respectively. Additionally, the primary destinations for NOG exports were China at USD4.57 bn (-20.73% MoM, and -12.92% YoY), followed by the United States at USD1.99 bn (-3.55% MoM, but +2.24% YoY), and India at USD1.83 bn (-2.53% MoM, but 31.80+% YoY). On a main commodity basis, coal export decreased by -19.68% MoM and -29.76% YoY to 2.41 bn), contributing to 12.59% of total exports in Jan-24. This decline was driven by a drop in coal price at USD116.5/Ton (-20.42% MoM and -56.26% YoY). Furthermore, we foresee a potential contraction in coal prices this year, driven by the possibility of increased production from major coal-producing countries such as Indonesia, China, and India. Looking ahead, export growth is expected to diminish due to moderating commodity prices and a global economic slowdown. However, the CPO price could potentially rebound due to lower production. We expect the average price of CPO to increase to USD4,500/MT this year (vs. USD3,882/MT in 2023). Currently, CPO contributes 9,04% to total exports in Jan-24.
Oil and gas weigh import performance
Total imports were recorded at USD18.51 bn in Jan-24 (-3.13% MoM, but +0.36% YoY). Furthermore, the yearly import rate was lower than both our projection and consensus estimates of +4.38% YoY and +1.97% YoY, respectively. Breaking down the specifics, OG imports contracted by -19.99% MoM and -7.15% YoY to USD2.69 bn. On the other hand, NOG imports inched up by +0.48% MoM and +1.76% YoY to USD15.81 bn. In terms of the broader economy categories, there was a decline in the import of each type of goods in Jan-24. The most significant decrease was consumption goods, which fell by -13.54% MoM to USD 1.77 bn. Meanwhile, intermediate and capital goods Meanwhile, intermediate and capital goods contracted by -2.25% MoM and -0.31% MoM to USD13.48 bn and USD3.26, respectively. Moving forward, we anticipate a rise in imports this year, driven by increased demand for consumer goods and raw materials amid the potential for a domestic economic rebound and a reduction in interest rates. Additionally, the manufacturing purchasing manager index (PMI) gained to 52.9 in Jan-24 from 52.2 in Dec-23.
End of the growing trend in forex reserves
In line with trade surplus performance, Bank Indonesia (BI) reported that Indonesia's foreign exchange (forex) reserves decreased to USD145.1 bn in Jan-24 (vs. USD146.4 bn in Dec-23), marking an end to the upward trend in forex reserves that began in October 2023. The decrease in reserves was attributed to the need to pay off maturing foreign government debt. Nevertheless, Indonesia's foreign exchange reserves remain robust, equivalent to financing 6.6 months of imports or 6.4 months of imports and debt payments, surpassing the international adequacy standard of 3 months of imports. The decrease in foreign exchange reserves coincided with Rupiah depreciation (-2.49% MtD to Rp15,780/USD in Jan-24), driven by a shifted FFR’s cut expectation from 1Q24 to 2H24, and election uncertainty. This high global interest rate could pose a risk to Indonesia’s export and financial markets. In January 2024, Indonesia experienced a slight net outflow of USD0.01 bn (equivalent to Rp0.2 tn) in the domestic bond market, while the stock market recorded a net inflow of USD0.53 bn (equivalent to Rp8.3 tn).
