A looming silver lining

May exports slightly improved on higher aggregate demand

In contrast to previous month’s data, but slower than our as well as the Bloomberg survey’s projections, May exports only reached USD11.5 bn, slightly accelerating by 0.31% MoM (-9.75% YoY due to high-base). This was supported by increased aggregate volume in both from non oil-gas and oil-gas components, translating a mild rebound in global demand amid lower MoM’s aggregate prices particularly for non oil-gas. In sum, the May exports brought 5M16 level to reach USD56.6 bn (-12.8% YoY).

​May exports by main products and market’s destinations

Last month, Indonesia’s top 10 export products experienced mix performances. For instance, palm oil (-3.38% MoM), jewelry (+10.99% MoM), electrical machinery (-4.34% MoM), ore and ashes (+38.16% MoM) and products of steel-iron (62.59% MoM). Moreover, in term of export destination, the reading shows varied results. Indonesia’s exports were higher to Thailand, Japan, EU, and Australia, whereas exports to China, United States, Singapore and Malaysia  contracted.

Imports were better-than-expected led by seasonal effect

May total imports bounced back by 2.98% MoM (-4.12% YoY) to USD11.1 bn, mainly on the back of higher demand for imported consumption goods as Indonesia started to enter cyclical trend on the advent of June’s fasting month. Note that import for consumption and intermediary goods surged 15.7% MoM and 3.86% MoM respectively in May. This development was also in line with manufacturing purchasing manager index (PMI) as surveyed by Nikkei-Markit which has stayed above 50 points (expansive mode) for three consecutive months, first time since September 2014.

Higher import growth brought a slower surplus in May

Nonetheless, with higher import growth compared to export, May trade surplus reached USD376 mn, slower than April’s position at USD662 mn, translating to 5M16 surplus which has reached USD2.7 bn, lower than 5M15 surplus level at USD3.9 bn.

2016 annual trade surplus to accelerate to USD8.6 bn on higher commodity prices in 2H

At this juncture, we reiterate our view that Indonesia 2016 total imports should enlarge to USD147.9 bn (+3.62%) compared to USD142.7 bn last year. This expectation is laid on the impact of three factors: 1) More stable Rupiah, 2) Relatively manageable inflationary pressure, and 3) Low interest rate environment. Those supporting factors would assist business players to provide more reliable expansion plans. Hence, they are likely spreading optimism by reactivate purchasing and restocking of capital goods and raw materials ahead. Meanwhile, we also believe expected moderately higher commodity prices in 2H should help 2016 total exports to improve to USD156.5 bn (+4.13%), resulting in higher 2016 annual trade surplus of USD8.6 bn (2015: USD7.6 bn).