MACROECONOMICS - JAKARTA. Indonesia recorded a surprisingly large trade surplus of $3.46 billion in June, as imports plunged more than expected and exports also remained weak, official data showed on Monday, adding to the case for possible rate cuts before year-end.
A Reuters poll of economists had expected a surplus of $1.35 billion last month. The country recorded a surplus of around $440 million in May.
However, the resource-rich country's overall trade surplus in the first half of 2023 remained some $5 billion below last year's. Indonesia's January-June trade surplus stood at $19.93 billion, data from the statistics bureau showed.
Analysts expect the surplus in merchandise trade for Southeast Asia's largest economy to narrow this year as exports soften amid declining prices of its top commodities, including palm oil, coal and nickel, and weakening global demand.
Exports slumped 21.18% on a yearly basis to $20.61 billion in June, deeper than the 18.85% fall expected in the poll.
Shipments of coal and palm oil suffered the biggest drop.
Imports were down 18.35% on a yearly basis to $17.15 billion, compared with the poll's forecast of 7.75% contraction with purchases of raw materials falling the most.
The data suggest the central bank has room to cut interest rates before the end of the year, said Fakhrul Fulvian, economist with Trimegah Securities.
Trimegah predicts Bank Indonesia (BI) will cut rates by 50 basis points this year, assuming Indonesia runs a current account surplus equivalent to 0.3% of GDP in 2023.
BI raised rates by 225 basis points between August to January to fight rising inflationary pressures.
Inflation has since cooled to within the bank's target range, prompting calls from some economists for policy easing, but nearly two-thirds of respondents in a mid-June Reuters survey of analysts still predicted BI will keep rates steady for the rest of the year.
BI's next policy review is scheduled for July 24-25.