Trade balance back in the red after surplus

JAKARTA. After recording its first surplus for six months in March, the country’s trade balance slid into the red again in April, posting a deficit of US$1.62 billion as exports further plunged despite a deceleration in imports.

Monthly exports declined by 9.11 percent to $14.70 billion from a year earlier, with non-oil exports — the biggest contributor to overall exports — dropping by 2.4 percent to $12.31 billion on an annual basis, the Central Statistics Agency (BPS) announced on Monday.

Exports were also down by 2.18 percent compared to March, while non-oil and gas exports gained slightly by 1.74 percent.

“Exports of several key commodities surged by volume, but as their prices dropped, their contribution was lower to total exports,” BPS chief Suryamin told reporters in a monthly press briefing.

Exports rely heavily on primary commodities, such as coal, palm oil, rubber, copper and nickel, which cause external trade to become heavily affected by the movement of international prices.

Overall exports in January-April amounted to $60.11 billion, down 7.07 percent from the same period last year, while non-oil and gas exports reached $49.57 billion, down 3.07 percent.

Monthly imports also declined in April, continuing a similar trend the previous month, with value settling at $16.31 billion, down by 3.68 percent from a year earlier, but up by 9.59 percent from March.

Accumulatively, imports in January to April settled at $61.96 billion, down by 1.15 percent from the same period last year.

The deficit in April was mainly attributed to the oil and gas trade, with imports surpassing exports, Suryamin said. The country’s non-oil and gas deficit only totaled $407.4 million in April, while the oil and gas deficit amounted to $1.21 billion, according to the BPS.

One of the factors behind the slowing imports was the deceleration in imports of capital goods that support investment, which in the January-April period plunged by 21.47 percent to $10.32 billion from the same period last year, Suryamin added.

Capital goods imports have been seen as an indicator for investment in the upcoming three to nine months as firms need to source the goods to realize investments.

In response to the announcement, Deputy Finance Minister Mahendra Siregar acknowledged that the deficit had been greatly affected by oil and gas imports, adding that the problem would not be resolved until the government raised fuel prices to curb excessive consumption.

As a net oil importer, Indonesia spent Rp 211.9 trillion (US$21 billion) on fuel subsidies last year, stimulating consumption of the energy source and contributing to its all-time high deficit of $1.88 billion last October.

“We hope the trade balance will improve after the government issues a new fuel policy. If we don’t take the measure, it will affect the health of our current account as well as balance of payments,” he told reporters at the House of Representatives.

Trade and current account deficits have put significant pressure on the rupiah, which last year became Asia’s worst performer as investors lost their confidence in the currency.

Enny Sri Hartati, an economist at the Institute for Development of Economics and Finance (Indef), said that the government’s move to raise fuel prices would help improve the trade balance by significantly
reducing fuel consumption.

She added, however, that the trade balance would gain no considerable contribution from exports as the international prices of commodities would remain volatile during the ongoing global crisis.

“There will be no fundamental change in our exports in the upcoming months because of the structure of our exports,” she told The Jakarta Post. (Linda Yulisman and Satria Sambijantoro/The Jakarta Post)