Linda Yulisman, Jakarta – The government expects the trade surplus to plunge to one-fifth of last year's level as the worldwide economic downturn will likely continue to hurt the country's exports.
Trade Minister Gita Wirjawan said in Jakarta on Wednesday that Indonesia's trade surplus could fall to just $5 billion this year from $26.06 billion last year because the European recession and deteriorating demand from other export destinations would put more pressure on the country's exports.
Indonesia booked a surprise trade deficit for the first time in nearly two years in April this year, as exports slumped throughout the month.
Exports declined by 3.46 percent to $15.98 billion in April on a yearly basis – the first since September 2009 – while imports surged by 11.65 percent year-on-year to $16.62 billion, resulting in a $641.1 million deficit.
"Contrary to $26 billion we achieved last year, it will be a good thing if we can reach a $5 billion surplus this year. Many other countries will likely see their trade balance move into the negative," Gita told reporters after a hearing at the House of Representatives.
The estimate was realistic due to growing uncertainties in the eurozone and fears that economic recovery in the region would stall, he said.
At the end of last year, the Trade Ministry said it aimed to reach $230 billion in exports in 2012, up 12.96 percent from 2011. However, earlier this year, it revised the target, saying this year's exports would likely be level with last year's.
"I don't see our capacity to export increasing from last year," Gita said, adding that considering a large bulk of the country's exports were primary commodities, whose prices are vulnerable to fluctuations in the international market, export values may also decline.
Gita pointed out that against declining exports, the country would likely see its imports, particularly of capital goods, surge as local industry maintained production activities and realized investment.
During the first quarter of this year, imports of capital goods climbed by 35.55 percent to $9.34 billion, while imports of raw materials and intermediary goods jumped by 15.53 percent to $33.13 billion, according to Central Statistics Agency (BPS) data.
Economists have blamed poor industrial development policies for domestic industry's heavy dependence on imported materials.
Indonesian Institute of Sciences (LIPI) economist Latif Adam acknowledged that the trade surplus would surely fall because exports largely relied on 10 commodities, of which five were primary commodities, such as palm oil, coal and rubber, whose prices were determined by the international market.
"While the export values of these commodities decline, our imports of capital goods and raw materials, whose prices are more stable, rise constantly," he said.
Indonesian exports are also oriented toward 13 countries, including the China, Japan and the US, which make up around 70 percent of total exports, according to Latif.
"The dwindling demand from these traditional export destinations will surely put pressure on our exports," he said.
Exports to the EU have been slowing down since the last quarter of last year, while exports to the US and South Korea, have decelerated since the first quarter of this year. Non-oil-and-gas exports to China dropped by 0.5 percent to $2.05 billion in April from a month earlier, while exports to Japan, fell by 15.18 percent on a monthly basis to $1.43 billion.
Latif added that in order to anticipate a potentially continuos decline in its trade surplus, the government needed to curb the growth of imports.
"With its huge population, rising middle class and poor law enforcement, Indonesia is an easy target market for countries that have seen their exports drop," Latif explained.
The government needed to be more proactive in using available measures authorized by the WTO, such as safeguards and anti-dumping duties, to curb the influx of imports, he added.