Linda Yulisman, Jakarta – Trade Minister Gita Wirjawan estimates that Indonesia's annual trade deficit could be as much as US$2 billion in 2012, as a downward trend in exports continued until the end the year.
"We will not book a surplus [in 2012] although earlier I predicted that it might amount to $2 billion," Gita said during a visit to The Jakarta Post.
The deficit is caused by a rise in imports matched by a downward trend in exports.
With imports continuing their upward trend in December, the total deficit for 2012 should be between $1 billion and $2 billion, he said. This may become the biggest annual deficit in the country's history. Even during the worst ever financial crisis in 2008, Indonesia still booked a surplus of $7.82 billion in its international trade.
Yearly exports could drop by up to 6 percent, driven by plummeting commodity prices, in spite of bigger volumes. Commodities make up around 65 percent of Indonesia's total exports.
The minister said there was a significant increase in exports to non-traditional markets such as Pakistan, Latin American nations and African countries. As the absolute value of exports to such countries remains very low, they will not have much effect on the final figure.
On the same day, the Central Statistics Agency (BPS) announced that monthly exports dropped by 4.6 percent to $16.4 billion in November, while imports rose by almost 10 percent to $16.9 billion, leading to a deficit of $478 million.
The BPS report led to a sharp fall in the value of the rupiah against the US dollar on Wednesday, down 0.5 percent to 9,688 per dollar as of 3:28 p.m. in Jakarta from Dec. 28, the biggest drop since Dec. 17, Bloomberg reported.
Total exports during January-November fell by 6.25 percent to $175 billion while overall imports rose by 9.4 percent to $176 billion, a deficit of $1.33 billion.
Danamon economists hold a similar view to the minister, expecting overall exports in 2012 to decline by around 6 percent.
"This may have a bigger impact on the current account deficit, which we forecast to be higher at 2.4 percent of the gross domestic product, up from our previous estimation of only 2.1 percent," Dian Ayu Yustina, Anton Hendranata and Anton H. Gunawan said in a research note.
The continuing trade deficit will most likely negatively affect the currency market, higher risks putting pressure on a currency that has already depreciated significantly in recent months.
"The rising pressure on the rupiah may compel BI to consider a rise in the overnight deposit facility rate [FASBI] to reduce pressure in the foreign exchange market. BI seem to prefer using the FASBI rate rather than direct intervention in the market," Danamon said.
Gita confirmed the government still maintained a bleak outlook on exports in 2013, as there has been no significant recovery in advanced economies, particularly those of the United States and the European Union. This will continue to weaken demand for manufactured goods as well as crank down commodity prices.
In its latest economic report, issued in October, the International Monetary Fund (IMF) projected that the world economy would expand by only 3.6 percent this year.
China, currently Indonesia's top trading partner, will grow by 8.2 percent next year, lower than its earlier estimate of 8.5 percent, which analysts said would curb the pace of its manufacturing activities.
In line with the estimate of the global growth, the World Trade Organization recently cut its export growth forecast for this year to 4.5 percent, from 5.6 percent.