Jakarta – Indonesia should anticipate a further increase in its trade deficit with the rest of the world, economists have said.

Economists with private lender Bank Danaman led by Anton Hendranata said the deficit could widen amid inward-oriented trade policies following the plan of the United States to impose tariffs on the import of steel and aluminum.

"The impact from US tariffs on steel and aluminum may be minimal, but we may suffer a larger blow on CPO (crude palm oil) exports, as European countries continue to ban palm oil from Southeast Asia," the economists said in a statement received by The Jakarta Post on Monday.

They recommended that the Indonesian government seek new export destinations to diversify its trade away from traditional markets.

According to Central Statistics Agency (BPS) data, Indonesia booked a US$116 million trade deficit in February, bringing the deficit for the past 12 months to $872 million, after Indonesia had enjoyed trade surpluses in the last three years. The country recorded a trade deficit of $760 million in January and $220 million in December 2017.

Regarding market pressure on the rupiah, the economists said situation might improve due to the tone of the meeting of the Federal Open Market Committee (FOMC) in the US, which preferred to stay on a gradual track of tightening at the pace of three rate hikes this year.

"Nonetheless, the rising wave of protectionism and the impact of US fiscal policies may still be a source of volatility in the financial market," they said. (bbn)

Source: http://www.thejakartapost.com/news/2018/03/26/brace-for-widening-trade-deficit-economists-say.html