Jakarta – Indonesia's trade balance suffered a major monthly blow in September as sluggish demand from key trading partners took a toll on export performance, particularly on "backbone" commodities such as coal and crude palm oil (CPO).
Statistics Indonesia (BPS) reported that September's exports slumped by 10.99 percent month-to-month (mtm) to US$24.8 billion, despite increasing 20.28 percent year-on-year (yoy). The yearly growth, however, was also the lowest since February 2021's 8.64 percent.
Imports in the same month, meanwhile, dropped by 10.58 percent mtm, but grew 22.02 percent yoy to $19.81 billion.
Consequently, the trade surplus plummeted by around 13 percent mtm to just $4.99 billion last month, albeit still maintaining its position in the positive zone for 29 consecutive months since May 2020.
The surplus in September was above state-owned Bank Mandiri's expectation of $4.84 billion, but still lower than financial research firm Moody's Analytics estimates of $5.3 billion. The year-to-date (ytd) surplus of $39.87 billion had also surpassed the total surplus in 2021.
Except for mining exports, which rose by 2.61 percent to $6.1 billion, all sectors recorded a monthly contraction in export contribution, with the oil and gas segment taking the deepest dive with a 21.41 percent mtm decline to $1.3 billion.
Manufacturing and agriculture exports, on the other hand, also slumped by 14.24 percent mtm to $16.96 billion and 8.65 percent mtm to $410 million, respectively.
On the import front, consumer good imports took the deepest plunge with a 14.13 percent mtm decline to $1.59 billion, followed by raw materials and capital goods with a 11.07 percent mtm decline to $14.9 billion and a 6.39 percent mtm decline to $3.32 billion, respectively.
Underlying issues
Indonesia's export performance has enjoyed a "commodity windfall" since the early months of 2022, with key commodity prices – such as coal and CPO – skyrocketing due to geopolitical battles that saw energy supplies dwindle.
However, experts have warned that relying on these commodities to support exports is unsustainable as prices will eventually go down, posing a threat to the trade balance and the overall economic growth of the nation.
"The decline in September export values was caused by a decline in exports of leading commodities, such as iron and steel, palm oil and coal. The decline was largely due to lower demand and prices on the global market," BPS deputy head Suhariyanto said in a press conference on Monday.
CPO exports in September fell by around 31.91 percent mtm to $2.4 billion, a stark contrast from the August data, when CPO export values broke the highest record of the year. CPO export volumes, meanwhile, also tumbled by 29 percent mtm to 2.5 million tonnes.
According to the World Bank data, average CPO prices on the global market fell by 11.37 percent mtm and 23.03 percent yoy to $909 per tonnes in September.
Among key trading partners that reduced their CPO purchases from Indonesia were India, Malaysia and China. India cut its overall non-oil and gas imports from Indonesia by around 29 percent mtm to $1.75 billion in September.
"The sharp decrease in CPO prices could have contributed toward the lower export value to India, notwithstanding their weakening manufacturing purchasing managers' index (PMI)," Bank Mandiri economist Faisal Rachman told The Jakarta Post on Monday.
Coal export values, meanwhile, went down by around 4.5 percent mtm to $4.2 billion, as its export volumes slightly increased by 1.2 percent mtm to 33.2 million tonnes in September.
Unlike with CPO, World Bank data show that average global coal prices slightly increased by 1.01 percent mtm and 120.11 percent yoy to $321.5 per tonnes, also per September.
As with the case in CPO, India greatly reduced its coal imports from Indonesia by 33.47 percent mtm to $565 million, followed by the Philippines and Japan, which axed their coal purchases by 19.72 percent mtm to $434 million and 3.86 percent mtm to $693 million, respectively.
However, China increased its coal demand by 41.19 percent mtm to $949 million in the same period, while countries in the European Union region also boosted their coal imports from Indonesia by 68 percent mtm to $161 million.
Indonesian Chamber of Commerce and Industry (Kadin) economist David Sumual expected the trade balance to remain in surplus until the end of this year, though narrower than currently, as long as coal prices remain high and demand from European countries strengthens.
David said that businesses had greatly increased their inventories during the Idul Fitri period, therefore the import performance would likely remain stable.
"Bauxite, lead and nickel exports are still in good shape. Production of war materiel needs all these components, especially bauxite and nickel, which are used to make bullets," David told the Post on Monday.
Data from the BPS also reveals that cumulative metal and nickel exports from January to September had increased by 80.74 percent yoy to $7.92 billion and 405.40 percent yoy to $4.13 billion, respectively.
Center of Economic and Law Studies (CELIOS) director Bhima Yudhistira explained that a possible price reversal of commodity prices in October could suppress the trade surplus, which would affect the rupiah exchange rate against the United States dollar.
"It is necessary to look for mitigation measures by increasing the portion of exports of non-commodity processing industry products," Bhima told the Post on Monday, "and searching for alternative markets that are still quite resistant to the threat of recession, such as the Middle East and the North African region."
Bank Mandiri forecasts that although exports will slow going forward, the real impact will be offset by robust processed nickel exports, which will result in a current account surplus of 0.45 percent of gross domestic production (GDP) this year.
Source: https://asianews.network/trade-surplus-nosedives-amid-cautious-export-performance