Vincent Fabian Thomas, Jakarta – Indonesia's trade balance experienced an unanticipated bump in October as demand from the country's largest Asian trading partners increased and imports of capital goods fell.
The trade surplus rose to US$5.67 billion in October, according Statistics Indonesia (BPS), reversing a drop in the previous month that brought the balance to $4.99 billion.
The export side was backed by shipments of crude palm oil (CPO), coal, iron and steel.
"The trade balance has remained in the surplus zone for the past 30 months, since May 2020," BPS undersecretary for services and distribution statistics Setianto told reporters on Tuesday.
Both exports and imports grew on an annual basis in October, with exports growing 12.3 percent to $24.81 billion and imports growing 17.44 percent to $19.14 billion. In the preceding month, both measures saw more than 20 percent year-on-year (yoy) growth.
On a month-to-month (mtm) basis, exports inched up by 0.13 percent in October, while imports fell by 3.4 percent. The month before, the figures had seen a mtm drop of more than a 10 percent.
Fewer shipments of raw materials and capital goods to Indonesia accounted for most of the mtm decline in imports, said Josua Pardede, chief economist at private lender Bank Permata. This indicated that the domestic manufacturing sector had been reducing production in anticipation of a possible drop in demand resulting from prolonged high inflation.
The Indonesian Purchasing Managers Index (PMI), an indication of the health of the manufacturing sector, fell to 51.8 in October from 53.7 a month earlier.
While imports had dropped, exports had managed to rise very slightly in October, he said, adding that prices for coal and CPO had dipped slightly but were compensated for by increases in export volumes of the two commodities.
Improved demand from India and China also helped Indonesia outperform September's exports, Josua said, adding that recession fears had so far been concentrated in US and Europe, while Asian demand remained more stable.
India overtook the US as a destination for Indonesian exports in October after more than a 21 percent monthly increase amid declining exports to western countries.
In addition, China's recent easing of some COVID-19 restrictions is believed to have contributed to October's increase in demand from the country.
Faisal Rachman, economist at state-owned lender Bank Mandiri, said in a statement on Tuesday that the bank still expected the trade surplus to narrow by the end of the year.
He said a continuing domestic economic recovery would improve demand and lead to higher imports, while the boom in commodity prices was set to calm down amid an increased risk of global recession.
"At the end of the day, it could weaken global demand. This creates the risk of weakening export performance," Faisal said.