Surprising Indonesian trade surplus has downside in falling imports

Better than expected number is reflection of imports decreasing by almost 26 per cent

PUBLISHED : Thursday, 15 October, 2015, 11:35pm
UPDATED : Thursday, 15 October, 2015, 11:35pm

Indonesia on Thursday reported a surprisingly big September trade surplus, but one that's rooted in a persistent economic worry this year - tumbling imports.

The statistics bureau said last month produced a trade surplus of US$1.02 billion, compared to the US$280 million forecast in a Reuters poll.

Imports were down 25.95 per cent from a year earlier, the second-biggest fall since 2009 and worse than the poll's 19.7 per cent forecast. The deepest contraction was in July, when imports plunged more than 28 per cent.

Exports last month were 18 per cent below a year earlier, slightly worse than the poll forecast's 15.5 per cent. The September fall was the second biggest since 2012.

Analysts say this year's poor imports reflect weak investment growth and consumption. This year's weak rupiah has made imported goods more expensive.

"Indonesia's trade surplus is improving due to weakening domestic demand, not strengthening external demand," lender ANZ said after the September data was released.

The rupiah did not move on the trade data, but it has been strengthening this month, including Thursday morning when it surged 2.4 per cent.

ANZ said the surging rupiah "may create policy space for Bank Indonesia to cut rates in coming months, but we would expect caution. These are volatile and uncertain times".

The trade data came out hours before a central-bank policy meeting, where analysts say the benchmark rate will be left at 7.5 per cent.

Imports of capital goods for January to September fell 16.9 per cent year on year, while those of raw materials were down 20.7 per cent.

Before the data came out, DBS said declining imports of capital goods showed "a strong indication that investment growth remains weak in the economy".

The surplus in the first nine months reached US$7.13 billion. In the same period last year, Indonesia had a US$1.67 billion trade deficit.