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ECONOMIC UPDATE - External trade review - March trade surplus contract, miss expectations



Narrowed trade surplus 

Statistics Indonesia (BPS) recorded Indonesia's trade surplus of USD2.91 bn in March, lower than the previous month's of USD 5.47 bn (-47% MoM). This figure was also below our and the consensus estimates of USD5.76 bn and USD4.44 bn, respectively. On an annual basis, the data showed weaker performance, shrinking by -36% MoM from USD4.53 bn in the same month of the previous year. Indonesia has successfully maintained the positive trend of international trade since May 2020 or 35 straight months of trade surplus.


The moderating commodity price is continued

The softness of the commodity price persists further due to the global economy slowdown. In March-23, the price of export commodities such as CPO and coal plunged by -36% YoY and -31% YoY to USD4,058/MT and USD177/Ton, respectively. On a monthly basis, CPO and coal slightly fell by -1% MoM and -8% MoM, respectively. On imported commodity prices, the WTI crude oil price was down by -25% YoY and -2% MoM to 76 USD/BBL, while the Brent oil price decreased by -24% YoY and -4% MoM to 83 USD/BBL, respectively. However, the government should anticipate a potentially higher crude oil price since OPEC+ plans to slash oil production by 3.7 mn barrels a day starting in May.


Exports rise on China’s higher demand

Total exports climbed by 9.89% MoM to USD23.50 bn in March-23, mainly driven by higher demand in China. Indonesia's monthly exports to China grew to USD637.2 mn, signifying China as the highest-growth export destination country. The main country destinations of non-oil and gas exports in March 2023 were China at USD5.67 bn (25.6% of total exports), United States at USD1.97 bn (8.9% of total exports), and Japan at USD1.78 bn (8.0% of total exports). Based on the commodities group from 2-digit HS, the contributors toward stronger exports came from mineral fuels at 14.29% MoM (+USD568 mn); iron steel at 6.59% MoM (+USD141 mn); precious metals and jewelry/precious stones at 93.04% MoM (+USD528 mn); machinery and mechanical appliances and part thereof at 19.48% MoM (+USD98 mn); and ores, slag, and ash at 52.28% MoM (+USD219 mn). 


Imports and PMI hike amidst the beginning of Ramadan

Indonesia started the Ramadan season at the end of last month. This event significantly triggered imports as the government should maintain inflation stability and ensure stock sufficiency during this moment. The total import in March elevated by 29.33% MoM to USD20.59 bn with oil and gas, and non-oil and gas imports grew by 25.28% MoM and 30.05% MoM to USD3.01 bn and USD17.58 bn, respectively. The import was dominated by raw/intermediary goods (75% of total import). From the selected non-OG sector, the biggest contributor (16% of total import) came from machinery/mechanical appliances and part thereof (HS 84) where it also increased by 15.65% MoM to USD2.64 bn. Moreover, the IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) rose from 51.2 in February to 51.9 in March. This level indicated the 19th straight month of growth in factory activity as the level was above 50. 


The challenges of international trade in 1Q23

We see March’s trade surplus supporting  GDP growth in 1Q23. However, the government should anticipate higher imports this month as the effect of Ramadan and Eid Al-Fitr celebration. Besides, rupiah appreciation this month could potentially weigh on international trade. Last week, the International Monetary Fund (IMF) revised up Indonesia's economic growth from 4.8% to 5% this year due to Indonesia's solid economic performance. This figure is in line with our forecast, while we maintain economic growth of 4.9% in 1Q23.