Indonesia Posts Surprise Trade Surplus Amid Slumping Demand

(Bloomberg) --

Indonesia posted a surprise trade surplus in October even as exports contracted for a 12th straight month, as slumping imports underscored concerns about Southeast Asia’s largest economy.

Exports fell 6.1% from a year ago to $14.9 billion, compared to a 8.2% decline forecast in a Bloomberg survey of economists, while imports dropped 16.4%, the biggest decline since May. That resulted in a trade surplus of $161.3 million, versus a $300 million deficit estimated in the survey.

“The decline in imports is quite worrying actually and a clear indication that the economy is slowing down,” said David Sumual, chief economist of PT Bank Central Asia in Jakarta. “The fall in imports of intermediary and capital goods is also an indication that investment is likely to continue to be sluggish for the period ahead.”

Bank Indonesia has cut interest rates four times this year to support the economy amid the U.S.-China trade war and slowing global growth. Official forecasts have been pared back several times this year, with the government now projecting gross domestic product to grow 5.1% for all of 2019, compared to an initial estimate of 5.3%.

Indonesia Posts Surprise Trade Surplus Amid Slumping Demand

Indonesian stocks rallied on news of the trade surplus. The Jakarta Composite Index rose as much as 0.6%, the most in more than a week.

Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, said a fall in oil and gas imports, which led the sharp decline in overall imports, suggests the government’s substitution policies are having an impact. The government has expanded the mandatory use of palm biodiesel, which is now blended with regular diesel.

However, he said, “this can’t explain everything, as non-oil and gas imports were also weak, consistent with slowing domestic demand” seen in third-quarter GDP data earlier this month.

Indonesia posted an annual trade deficit of $8.6 billion last year, the widest shortfall since the agency began the regular release of data in 1975. That prompted the government to adopt a slew of measures, including higher tariffs on some goods, in a bid to curb imports.

Other key points from the data include:

  • Imports declined 16.4% to $14.8 billion compared to a year earlier. The median estimate was for a 15.4% drop
  • Imports of raw materials and intermediary goods slumped 18.8% compared to a year earlier, while imports of capital goods fell 11.4%
  • Shipments of oil and gas fell 40.1% compared to a year earlier. Manufacturing exports declined 2.49%

©2019 Bloomberg L.P.

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