Narrowed trade surplus in January
Statistics Indonesia recorded a trade surplus at USD3.87 bn in Jan-23, as exports grew much faster than imports and beat our and consensus estimates of USD3.16 bn and USD3.06 bn, respectively. However, the surplus was the lowest since May-22 and slightly declined from USD3.96 bn in Dec-22. On a yearly basis, it showed better performance rising by 302% YoY from USD0.96 bn in the same month of the previous year. The January’s trade balance marks the 33rd consecutive month surplus that Indonesia has achieved since May 2020.
Moderating commodity prices
The windfall commodity price starts to decline due to the global economy slowdown. In Jan-23, CPO prices plunged by -7% MoM to USD3,860/MT, while coal decreased by -34% MoM to USD266.4/Ton. On a yearly basis, CPO decreased by -33% YoY but coal rose by 19.5% YoY. Compared with the previous year before the pandemic (Jan-2018), CPO and coal prices in Jan-23 grew significantly by 55% and 22%, respectively.
Non-oil and gas exports slip on weaker commodity shipment value
The total exports went down by -6.36% MoM to USD22.3 bn. The Non oil and gas export slipped by -6.84% MoM to USD20.8 bn, while oil and gas rose slightly by 0.98%MoM to USD1,487 mn. Based on the commodities group from 2-digits HS, the contributor toward weaker export came from mineral fuels at -8.19% MoM (-USD379.7 mn); animal or vegetable fats and oils at -9.95% MoM (-USD2,363 mn); iron and steel at -9.26% MoM (-USD215.1 mn); Ores, slag, and ash at -36.44% MoM (-USD342.2 mn); Tin and articles thereof at -76.75% MoM (-USD 142.1 mn). Based on industrial sectors, all of sectors recorded a decline. The agriculture, forestry, and fisheries recorded -0.71% MoM to USD367.7 mn, Manufacturing -5.03% MoM to USD15,651 mn, mining and other -12.66% to -USD4,806.9 mn.
PMI rise amidst weakening export and import
The total import decreased by -7.15% MoM to USD18,443 mn in Jan-23. Oil and gas import fell by -9.21% MoM to USD2,906 mn, meanwhile non oil and gas import decreased by -6.75% MoM to USD15,536 mn. The majority share of import was raw/intermediary goods (75.3% of total import). From the selected non-OG sector, the biggest contributor (15.9% of total import) came from machinery/mechanical appliances and part thereof (HS 84) where it also slipped by -14.9 % MoM to USD2,468 mn. Despite decreasing export and import, IHS Markit Indonesia Manufacturing Purchasing Managers’ Index (PMI) still showed good performance by recording a higher level at 51.3 in Jan-23 (vs 50.9 in Dec-22). It was above the 50-threshold, signifying the expansion.
Lower exports and imports growth seen this year
We expect exports and imports growth will decrease this year by 5.4% YoY (2022: 16.3%) and 5.1% YoY (2022: 14.8%). The normalization of commodity prices, global and domestic economic slowdown, and interest rate hikes will weigh on sentiment. On the other hand, China's reopening and the downstream commodities policy would provide some support, in our view. With trade surpluses in 2023 likely to be smaller than in 2022, rupiah would see less from trade surplus. The government plans to require some exporters to retain certain portion of their export earnings onshore in a bid to help boost the domestic supply of foreign currency, but it is still unclear when the rules would become effective.