Indonesian exports witnessed a significant drop last month, but a substantial decline in imports allowed the country ro maintain a trade plus, reflecting the adverse impact of a weakened global economy on trade flows.
According to the latest Statistics Indonesia (BPS) report, the trade surplus in April reached US$3.94 billion, making for a 36-month trade surplus.
“The trade surplus in the trade value in April 2023 was wider than in the preceding month due to a deeper drop in imports than in exports,” BPS official Imam Machi said.
He further noted that exports experienced a significant year on year (yoy) drop of 29.4 percent, while imports declined by 22.3 percent yoy.
The latest trade slowdown continues a downward trend seen since February. In April, Indonesia recorded exports worth US$ 19.29 billion, reflecting a decline of 17.62 percent compared to March. Simultaneously, imports witnessed a significant drop of 25.45 percent month on month, amounting to US$15.35 billion.
China’s policy as major factors behind the drop in key commodities exports
Imam Machdi mentioned that while the prices of key export commodities like palm oil, coal, and nickel had increased on a monthly basis, they remained lower compared to the previous year. This development may signal the conclusion of Indonesia’s commodity windfall experienced throughout 2022.
The decrease in coal and palm oil esports was primarily attributed to diminishing volumes, while the decline in iron and steel exports resulted from the downward trend in global prices for these commodities.
Imam highlighted that China’s zero-emission policy had a significant impact on coal demand within the country, subsequently affecting Indonesia’s coal exports. He further attributed this trade decline to China’s economic slowdown.
The latest data from S&P Global revealed a deterioration in China’s Purchasing Managers Index, a key measure of business confidence, which fell to 49.5 in April from 50 in March, marking the first decline in three months.
That comes after China recorded a gross domestic product (GDP) growth of 4.5 percent yoy in the Q1 2023.
Supporting this view, the chief economist of Bank Permata Josua Parded noted that a prolonged economic slowdown in China and the US would adversely impact Indonesia’s export performance, potentially leading to a decrease in the trade surplus and subsequently affecting GDP growth for this year.
In addition, economist at Bank Mandiri Faisal Rachman explained that the decline in exports is expected to persist due to the normalization of commodity prices. This trend is driven by weakening global demand, high inflation, and ongoing policy rate hikes.
However, Faisal also mentioned that there is a possibility that “the trade surplus could last longer than anticipated”. This is because the decline in commodity prices might occur at a more gradual pace than previously expected, thanks to China’s economic reopening and the production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
