Indonesia Macro Update - Trade Balance 16 Aug 2024

KBVS MACRO UPDATE
Friday, 16 August 2024

Trade Surplus Narrows, Raising Concerns of Rupiah Depreciation

Unexpectedly, Indonesia's trade surplus in Jul ‘24 dropped to USD0.47 bn (Cons: USD2.47 bn, KBVS: USD3.21 bn, Prev: USD2.39 bn), marking its lowest value since May ’23 amid higher-than-expected intermediary goods import. This occurred despite Indonesia's FX Reserves rising by USD5.2 bn during Jul ‘24 and an 11.0% YoY increase in China's imports from ASEAN.

The development of the trade surplus was driven by exports growing at 6.46% YoY. On the other hand, imports grew at a higher rate of 11.07% YoY, with the increase primarily driven by categories of Raw Materials/Semi-Finished Goods (+17.2% MoM) and Capital Goods (+21.2% MoM). However, we hope that these increased imports can be processed domestically and eventually be re-exported by Indonesia within the next 1 to 3 months.

Given the narrowing trade surplus, in the short term, we anticipate this will lead to a depreciation of the Rupiah to IDR 15,800–IDR 16,000 per USD by the end of Aug ‘24. Concurrently, we also expect that the decline in the SUN10Y yield will likely be smaller compared to other government bonds.

 

Regards,

Fikri C Permana - KBVS Research

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