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Business Times
4 days ago
- Business
- Business Times
Indonesia's exports rally in May boosts trade surplus, but US tariff risks still loom
[JAKARTA] Indonesia's exports rebounded in May after a lacklustre April, giving the country's trade surplus a shot in the arm. But while the recovery offers a glimmer of hope, analysts note that dark clouds remain on the horizon amid lingering uncertainty around the United States' tariffs. Data released by the Indonesian statistics agency on Tuesday (Jul 1) showed that exports surged 9.68 per cent year on year (yoy) in May, far exceeding the 0.4 per cent rise expected in a Reuters poll. The recovery was powered by strong shipments of palm oil, basic metals, jewellery, semiconductors and organic base chemicals, said the agency's deputy of statistics, Pudji Ismartini. The export surge pushed the country's trade surplus to US$4.3 billion in May, a dramatic turnaround from just US$160 million the month before. Indonesia's exports of iron and steel to China rose by 31.56 per cent, even as looming US tariff threats clouded the trade outlook. Still, analysts believe the rebound may prove fragile. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up ' US tariffs on Chinese goods, though reduced to 30%, are still elevated compared to pre-trade war levels. This continues to weigh on global demand and Indonesia's exports, particularly as commodity prices soften and China's economic slowdown persists. ' — Josua Pardede, chief economist at Permata Bank While US-China trade tensions have eased following a recent agreement, uncertainty continues to hang over several countries, including Indonesia, as US President Donald Trump's Jul 9 deadline on tariff reviews approaches. The US has signalled that extensions are unlikely, raising concerns over possible new duties. 'Despite the easing tensions, Indonesia continues to face external headwinds,' said Josua Pardede, chief economist at Permata Bank. 'US tariffs on Chinese goods, though reduced to 30 per cent, are still elevated compared to pre-trade war levels. This continues to weigh on global demand and Indonesia's exports, particularly as commodity prices soften and China's economic slowdown persists.' South-east Asia's largest economy faces steep tariffs of 32 per cent under Trump's trade measures. Radhika Rao, senior economist at DBS, said that the strong exports in May likely reflected the continued front-loading of demand ahead of the July deadline, with shipments to the US, in particular, growing by double digits. Indonesia's shipments of machinery and electronic equipment to the US rose by 18 per cent between January and May, while its imports of mechanical machinery and equipment from China increased 22.9 per cent over the same period. 'Imports from China have also risen, suggesting rerouting of exports through the region to take advantage of the tariff differential,' Radhika said. Indonesia's imports grew 4.14 per cent yoy, though they edged down by 1.32 per cent on a monthly basis, cooling off after a notable spike in April. One of the biggest drops came from precious metals, with imports plunging 78.39 per cent month on month. This likely reflected waning gold appetite in May as trade tensions began to ease. Weaker domestic demand is helping to contain import growth, preserving a healthy trade surplus, Pardede said. Meanwhile, falling oil prices amid de-escalation in the Middle East are also providing some relief to the country's external balance. Indonesia's exports of crude and refined palm oil soared 53 per cent yoy in May, reaching 1.88 million tonnes, driven by strong demand from India. Inflation remains on target On the inflation front, consumer prices crept up by 1.87 per cent yoy in June, snapping back after a brief dip into deflation in May, official data indicated. Volatile food inflation spiked, driven by a jump in prices of household staples such as shallots, rice, tomatoes, and bird's eye chillies. Annual headline consumer price index (CPI) inflation picked up pace in June, rising to 1.87 per cent yoy from 1.6 per cent in May. Meanwhile, core CPI inflation held steady, falling slightly to 2.37 per cent yoy from 2.4 per cent the previous month. Administered price inflation crept up, fuelled mostly by higher airfares during the school holiday rush, though this was tempered by a drop in non-subsidised fuel prices after official price tweaks. Pardede noted that inflation is expected to stay within Bank Indonesia's target range of 1.5 to 3.5 per cent until the end of 2025. He said the impact of rupiah depreciation on inflation, or imported inflation, is gradually fading as global uncertainties ease. 'Risks tied to the 'trade war 2.0', especially reciprocal tariffs, have eased following the US-China trade agreement, encouraging capital inflows. This has helped soften the risk of inflation passing through from producers to consumers.'
Business Times
22-05-2025
- Business
- Business Times
Indonesia's Q1 current account deficit narrows to 0.1 per cent of GDP
[JAKARTA] Indonesia's current account deficit narrowed to around US$200 million in the first quarter, equal to 0.1 per cent of gross domestic product, from a deficit of 0.3 per cent of GDP in the previous quarter, the central bank said on Thursday (May 22). Indonesia's current account is closely monitored by investors and policymakers because it is a source of vulnerability, making the country susceptible to capital outflows. A narrower deficit, which could relieve pressure on the rupiah currency, may provide more space for the central bank to relax monetary policy, some analysts say. Bank Indonesia (BI) on Wednesday cut interest rates for a third time in an easing cycle that started in September, aimed at lifting economic growth. The smaller January-March deficit was due to a larger merchandise trade surplus, despite weakening global economic growth, BI said in a statement. South-east Asia's largest economy booked a four-month high trade surplus of US$4.33 billion in March, due to strong palm oil and nickel exports and a rush to beat the implementation of US tariffs – which have since been frozen until July. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up BI maintained its outlook for the full-year current account deficit to be within 0.5 per cent to 1.3 per cent of GDP this year. Last year's deficit was 0.6 per cent of GDP. The first-quarter balance of payments outcome was a deficit of around US$800 million, compared with a surplus of US$7.9 billion in the previous quarter, BI added. Josua Pardede, chief economist at Permata Bank, revised his outlook for this year's current account deficit to 0.87 per cent of GDP, compared with a previous forecast of 1.18 per cent, following the first-quarter data and positive developments in US-China tariff negotiations. 'With the deficit manageable and foreign (exchange) reserves still relatively ample, we see that there remains room for a 25bps BI-rate cut in 2H25,' he said. Indonesia is currently also negotiating tariffs with Washington. REUTERS
Business Times
22-04-2025
- Business
- Business Times
Rupiah to extend losses as Bank Indonesia battles volatility
[JAKARTA] The Indonesian rupiah will extend this year's 4 per cent decline due to fragile investor confidence, spurring further intervention by the central bank to stem volatility, according to analysts. MUFG Bank expects the currency will weaken to 17,100 per US dollar in coming months, while Barclays Bank says its likely to test 17,200 by the first quarter of 2026 with Bank Indonesia (BI) intervening. The rupiah closed on Monday (Apr 21) at 16,805. The rupiah is the only major Asian currency to decline against the US dollar this year as concerns grow over President Prabowo Subianto's controversial fiscal policies. The slide is putting pressure on the central bank as it balances efforts to support the currency, while keeping interest rates low to support growth. Bank Permata's chief economist Josua Pardede and Bank Danamon's Hosianna Evalita Situmorang both say BI may defend the currency when it weakens past 17,000. It slid to a record low of 16,957 per US dollar on Apr 9. 'If the rupiah breaches this threshold, the potential for market panic may increase, which could ultimately trigger greater capital outflows and further pressure on the exchange rate,' Bank Permata's Pardede said. Overseas investors have sold more than US$1 billion of Indonesian stocks and US$428 million of the nation's bonds this month, data compiled by Bloomberg show. The rupiah slid for a fifth week last week, the longest string of such losses since October 2023. A weakening currency may accelerate capital outflows, while seeking to support the currency risks shrinking the central bank's foreign reserves. BI currently sits on a record high stockpile of reserves, boosted by tax and service revenues as well as the withdrawal of the government's foreign loans. 'We expect BI to lean heavily on its reserves' and tools such as domestic non-deliverable forwards to smooth volatility, while still tolerating some degree of currency adjustment, said Karinska Salsabila Priyatno, an analyst at Mirae Asset Sekuritas Indonesia. BLOOMBERG
Mint
21-04-2025
- Business
- Mint
Rupiah to Extend Losses as Bank Indonesia Battles Volatility
(Bloomberg) -- The Indonesian rupiah will extend this year's 4% decline due to fragile investor confidence, spurring further intervention by the central bank to stem volatility, according to analysts. MUFG Bank Ltd. expects the currency will weaken to 17,100 per dollar in coming months, while Barclays Bank Plc says its likely to test 17,200 by the first quarter of 2026 with Bank Indonesia intervening. The rupiah closed Monday at 16,805. The rupiah is the only major Asian currency to decline against the dollar this year as concerns grow over President Prabowo Subianto's controversial fiscal policies. The slide is putting pressure on the central bank as it balances efforts to support the currency, while keeping interest rates low to support growth. PT Bank Permata's chief economist Josua Pardede and PT Bank Danamon's Hosianna Evalita Situmorang both say Bank Indonesia may defend the currency when it weakens past 17,000. It slid a record low of 16,957 per dollar on April 9. 'If the rupiah breaches this threshold, the potential for market panic may increase, which could ultimately trigger greater capital outflows and further pressure on the exchange rate,' Bank Permata's Pardede said. Overseas investors have sold more than $1 billion of Indonesian stocks and $428 million of the nation's bonds bonds this month, data compiled by Bloomberg show. The rupiah slid for a fifth week last week, the longest string of such losses since October 2023. A weakening currency may accelerate capital outflows, while seeking to support the currency risks shrinking the central bank's foreign reserves. Bank Indonesia currently sits on a record high stockpile of reserves, boosted by tax and service revenues as well as the withdrawal of the government's foreign loans. 'We expect BI to lean heavily on its reserves' and tools such as domestic non-deliverable forwards to smooth volatility, while still tolerating some degree of currency adjustment, said Karinska Salsabila Priyatno, an analyst at PT Mirae Asset Sekuritas Indonesia. More stories like this are available on First Published: 22 Apr 2025, 01:47 AM IST
