Falling imports in August helped ease the strain on Indonesia’s rupiah, which has lost 20 percent against the dollar so far this year.
The declining strength of the rupiah and dropping consumer spending power as fuel prices have spiralled combined in August to enable Indonesia to post its first trade surplus in five months. Imports of both consumer and capital goods weakened.
Southeast Asia’s largest economy saw a 37 percent drop in imports of machinery and electrical devices in August compared to July. Imports of automotive and steel related goods in August dropped 20 and 44 percent, respectively, compared to July.
Total imports contracted 5.7 percent in August after expanding 6.5 percent in July, when Indonesia posted a record trade deficit of $2.3 billion.
Exports in August contracted by 6.3 percent after also recording a 6.1 percent decline in July.
Analysts said the August figures boded well for Indonesia’s economy, which posted a second quarter current account deficit of 4.4 percent of GDP, much of it linked to a shortfall in domestically produced oil and gas products.
“Concerns over the widening current account deficit and Bank of Indonesia’s falling FX reserves coincided with greater global aversion towards emerging markets, amid Fed-tapering fears,” said HSBC analyst Frederic Neumann. “But the currency has stabilized in recent weeks, thanks to various conventional and non-conventional measures by the central bank since June to narrow the current account deficit, control inflation and restore confidence in its ability to defend the rupiah.
“Nevertheless, it may take some time before the currency can recover. Although the trade shortfall should gradually correct, the current account deficit remains pressured by significant corporate repatriation outflows.”
HSBC now expects Indonesia’s GDP to grow 5.6 percent this year, down from its previous prediction of 6 percent.
Contact Mike King at firstname.lastname@example.org.