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Trade Outlook

September 2019 Inflation Update: Deflation
October 07, 2019 16:27 WIB

Prices headed lower in September 2019. On a monthly basis, consumer prices declined by 0.27%, or below August’s inflation of 0.12% mom. The monthly deflation also came in below our estimate of -0.15% mom and the median market expectations of -0.15% mom. September 2019’s mom deflation was also lower than the mom deflation recorded in September 2018 (-0.18% mom) and the inflation recorded in September 2017 (+0.13% mom). In more detail, prices in the core and administered components were stable at 0.29% mom and 0.01% mom. Prices in the volatile component, however, were sharply lower (-2.26% mom).

On an annual basis, consumer prices rose at a slower pace (3.39% yoy vs. 3.49% yoy in the previous month). Prices in the non-foods component rose 0.20% mom but fell in the foods component (-0.96% mom).

Compared to August 2019, the easing inflationary pressures were mostly driven by deflation in foodstuff prices (-1.97% mom), with prices in the other CPI components increasing at a slower pace. The prices of chilis, onions, chicken meat, and tomatoes declined, while the prices of rice, spinach, and mustard greens remained stable.

Higher gold and jewelry prices lifted prices in the clothing component (+0.72% mom), while prices in the education component (+0.47% mom) decelerated given the academic year is already underway. Prices in the other CPI components also rose at a slower pace in September 2019, namely: the medical care component (+0.32% mom), the prepared foods 

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July Update: Back to Deficit
August 16, 2019 08:48 WIB

Indonesia recorded brisker foreign trade following the end of Lebaran and helped by the increasing number of working days. In July 2019, Indonesia’s exports and imports both rose on a monthly basis to USD 15.4 bn (+31.0% mom) and USD 15.5 bn (+35.0% mom), respectively, monthly highs in 2019. On an annual comparison, however, exports and imports were still down by 5.2% yoy and 15.2% yoy. As a result, the trade balance posted a deficit of USD 63.5 mn in July 2019, albeit smaller than the median consensus of a USD 420 mn deficit and Danareksa’s estimate of a USD 482.5 mn deficit. The smaller-than-expected deficit stemmed from a lower oil and gas deficit (USD 0.14 bn) and a USD 0.08 bn surplus from non oil and gas trade. In the Jan-Jul period, Indonesia’s trade deficit reached USD 1.9 bn, or still lower than in the previous year (USD 3.21 bn deficit).

Surging oil and gas exports (+115.2% mom) and non oil and gas exports (+25.3% mom) pushed up July’s exports value. The higher exports reflect rising trade volume (+21.5% mom, +3.9% yoy) and higher average prices (+7.8% mom, -8.7% yoy). By product type, the shipments of Indonesia’s top non oil and gas export products rose - including exports of mineral fuel (HS 27), electrical appliances (HS 85), and vehicle and parts (HS 87). These three commodities are 25.6% of Jan-Jul’s non oil and gas exports. By destination country, the value of Indonesia’s non oil and gas exports to China, the U.S. and Japan rose by 25.9%, 47.1%, and 18.9% mom, respectively. In the Jan-Jul period, exports to these three countries contributed 35.8% of Indonesia’s non oil and gas exports.

The higher imports reflect an increase in the value of oil and gas imports (+2.0% mom to USD 1.7 bn) and much higher non oil and gas imports (+40.7% mom to USD 13.8 bn). Both monthly imports volume (+32.9% mom, -12.2% yoy) and average prices (+1.5% mom, -3.4% yoy) were higher. By product type, Indonesia’s main non oil and gas imports, such as mechanical appliances (HS 84), electrical appliances (HS 85), iron and steel (HS 72) and plastics products (HS 39) rebounded. By country of origin, the imports of non oil and gas products from China, Japan and Thailand rose by 57.7% mom, 21.1% mom and 25.6% mom, respectively. 

Imports of raw materials, capital goods, and consumption goods rose by 29.0% mom, 60.7% mom, and 42.1% mom, respectively. In Jan-July 2019, raw materials accounted for 74.6 percent of the total imports, followed by capital goods (16.3%) and consumption goods (9.1%).

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Trade Outlook Agustus 2019
August 15, 2019 08:57 WIB

Moderate economic prospects coupled with accelerating consumer prices in Indonesia’s trading partners and the end of seasonal events, should help exports to rebound in July. The Composite LEI for Indonesia’s trading partners fell further but at a slower pace. In May 2019, the LEI dipped 2.4% mom after falling 3.8% mom in the previous month. For Indonesia’s major trading partners, the LEI for China and Japan contracted by 3.3% mom and 1.0% mom, respectively, while the LEI for the U.S edged up by 0.3% mom. These developments depict slowing economic expansion, resulting in soft demand for imports going forward. At the same time, the manufacturing PMI of Indonesia’s trading partners stood at a low level, signalling a sluggish improvement in business conditions with a contraction in both new orders received and production output. Furthermore, the average prices of Indonesia’s major commodity exports declined at a faster pace in June (-8.0% mom) after falling 6.8% mom in the previous month. As such, there will not be a significant improvement in exports value on the prices side. In regard to general prices, the consumer price index of Indonesia’s trading partners tended to accelerate. The indicator showed rising prices (from 0.2% mom to 1.3% mom). Moreover, since seasonal events have ended and the number of working days has increased, exports value should pick up on a monthly basis.

Moderate domestic demand, higher global oil prices, and the end of seasonal events may lead to rising imports. On the consumer side, July’s headline inflation reached 0.31% mom, easing from 0.55% mom in May. The milder pressure on prices was driven by easing foodstuff prices, and deflation in transportation prices amidst surging education costs. The monthly increase in inflation, however, was more than it was in the previous few years. Domestic demand grew at a softer pace. In July, the average rupiah/USD exchange rate appreciated by 1.3% mom (+3.3% ytd) after strengthening 1.1% in the previous month. Meanwhile, after falling 13.3% mom, average prices in the global oil basket rebounded 5.2% in June. Inline with the exports pattern, Indonesia’s imports also returned to normal after the Lebaran month. Given this, the value of imports should increase on a monthly basis in July. 

Against this backdrop, we expect Indonesia’s exports to reach USD 14.8 bn in July 2019, with imports reaching USD 15.3 bn. This will translate into a July 2019 trade deficit of USD 0.48 bn.

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Forecast For Aug 2016

Exports US$ 10.40 bn
Imports US$ 10.20 bn
Trade Balance US$ 0.25 bn

Forecast for 2016

Exports US$ 148.50 bn
Imports US$ 147.20 bn
Trade Balance US$ 1.30 bn

DRI Forecast for Jan 2017

MoM(%) 0.74
YoY(%) 3.26

End of period(% p.a) 4.75

Forecast for 2016

Inflation(%) 3.30
SBI(% p.a) 4.75