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Trade Outlook

Trade Outlook Juni 2018
June 06, 2018 15:25 WIB

After exports rose by 10.3% mom in March, they dropped by 7.2% mom in April (+8.9% yoy) to US$ 14.4 bn. Imports, by comparison, rose further by 11.3% mom (+34.7% yoy) to US$ 16.1 bn. As a result, Indonesia posted a sizeable trade deficit in April of US$ 1.62 bn, owing to an oil and gas deficit of US$ 1.13 bn and a non oil and gas deficit of US$ 0.49 bn. The deficit was surprisingly far worse than the median estimate of a US$ 733 mn surplus. Year-to-date, Indonesia’s foreign trade posted a US$ 1.31 bn deficit. This compares to a surplus in the same period last year of US$ 5.4 bn.

Oil and gas exports (-11.3% mom) and non oil and gas exports (-6.8% mom) reached US$ 1.2 bn and US$ 13.2 bn, respectively. The decline in exports reflects lower exports volume (-10.1% mom, +6.3% yoy) and higher average prices (+3.2% mom, +2.5% yoy). By product type, the exports of Indonesia’s top non oil and gas products were mixed. The exports of mineral fuel (HS 27) and animal and vegetable fats, oil & waxes (HS 15) slumped, whereas the exports of vehicles and parts (HS 87) increased. By destination country, the value of non oil and gas exports to China, Japan and the U.S dropped by 22.8%, 2.6%, and 9.9% mom, respectively.

Oil and gas imports (+3.6% mom) and non oil and gas imports (+12.7% mom) increased to US$ 2.3 bn and US$ 13.8 bn, respectively. Although the average prices of imports contracted (-2.1% mom, +13.5% yoy), volume shipments were higher on a monthly comparison (+13.7% mom, +18.7% yoy). By product type, Indonesia’s main non oil and gas imports were also mixed. Imports of machinery and electrical appliances (HS 85) and iron and steel (HS 72) were higher, while imports of machinery and mechanical appliances (HS 84) were lower. By country of origin, the imports of non oil and gas products from China and Japan rose by 29.7% mom and 2.5% mom, respectively, while imports from Thailand were 5.5% mom lower.

By type of use, the imports of raw materials, capital goods, and consumption goods rebounded by 10.7% mom, 6.6% mom, and 25.8% mom in April 2018. In the period of January-April 2018, raw materials accounted for 74.6 percent of the non oil and gas imports, followed by capital goods (16.3%) and consumption goods
(9.0%).

The latest data indicates that the economies of Indonesia’s main trading partners are continuing to perform well as expected. Economic activity continues to strengthen in the U.S. and Japan, while China’s economy is stabilizing. Notably, in May 2018, the average prices of Indonesia’s major commodity exports rose by 0.37% mom (from -1.60% mom in April). Meanwhile, global oil prices continued to strengthen
by 1.8% mom.

The U.S. economy expanded by 2.8 percent yoy in Q1 2018, or faster than in both Q1 2017 (+2.0% yoy) and Q4 2017 (+2.6% yoy). Compared to Q1 2017, growth in the following components accelerated: gross private domestic investment (+5.8% yoy), exports (+4.2% yoy), imports (+4.3% yoy), and government expenditure (+1.1% yoy). Meanwhile, the growth in personal consumption-PCE eased (+2.6% yoy). On the manufacturing side, the expansion continued in May 2018. The May ISM Manufacturing Index rose from 57.3 to 58.7, given stronger growth of new orders, production and employment. On the consumer side, U.S. household optimism improved further. The consumer confidence index increased from 125.6 to 128.0 in May 2018. Consumer expectations toward both business and labour market conditions were quite strong, and should continue to support solid household spending in the near term. Consumer spending rose further in April. Following a 0.6% mom increase (+4.9% yoy) in March, retail sales edged up by 0.2% mom (+4.7% yoy) in April, supported by higher sales of fuel, food & beverages, building materials, and apparel.

China’s economic outlook is improving. In Q1 2018, China’s economy posted stronger-than-expected growth of
6.8 percent yoy, unchanged from the previous quarter. The expansion was mainly driven by the solid pace of
consumption and exports. On the manufacturing side, the official NBS Manufacturing PMI in China increased to 51.9 in May 2018 from April’s level 51.4, the highest reading since September 2017. The stable PMI indicates that manufacturing activity expanded at a faster pace, supported by faster growth of new orders, new export orders, and production. On the consumer side, monthly retail sales grew by 0.66% mom (+9.4% yoy) in April, or less than March’s 0.73% mom growth (+10.1% yoy). Sales of garments, personal care products, home appliances and furniture rose at a slower pace. In regard to price developments, consumer prices continue to slow on both a monthly and annual basis in April (-0.2% mom, +1.8% yoy) from March (-1.1% mom, +2.1% yoy). The cost of foodstuffs slowed, while the cost of non food items was unchanged.

The Japanese economy continues to improve. The CEI rose further by 1.4%, whereas the LEI fell by 0.9% yoy, in March 2018. On the manufacturing side, the Nikkei Manufacturing Purchasing Managers Index (PMI) fell slightly to 52.8 in May 2018, or below April’s final reading of 53.8. Production, new orders received, and employment rose at a softer pace. On the consumer side, consumer spending rebounded however. In April, retail sales grew faster on both a monthly and annual basis (+1.4% mom, +1.6% yoy) compared to the previous month (-0.6% mom, +1.0% yoy). Sales of fuel and motor vehicles edged up at a faster rate. In addition, April’s annual consumer prices eased further (- 0.4% mom, +0.6% yoy). Headline inflation rose at a softer pace, given easing prices in the food and transportation component.

The Fed maintained the FFR target at 1.50%-1.75% during its May meeting, or inline with market expectations. The FOMC release reveals that U.S. economic activity strengthened, supported by a firm job market as well as a moderate pace of consumer spending and business fixed investment. The Fed also stated that inflation and core inflation have moved close to 2 percent, signalling that further FFR hikes are on the table this year. In line with that, the policies of other major central banks is also unchanged. The People’s Bank of China (PBOC) kept its benchmark lending rate at 4.35 percent and its deposit rate at 1.50 percent, whereas China’s 7-day reverse repo reached 2.55 percent. In its latest policy, the PBOC lowered the reserve ratio for large Chinese banks by 100 bps to 16% from 17%, and 14% from 15% for smaller banks. The policy is intended to improve liquidity conditions and help banks to reduce their funding costs. In Japan, the Bank of Japan (BOJ) maintained its key short term interest rate at minus 0.1 percent on the Policy-Rate Balances in current accounts held by financial institutions at the bank. In regard to long term interest rate policy, the purchase of Japanese Government Bonds will continue in order to keep the 10-year JGB yield at around zero percent (an annual pace of 80 trn Yen).

Indonesia’s CEI (+1.3%) and LEI (+0.8%) were higher. This suggests that economic activity continues to gain some traction. In regard to consumer prices, monthly headline inflation accelerated to 0.21% mom (+3.23% yoy) in May, from 0.10% mom (+3.41% yoy) in the previous month. Prices in most components grew at a faster pace due to Ramadan. More specifically, prices in the food component and the non food component rose by 0.25% mom and 0.19% mom, respectively. On the monetary side, BI raised its benchmark 7-day Reverse Repo rate on two occasions in May 2018. The rate now stands at 4.75 percent with the Lending Facility rate and the Deposit rate at 5.50 percent and 4.00 percent, respectively. The central bank stated that its policy is pre-emptive, front-loading, and ahead of the curve, and intended to ensure rupiah stability given the prospect of more FFR hikes in the future, whilst also keeping inflation in the targeted corridor. Meanwhile, the rupiah continued to weaken further. In May 2018, the rupiah fell by 1.6% mom, following its decline in the previous month (-0.4% mom). Year-to-date, the monthly average rupiah depreciation has reached 3.6 percent.

In view of the latest developments, we expect Indonesia’s exports to reach US$ 15.6 bn in May 2018, with imports reaching US$ 15.2 bn. This will translate into a trade surplus of US$ 434.4 mn in May 2018.

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Business Sentiment Survey May 2018
May 25, 2018 09:15 WIB

Optimism remains high but risks mount

THE FEBRUARY - MARCH 2018 RESULTS:

The Business Sentiment Index (BSI) climbed 1.7 percent to 134.3 in the reporting period of February – March 2018, the second survey on a spin in which the BSI has increased.

The improving sentiment in our latest survey mainly reflects more positive assessments on the performance of Indonesia’s economy and its future outlook. These two indices were up by 2.0 percent and 1.1 percent, respectively.

Despite this sanguine outlook, however, sentiment toward the four economic indicators covered in our survey – the rupiah, inflation, interest rates and stock prices – all took a dramatic turn for the worse as external developments created turbulence in the financial markets. In particular, CEOs are now much more downbeat on the prospects for the rupiah (this index slumped a precipitous 22.2 percent to 84.5).

Corporate performance was pretty solid according to the CEOs surveyed. Most encouragingly, profits grew at a faster pace: this index gained 4.6 percent to 110.3 as the COGS remained subdued (this index eased 0.4 percent to 104.3). And at the top line, sales growth was also robust (this index rose 3.5 percent to 108.8).

CEOs were again less satisfied with the performance of the government. This metric, as measured by the Business Confidence in the Government Index (BCGI), declined by 5.8 percent to 140.4 after slipping 2.5 percent in the previous survey. In particular, CEOs are less confident in the government’s ability to either create a healthier marketplace or rein in inflationary pressures.

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Trade Outlook Mei 2018
May 08, 2018 08:39 WIB

After exports declined in two straight months, they surged in March to US$ 15.6 bn (+10.2% mom, +6.1% yoy). Imports also increased: they rose by 2.1% mom (+9.1% yoy) to US$ 14.5 bn. As a result, Indonesia posted a sizeable trade surplus in March of US$ 1.09 bn, owing to a strong non oil and gas surplus. Year-to-date, the trade surplus has reached US$ 282.8 mn, yet far below the surplus in the same period last year of US$ 4.1 bn.

Non oil and gas exports jumped by 11.8% mom to US$ 14.2 bn in March 2018, while oil and gas exports dropped by 3.8% mom to US$ 1.3 bn. The monthly increase in exports stemmed from higher exports volume (+12.7% mom, +8.1% yoy), while average prices contracted (-2.1% mom, -1.8% yoy). By product type, the exports of
Indonesia’s top non oil and gas products were mixed. The exports of mineral fuel (HS 27) and ores slag (HS 26) climbed, whereas the exports of animal and vegetable fats, oil & waxes (HS 15) declined. By destination country, the value of non oil and gas exports to China, Japan and the U.S rose by 14.3%, 12.9%, and 23.6% mom, respectively.

Oil and gas imports rose to US$ 2.3 bn (+1.2% mom), while non oil and gas imports climbed to US$ 12.2 bn (+2.3% mom). The average prices of imports rose (+8.0% mom, +12.8% yoy) even though volume shipments were lower on a monthly comparison (-5.5% mom, -3.3% yoy). By product type, Indonesia’s main non oil and
gas imports were mixed. Imports of machinery and mechanical appliances (HS 84) and iron and steel (HS 72) were higher, while imports of machinery and electrical appliances (HS 85) weakened. By country of origin, the imports of non oil and gas products from Japan and Thailand rose by 17.8% mom and 5.3% mom, respectively,
while imports from China were 17.8% mom lower.

By type of use, the imports of raw materials and capital goods rebounded by 2.6% mom and 8.9% mom in March 2018. By comparison, imports of consumption goods declined by 12.8% mom. In Q1 2018, raw materials accounted for 74.7 percent of non oil and gas imports, followed by capital goods (16.3%) and consumption goods (8.9%).

The latest data indicates that the economies of Indonesia’s main trading partners are continuing to expand as expected. Economic activity continues to strengthen in the U.S. and Japan, while China’s economy is stabilizing. Notably, in April 2018, the average prices of Indonesia’s major commodity exports increased slightly by 0.23% mom, whereas global oil prices surged 7.2% mom.

According to the latest data, the U.S. economy expanded by 2.9 percent yoy in Q1 2018, or faster than in both Q1 2017 (+2.0% yoy) and Q4 2017 (+2.6% yoy). Compared to Q1 2017, growth in the following components accelerated: gross private domestic investment (+5.8% yoy), exports (+4.3% yoy), imports (+4.2% yoy), and government expenditure (+1.2% yoy). Meanwhile, the growth in personal consumption-PCE slowed (+2.6% yoy). On the manufacturing side, expansion slowed in April 2018. The April ISM Manufacturing Index fell from 59.3 to 57.3, given softer growth of new orders, production and employment. On the consumer side, U.S. household optimism improved. The consumer confidence index increased from 127.0 to 128.7 in April 2018. Consumer expectations on both business and labour market conditions were quite positive. Consumer spending also recovered in March. Following a decline for 3 consecutive months, retail sales rose by 0.6% mom (+4.5% yoy), given higher sales of motor vehicles, furniture, and electronics.

China’s economic outlook is expected to remain steady. In Q1 2018, China’s GDP expanded by 6.8 percent yoy, the same growth as in the previous quarter. The expansion was mainly driven by the solid pace of consumption and exports. On the manufacturing side, the official NBS Manufacturing PMI in China fell slightly to 51.4 in April 2018 from 51.5 in the prior month. The stable PMI indicates that manufacturing activity expanded at a faster pace. On the consumer side, monthly retail sales grew by 0.73% mom (+10.1% yoy) in March, accelerating from February (+0.71% mom, +9.7% yoy). Sales of building materials, furniture, home appliances and personal care rose at a faster pace. In regard to price developments, consumer prices cooled on both a monthly and annual basis in March (-1.1% mom, +2.1% yoy) from February (+1.2% mom, +2.9% yoy). The cost of both food and non food items increased at a slower pace.

The Japanese economy continues to improve, since the CEI and LEI rose further by 1.1% and 1.2% yoy, respectively, in February 2018. On the manufacturing side, the Nikkei Manufacturing Purchasing Managers Index (PMI) rose to 53.8 in April, or above March’s final reading of 53.1. Production output and new orders received rose at a faster pace. On the consumer side, consumer spending slumped however. In March, retail sales grew more slowly on both a monthly and annual basis (-0.7% mom, +1.0% yoy) compared to the previous month (+0.4% mom, +1.6% yoy). The sales of food and beverages, fuel, and machinery & equipment edged up at a slower rate. In addition, March’s annual consumer prices eased (-0.4% mom, +1.1% yoy). Headline inflation was at its lowest level since December 2017, given easing prices in the food component.

The Fed held the FFR target at 1.50%-1.75% during its May meeting, or inline with market expectations. The FOMC release reveals that U.S. economic activity strengthened, supported by a firm job market as well as moderate pace of consumer spending and business fixed investment. The Fed also stated that the inflation and core inflation have moved close to 2 percent, signalling that further FFR hikes are on the table this year. In line with that, other major central banks’ policy is also unchanged. The People’s Bank of China (PBOC) maintained its benchmark lending rate at 4.35 percent and its deposit rate at 1.50 percent, whereas China’s 7-day reverse repo reached 2.55 percent. In its latest move, the PBOC lowered the reserve ratio for large Chinese banks by 100 bps to 16% from 17%, and 14% from 15% for smaller banks. The policy is intended to improve liquidity conditions and help banks to reduce their funding costs. In Japan, the Bank of Japan (BOJ) maintained its key short term interest rate at minus 0.1 percent on the Policy-Rate Balances in current accounts held by financial institutions at the bank. In regard to long term interest rate policy, the purchase of Japanese Government Bonds will continue in order to keep the 10-year JGB yield at around zero percent (an annual pace of 80 trn Yen).

Indonesia’s CEI (+1.2%) and LEI (+0.2%) were higher, indicating a brisker pace of economic activity. In regard to consumer prices, monthly headline inflation slowed to 0.10% mom (+3.41% yoy) in April, from 0.20% mom
(+3.40% yoy) in the previous month. Prices in most components grew at a slower pace. More specifically, prices in the food component fell by 0.04% mom, while prices in the non food component cooled by 0.17% mom. On the monetary side, BI left the BI 7-day Reverse Repo rate on hold at 4.25 percent with the Lending Facility rate and the Deposit rate at 5.00 percent and 3.50 percent, respectively. BI has kept rates low in consideration of several internal factors including the need to bolster economic growth and keep macroeconomic indicators stable (stable inflation, solid exports, and a more manageable CAD). Externally, the considerations include the fact that the world’s major economies are improving, the possibility of more aggressive hikes in the FFR than previously expected, the increasing risk of weaker global trade due to the implementation of inward-oriented trade policy, and heightened geopolitical risks. Meanwhile, the rupiah continued to weaken further. In April 2018, the rupiah fell by 0.4% mom, following its decline in the previous month (-1.1% mom). Year-to-date, the monthly average rupiah’s depreciation has reached 1.9 percent.

In view of the latest developments, we expect Indonesia’s exports to reach US$ 14.9 bn in April 2018, with imports reaching US$ 14.1 bn. This will translate into a trade surplus of US$ 835.6 mn in April 2018.

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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

Inflation
MoM(%) 0.74
YoY(%) 3.26

SBI
End of period(% p.a) 4.75

Forecast for 2016

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