(Photo: special)

JAKARTA (TheInsiderStories) – Indonesia`s trade balance recorded a deficit of US$120 million in February, lower than January’s deficit at level $676.9 million, the Indonesia Statistics said on Thursday (15/3).

Indonesia’s exports rose 11.76 per cent at $14.10 billion, while its imports reached $14.21 billion or jumped 25.18 per cent in this mont. Cumulatively, the largest export is still contributed by mineral fuel, especially coal with a value of $3.4 billion.

Imports in February surged significantly, driven by the increase of the imports of raw material, and consumer goods such as rice import from Vietnam according to Kecuk Suharyanto, chief of Statistics Indonesia.

However, He warns the government to improve the trade balance since the country has been recorded deficit in three months in the row, after a $220 million deficit in December 2017 and a $676.9 million deficit in January 2018.

In February, the imported rice has started arriving in a number of ports across Indonesia as the commodity price remains above the ceiling set by the government.

State Logistics Agency (Perum Bulog) procurement director Andrianto Wahyu said that more than 57,000 tons of imported rice have arrived in three Indonesian ports.

Otherwise, Bank Indonesia Governor Agus Martowardojo said another monthly trade deficit is not something to worry about, especially as a big chunk of the deficit is caused by rising demand for raw materials and capital goods from domestic manufacturers.

This points to rising activity and rising confidence in the manufacturing industry, which should impact positively on employment opportunities and future exports. The capital spending of manufacturers is one of the signs that the manufacturers expect the sector to grow or at least steady demand for their products.

However, based on data from the Statistics Indonesia, not only imports of capital goods and raw materials that have increased by double-digit figures, the imports of consumer goods have also grown by a double-digit figure in February 2018.

On the one hand, this can be a good sign as it signals an expected recovery of consumers’ purchasing power and household consumption are strengthening in Indonesia. On the other hand, it puts pressure on both Indonesia’s trade balance and the current account balance as well as the rupiah exchange rate.

Martowardojo said he expects Indonesia’s current account deficit to widen to 2.1 per cent of GDP in full-year 2018 (from a deficit of $17.29 billion or 1.7 per cent of GDP in the preceding year).

This new estimate is at the lower end of Bank Indonesia’s earlier current account deficit forecast of 2.0 – 2.5 per cent of GDP. Martowardojo added that a 2.1 per cent of GDP current account deficit is a “healthy level”. Several analysts, however, claim that the rupiah will remain Asia’s most vulnerable currency as long as the country has a current account deficit.

Email: elisa.valenta@theinsiderstories.com