Indonesia marks smallest trade surplus in 9 months in February
A drop in commodity prices and slowing global economic growth last year pressured the resource-rich country’s external balance
Indonesia booked its smallest trade surplus in nine months in February as imports came in stronger than expected, while exports slumped, reinforcing expectations the surplus could narrow further this year.
Indonesia’s trade surplus last month was around $870 million, data from the statistics bureau showed on Friday, below the $2.32 billion expected by economists polled by Reuters and January’s $2 billion surplus. The February surplus was the smallest since May 2023.
A drop in commodity prices and slowing global economic growth last year pressured the resource-rich country’s external balance.
This year, exports may also have been affected by delays in the government’s issuance of mining permits, which have disrupted activities in coal, nickel and tin mines, among others.
In February, exports dropped 9.45 per cent from a year earlier to $19.31 billion, more than the 6.5 per cent predicted in the poll.
Shipments of Indonesia’s biggest export products, coal and palm oil, were down 18.7 per cent and nearly 40 per cent, respectively, year-on-year by value.
“One of the reasons for the drop in crude palm oil exports is falling demand in buyer countries. With a new trade avenue opened, a number of European countries have access to sunflower oil and other seed oils with cheap prices,” said acting head of the statistics bureau, Amalia Adininggar Widyasanti.
Also, Amalia said, China and India have high stocks of the edible oil.
By volume, February crude palm oil exports fell 32.5 per cent from a year earlier to 1.42 million tonnes, according to bureau data.
Imports were worth $18.44 billion in February, up 15.84 per cent from a year earlier, against market expectations for a 9.3 per cent increase, with the biggest rise recorded for imports of machinery, plastic and electrical equipment.
Rice imports, aimed at addressing a domestic supply shortage because early-year harvests were hit by prolonged dry weather, also affected the overall imports.
February’s higher-than-expected import figure might be temporary, reflecting that local producers were stocking up ahead of the Muslim fasting month of Ramadan, which started this month, said Irman Faiz, economist with Bank Danamon.
Elections in February and an expected transfer of power to a new government in October also impacted trade, DBS Bank economist Radhika Rao.
“Front-loading in investments ahead of the political transition, pre-festive demand and higher cereal purchases likely lited total imports, narrowing the trade surplus,” Rao said. “This sets the stage for modest widening in the current account gap this year.”
Indonesian state banks will provide loans subsidised by the government to food procurement companies to ensure adequate supplies of rice and other staples, as harvests were disrupted by prolonged dry weather, an official said.
State banks will prepare a total of 28.7 trillion rupiah ($1.84 billion) in credit this year, with 6 trillion rupiah withdrawn already, National Food Agency (NFA) Chief Arief Prasetyo Adi told a parliamentary hearing.
“The purpose is for food companies to become standby buyers, become the oftaker for products from our farmers,” he said adding the loans were important as some food companies still needed financial support.
The assigned food companies are Bulog and ID FOOD, which will use the loan to secure a number of staple foods from rice, corn, shallots, chilis, beef, chicken, eggs, sugar, cooking oil, and fish, the NFA said. The Indonesian government will subsidise the interest cost of the loans, resulting in an interest rate of just 2 per cent if the food companies provide collateral for the loans and 3 per cent without security, the NFA added.
Southeast Asia’s biggest economy has been trying to control rising food prices since last year, especially for its main diet of rice, amid low production caused by the El Nino weather phenomenon.
Indonesia’s food procurement company Bulog is optimistic rice prices will be under control ahead of the Islamic fasting month of Ramadan that starts in the second week of March as harvests improve supplies, its chief executive said.
Prices for rice, the staple for most of Indonesia’s 270 million people, have soared more than 16 per cent since last year as the El Nino weather phenomenon cut rainfall across large parts of Asia in 2023, reducing output and sparking food inflation pressure for some of the world’s most price-sensitive consumers.
Rice harvests have started in some areas with supplies starting to flow into some of the main rice markets in the country, Bulog Chief executive Bayu Krisnamurthi said.