FX Likely Focus Of Upcoming BI Meeting At Time Of Weak Exports

USDIDR has broken out of the range around 15700 that it has been in for most of October and has jumped to 15848, which is likely to be the focus of Bank Indonesia’s discussion at its meeting today (see MNI BI Preview here). One of its tools to manage the currency are FX term deposits for export earnings which are increasingly being used but this week data showed that nominal export growth is very soft. Rupiah depreciation should help competitiveness but is a risk to import prices.

• Exports fell 16.2% y/y and excluding petroleum & gas -17.5% in September. This is likely to be a significant drag on nominal growth as exports were worth around 21% of GDP in 2022. Weaker commodity prices have weighed on export values with the terms of trade falling 6.7% y/y in June but improving over July/August.

Source: MNI - Market News/Refinitiv

• Indonesia’s shipments to its five largest destinations plus most of Asia have all been shrinking compared to a year ago since mid-year. China is the largest endpoint taking 23% of Indonesian exports last year worth almost 5% of GDP. Exports to the large Asian economy fell 15.9% y/y in September. The US is the second largest and shipments there fell 13.1% y/y while to Japan they contracted 35.6% y/y and India -14.1% (equal third). Exports to Europe collapsed 26.2% y/y.

Source: MNI - Market News/Refinitiv

• The trade surplus has come off its post-pandemic highs but remains at healthy levels due to imports contracting sharply too, but that may be a warning sign re the strength of domestic demand.