Trade Picture Improving As Terms Of Trade Rise, Exports To China Weak

Indonesia’s solid Q1 GDP growth of 5.1% y/y was driven by domestic demand with exports rising only 0.5% y/y and falling short of import growth of 1.8%. The May trade data though showed a slight improvement in the nominal merchandise trade surplus as export growth recovers helped by the terms of trade. Trade will continue to be monitored closely while it underperforms domestic demand and the rupiah is weak.

• The outlook is uncertain as the May S&P Global manufacturing PMI reported contracting export orders with domestic demand keeping activity positive.
• USDIDR has weakened again today to 16422 and is now up 2.7% since the May 22 Bank Indonesia meeting. An increase in export earnings would be welcome in terms of FX stability.
• The 3-month average of the goods surplus has improved over the last three months helped by a pickup in the terms of trade which was up 4% in April from December 2023 and 6.1% higher on the year. This has helped to boost export values which rose 2.9% y/y in May from 1.7% in April and -3.7% in March. Whereas imports fell 8.8% y/y.

Source: MNI - Market News/Refinitiv

• Shipments to Indonesia’s main export destinations have been mixed though with the 3-month average down 8.2% y/y to China and 1.9% y/y to Japan but up 16.6% y/y to India and 9.8% y/y to the US. They remain weak to much of Asia and Europe but strong to Korea and Australia.

Source: MNI - Market News/Refinitiv