Bahana Macrosight: Strongest trade data in pandemic

Summary:

• November trade surplus at USD2.61bn, in line with consensus
• Exports jumped 6.4% m-m and 9.54% y-y, beating estimates

Trade surplus on surprise jump in exports

Indonesia’s trade surplus narrowed from USD3.61bn in October to USD2.61bn in November, in line with the median forecast of USD2.60bn. We think the trade data should be cheered by the markets, particularly as the surplus was underpinned by strong exports. Exports jumped by 6.4% m-m/9.54% y-y to USD15.28bn last month, beating market expectations of only 0.35% y-y growth. Indonesia recorded strong shipments to China, with exports there jumping by 15.61% m-m/25.20% y-y, both for raw commodities and manufacturing goods. That bolstered Indonesia’s total exports of palm oil (HS 15), mineral fuel/coal (HS 27), and iron and steel (HS 72), which on m-m basis surged by 23.61%, 21.73% and 19.72%, respectively. Our view here is the exports rebound could be pretty much sustained, as a global recovery continues to boost demand for manufacturing products and commodities from Indonesia.

Imports improved in a sign of domestic GDP recovery

Import growth rates stood at 17.4% m-m/-17.46% y-y, or USD15.28bn in November, beating market expectations that expected -24.5% y-y import growth last month. All import components rebounded, with Indonesia’s overseas purchases of capital goods, consumption goods and raw materials all surging 31.5%, 25.5%, and 13.0% in November compared to a month earlier. Imports of industrial goods such as mechanical-electrical machineries (HS84-85) and iron & steel (HS72) also grew by 8.3%, 23.8% and 17.1% m-m, respectively. The rebound in Indonesia’s imports appeared consistent with the ongoing global recovery and regional trend, particularly China whose y-y growth rates for industrial production and exports are already back to pre-pandemic levels at 7.0% and 14.1% averages in the past 3 months (see Daiwa report: China’s factories do better). While 11M20 import value remains low at USD127.1bn (-18.9% y-y), the latest rebound in imports may be a prescient sign of economic recovery ahead, particularly investments, and should translate into improved manufacturing PMI and credit growth in the upcoming months.

USD19.7bn ytd trade surplus – what’s to fear about IDR stability?

Cumulatively, Indonesia’s trade surplus hit IDR19.66bn in 11M20 and the surplus is on track to hit USD22-23bn by year’s end. It shall be the biggest surplus since the USD26bn recorded in the 2011 commodity boom. This points to another current account surplus in 4Q20, with the goods-balance surplus likely to fall in the range of USD8bn-USD9bn (Oct-Nov: USD6.19bn), higher than USD7.98bn in previous quarter. Our view here is the elevated commodity prices appear sustainable beyond 2021. The trade surplus, therefore, could continue despite possible pick-up in imports in the first half next year. The trade balance should give comfort for Bank Indonesia to deliver another 25-bps rate- cut to 3.50% in its monetary meeting this week, as the central bank capitalized on the momentum to boost investments and accelerate economic recovery.