Economic Highlighs (Indonesia) - 05/05/2014

Weak Export Recovery Pointing To Higher Current Account Deficit, While Prices Remained Stable

¨      Indonesia’s export rebounded by 1.2% y-o-y in March, from -2.5% in February and-5.9% in January. The improvement was due mainly to a revival in the non-oil and gas but offset partially by the decline in gas exports and a sharper drop in crude oil exports.

¨      Imports declined further but by a smaller magnitude of 2.3% y-o-y in March, from -9.9% in February and compared with -3.5% in January. The decline was due to a drop in the imports of gas and crude oil. On the contrary, imports of oil products started to gain pace in March.

¨      As a result, trade balance still recorded a surplus albeit lower at USD673m in March, compared with USD785m in February. Cumulatively, the trade surplus amounted to USD1.1bn in 1Q 2014, lower than a surplus of USD2.3bn recorded in 4Q 2013. This will likely contribute to higher current account deficit in the balance of payments in 1Q 2014 estimated at around 2.3% of GDP in the 1Q, higher than the deficit of 2.0% of GDP recorded in 4Q 2013.

¨      Separately, the headline inflation was unchanged at 7.3% y-o-y in March, but lower than +7.7% in February. This was on account of lower food prices, on the back of better harvest season in March-April. The core inflation, on the other hand, inched-up to 4.7% y-o-yin April due in part to rising housing cost, while jewel made of gold mitigated the increase.

¨      Going forward, we see inflation trend higher in view of the upcoming fasting and holiday season. Throughout the year, however, we expect inflation to average at 6.2% in 2014, lower than +7.0% recorded in 2013,  due to base effect as the Government seems likely to keep the subsidized fuel price unchanged, hence, we expect the benchmark rate to be kept unchanged at 7.5% by the central bank in the near term.

Link to the report:

Economic Highlights : INDONESIA - Weak Export Recovery Pointing To Higher Current Account Deficit, While Prices Remained Stable

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