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Bank Indonesia ExpectsTrade Surplus in March

Bank Indonesia ExpectsTrade Surplus in March

JAKARTA:  Indonesia (which is the widest measure for trade) is expected to widen to 2 percent of gross domestic product (GDP) in Q1-2018 as imports have been better than a year ago. Martowardojo added that Bank Indonesia is not concerned about the country’s current account deficit as long as it remains below 3 percent of GDP. Moreover, the recent surge in raw material imports is caused by rising demand from the manufacturing sector. This should be a good development as an expanding manufacturing industry boosts overall economic growth. For the long term, however, Martowardojo hopes that Indonesia will reduce its dependence on imports because this would cause a structural improvement for the nation’s current account deficit.

However, analysts do not agree with Bank Indonesia’s forecast for a big monthly trade surplus in March 2018. The consensus of ten economist, surveyed by Bloomberg, is that Indonesia saw another small trade deficit (approx. USD $100 million) last month. Most believe that Indonesia’s export performance weakened in March amid slowing manufacturing activity in key export markets such as China, Japan, India, ASEAN and the European Union. Meanwhile, imports are believed to remain around the same level as in the preceding month. Although Indonesia’s manufacturing activity fell in March (implying falling demand for imports of raw materials), imports of capital goods remain strong due to investment.

If the consensus is correct and Indonesia will indeed see another small trade deficit in March, then the Q1-2018 current account deficit is likely to be pushed beyond the 2 percent of GDP level.

Meanwhile, Bhima Yudhistira, economist at Indef, also expects to see a small trade deficit in March. But contrary to the consensus of the ten economists.