Our external balance – Thu, January 19 2023

Indonesian exports, which generated about US$54.5 billion in trade surplus last year, up by 50 percent from 2021, are widely predicted to decline this year due to the weakening commodity market as the risks of economic recession have pressed down global demand for goods.

But we think the inordinately big concern over the end of the commodity boom and its likely adverse impact on the rupiah exchange rate is misplaced. True, the growth of the export value has begun to shrink since September, but a closer reading shows that the decline in commodity prices is still gradual and not all commodities suffer from falling demand. For example, the demand for Indonesian coal, palm oil and several other minerals will remain fairly strong amid the prolonged Russia-Ukraine war.

Hence, we will still enjoy a trade surplus though not as big as that of last year, especially because imports this year are also predicted to decline slightly due to the expected lower economic growth, from about 5.2 percent last year to a range of 4.9-5.1 percent this year. Analysts expect the current account balance (imports and exports of goods and services and payments made to foreign investors) to turn to a deficit of around 1.125 percent of gross domestic product (GDP) this year from an estimated surplus of 1 percent of GDP in 2022.