Confirming the Export Turn-Around

INDONESIA - Report 02 Mar 2017 by Cyrillus Harinowo

In my previous report, I highlighted the turn-around in the export sector based on the preliminary data. The latest data on exports further confirmed the turn-around, which provides broad space for improvement in the overall economy. The rise of China as the number one export destination in the latest monthly data, as well as the rise in commodities prices, strengthened the trend of increasing exports into the latest data, for January 2017.

Compared with the same period of the previous year, total exports increased by more than 27%. While oil and gas exports increased only marginally in January 2017, non-oil exports increased quite significantly, almost reaching a 30% year-over-year rise, so that the marginal increase in oil and gas exports did not slow the growth of overall exports. If this trend continues or strengthens in the coming months, there is a greater likelihood that annual export performance in 2017 may surpass that of 2016.

The performance in exports led the January 2017 trade balance to a much larger surplus for that month. The trade surplus for that month was reported at $1.396 billion, surpassing all the monthly trade surpluses in 2016. The January 2017 trade surplus was derived from exports, which reached $13.385 billion, while imports reached $ 11.989 billion.

The Central Board of Statistics also released the National Accounts data, which revealed that the economy in Q4 was broadly in line with the consensus expectation. The main component of GDP growth was consumption, while the second component was capital formation. Government expenditures apparently fluctuated in their contribution to the GDP, including in Q4 2016. At the same time, the Central Bank also released the encouraging Q4 balance of payments report, which reported a smaller deficit of the current account.

The Central Board of Statistics' Inflation Report showed a surge in inflation for the month of January 2017, at 0.97%. With that performance, year-over-year inflation stood at 3.49%. This development allowed the Central Bank to keep the benchmark interest rate constant at 4.75% even though the Fed indicated it would raise the benchmark rate three times this year.

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