JAKARTA. Indonesia recorded a negative trade balance for a second straight month in May, as exports remained under pressure from weak global demand while imports soared on capital goods purchases for investment.Analysts said monthly trade deficits would likely be the norm as long as the nation’s traditional export destinations, particularly the US and China, continued to suffer from fallout from the eurozone crisis.“We really cannot control the course of our trade balance because it depends greatly on the recovery in the Europe and the US. We’ll likely see trade deficits continue until the third quarter of this year,” Latif Adam, an economist from the Indonesian Institute of Sciences (LIPI), said.The nation’s trade balance stayed in the red in May, recording a US$485.9 million deficit, which followed a $641.1 million deficit in April, the first since July 2010, according to the Central Statistics Agency (BPS).Imports surged 16.09 percent year-on-year to $17.21 billion in May, while exports dropped 8.55 percent to $16.72 billion. The cumulative value of imports grew by 16.62 percent in the first five months of 2012, compared to the same period last year, while exports tread water, rising 1.48 percent in the same period.Deputy Trade Minister Bayu Krisnamurthi described the situation as “quite serious and not easy” but “manageable”.“The short-term outlook is still hard, although the mid-term outlook is promising. The key is the global economic recovery,” Bayu said.The government earlier anticipated that the nation’s trade surplus for 2012 would drop to one-fifth of last year’s $26.06 billion. The trade surplus in the first five months of the year was $1.52 billion, down from $11.72 billion in the same period last year.Two consecutive months of trade deficits should serve as a warning for the government to intensify its market diversification push into non-traditional export destinations and to encourage the creation of value-added products, Latif said.Ahmad Erani Yustika, an economist at the Institute for Development of Economics and Finance (INDEF), said that a global reevaluation of commodity prices would couple with dwindling demand to deepen the nation’s export slump.According to the BPS, exports of minerals (mainly coal) and vegetable oil (mainly palm oil) contributed 16.94 percent and 13.37 percent, respectively, to the nation’s total of non-oil and gas exports of $162.02 billion in 2011. Indonesia is the world’s largest exporter of thermal coal and palm oil. “The prices for our primary commodities will continue to fall in the international market. An annual trade deficit is likely,” Erani said. He also highlighted that the high growth in imports resulting from the dependence of domestic manufacturers on imported raw materials and intermediary goods, would also threaten the country’s trade balance in coming months.Imports of raw materials and intermediary goods comprised 73.05 percent of the value of all imports in the first five months of the year, which stood at $79.9 billion, while capital goods accounted for 19.96 percent and consumption goods comprised 6.99 percent.Trade Minister Gita Wirjawan, who relinquished his post as chairman of the Investment Coordinating Board (BKPM) last month, said soaring imports was a necessary pain as Indonesia continue to climb the value chain. Realized foreign investment (FDI) in Indonesia hit a record high in the first quarter, coming in at Rp 51.5 trillion ($5.7 billion), up 30 percent from the same period in 2011.Gita said that the influx of raw materials and capital goods was a positive sign for realized investment in the country and that the benefits would be felt in the next six to 18 months.Industry players said that Indonesian exports would receive a considerable boost starting this month as Muslims all around the globe prepare for increased consumption during the holy month of Ramadhan.“There will be an increase of up to 10 percent in demand from earlier months,” Fadhil Hasan, the executive director of Indonesian Palm Oil Producers Association (Gapki), said. (Linda Yulisman/ The Jakarta Post)
Trade gaps likely to continue
JAKARTA. Indonesia recorded a negative trade balance for a second straight month in May, as exports remained under pressure from weak global demand while imports soared on capital goods purchases for investment.Analysts said monthly trade deficits would likely be the norm as long as the nation’s traditional export destinations, particularly the US and China, continued to suffer from fallout from the eurozone crisis.“We really cannot control the course of our trade balance because it depends greatly on the recovery in the Europe and the US. We’ll likely see trade deficits continue until the third quarter of this year,” Latif Adam, an economist from the Indonesian Institute of Sciences (LIPI), said.The nation’s trade balance stayed in the red in May, recording a US$485.9 million deficit, which followed a $641.1 million deficit in April, the first since July 2010, according to the Central Statistics Agency (BPS).Imports surged 16.09 percent year-on-year to $17.21 billion in May, while exports dropped 8.55 percent to $16.72 billion. The cumulative value of imports grew by 16.62 percent in the first five months of 2012, compared to the same period last year, while exports tread water, rising 1.48 percent in the same period.Deputy Trade Minister Bayu Krisnamurthi described the situation as “quite serious and not easy” but “manageable”.“The short-term outlook is still hard, although the mid-term outlook is promising. The key is the global economic recovery,” Bayu said.The government earlier anticipated that the nation’s trade surplus for 2012 would drop to one-fifth of last year’s $26.06 billion. The trade surplus in the first five months of the year was $1.52 billion, down from $11.72 billion in the same period last year.Two consecutive months of trade deficits should serve as a warning for the government to intensify its market diversification push into non-traditional export destinations and to encourage the creation of value-added products, Latif said.Ahmad Erani Yustika, an economist at the Institute for Development of Economics and Finance (INDEF), said that a global reevaluation of commodity prices would couple with dwindling demand to deepen the nation’s export slump.According to the BPS, exports of minerals (mainly coal) and vegetable oil (mainly palm oil) contributed 16.94 percent and 13.37 percent, respectively, to the nation’s total of non-oil and gas exports of $162.02 billion in 2011. Indonesia is the world’s largest exporter of thermal coal and palm oil. “The prices for our primary commodities will continue to fall in the international market. An annual trade deficit is likely,” Erani said. He also highlighted that the high growth in imports resulting from the dependence of domestic manufacturers on imported raw materials and intermediary goods, would also threaten the country’s trade balance in coming months.Imports of raw materials and intermediary goods comprised 73.05 percent of the value of all imports in the first five months of the year, which stood at $79.9 billion, while capital goods accounted for 19.96 percent and consumption goods comprised 6.99 percent.Trade Minister Gita Wirjawan, who relinquished his post as chairman of the Investment Coordinating Board (BKPM) last month, said soaring imports was a necessary pain as Indonesia continue to climb the value chain. Realized foreign investment (FDI) in Indonesia hit a record high in the first quarter, coming in at Rp 51.5 trillion ($5.7 billion), up 30 percent from the same period in 2011.Gita said that the influx of raw materials and capital goods was a positive sign for realized investment in the country and that the benefits would be felt in the next six to 18 months.Industry players said that Indonesian exports would receive a considerable boost starting this month as Muslims all around the globe prepare for increased consumption during the holy month of Ramadhan.“There will be an increase of up to 10 percent in demand from earlier months,” Fadhil Hasan, the executive director of Indonesian Palm Oil Producers Association (Gapki), said. (Linda Yulisman/ The Jakarta Post)