Statistics Indonesia (BPS), a non-departmental government institute, expects that Indonesia's trade balance will post a deficit of around USD $4 billion in 2014. The key question is whether increased manufacturing and agricultural exports can replace reduced raw mineral exports. The forecast of BPS is approximately similar to the country's trade deficit in 2013. Last year, Southeast Asia's largest economy recorded a deficit of USD $4.06 billion as the total value of exports amounted to USD $182.57 billion, while imports reached USD $186.63 billion.
Indonesia's export sector is impacted by the implementation of the government's ban on unprocessed mineral export (effective since 12 January 2014) as around 60 percent of the country's export constitutes commodities, most of which is raw material. The government introduced this ban in order to develop value-added domestic industries. It will take time, however, to develop sufficient domestic smelting capacity. Due to major concerns about the immediate impact of the ban on Indonesia's wide current account deficit, a last-minute revision by President Susilo Bambang Yudhoyono meant that exports of iron ore, led, copper and zinc concentrates are able to continue temporarily (under specific conditions). Despite this revision, Indonesia's export sector will still feel the impact of the ban as mineral exports are curbed (mineral exports account for about 10 percent of the country's total exports, while exports of unprocessed minerals earn about USD $2 billion per month).
Indonesia's Trade Balance 2013 (in billion US Dollar):
|Month||Oil & Gas||Non Oil & Gas||Total|| Oil & Gas
||Non Oil & Gas||Total|
Source: Statistics Indonesia
To offset reduced mineral exports, Statistics Indonesia hopes that Indonesia's manufacturing and agricultural export can continue to post a growing trend. Recently, the institute detects a rise in agricultural exports, such as crude palm oil and (processed) rubber, amid an improving global economy. Growth of manufacturing exports is also seen in increased exports of textiles and shoes.
In terms of export, the sharply depreciated rupiah exchange rate (falling over 21 percent against the US dollar during 2013) contains an advantage as it makes Indonesian products more competitive on the global market. This should also provide a boost.
Previously, Ministers of Economy and Finance Hatta Rajasa and Chatib Basri both stated that the ban on unprocessed minerals will temporarily burden the country's trade balance as it curbs minerals exports while it triggers higher imports for the establishment of smelters. From 2016 onwards, a trade surplus is forecast as exports of processed minerals is expected to surge from about USD $4 billion in 2014 to USD $9 billion.