Cumulatively, Indonesia now has a trade surplus of USD $2.43 billion in the first quarter of 2015, up 129 percent from the same period in 2014, supported by a large decline in fuel imports. This is a good development in the context of curbing the country’s wide current account deficit. Indonesia’s full-year 2014 current account deficit amounted to USD $26.2 billion, equivalent to 2.95 percent of the country’s gross domestic product (GDP), improving from a (revised) deficit of USD $29.1 billion (3.18 percent of GDP) in 2013. Although improving, this deficit is still high and therefore makes Indonesia vulnerable to capital outflows, especially ahead of looming higher US interest rates.

The Indonesian rupiah had appreciated 0.44 percent to IDR 12,849 per US dollar according to the Bloomberg Dollar Index at 10:50 am local Jakarta time on Thursday (16/04). Meanwhile, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) appreciated 1.06 percent to IDR 12,838 per US dollar on Thursday (16/04).

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

However, it should be remembered that the rupiah is still expected to experience depreciating pressures amid generally bullish US dollar momentum (due to looming further monetary tightening in the USA). This means that the US dollar is likely to appreciate against all currencies, particularly those of emerging markets as capital flows back to the USA.

One last note regarding the March 2015 trade surplus. Although the monthly trade surplus looks positive at first sight, there is also a negative side to it, namely that the surplus is primarily caused by a sharp decline in imports. Apart from declining fuel imports there is also evidence that imports of capital goods have declined. A decline in imports of capital goods signals that there is less output in Indonesian factories, hence indicating that domestic (and global) demand has reduced. This is not good for the country’s economic growth, which has already slowed to a five-year low of 5.02 percent year-on-year in 2014.