In fact, Suryamin, Head of Statistics Indonesia, informed that this is the first time in five years that both the country’s oil & gas balance and non-oil & gas balance are in surplus. Normally, Indonesia posts a wide deficit in the oil & gas sector due to costly oil imports to meet domestic fuel demand. However, amid low crude oil prices this balance has improved markedly.

Indonesia’s monthly imports in February declined by 16.2 percent year-on-year (y/y) to USD $11.6 billion. The country’s oil & gas imports plunged by 50.3 percent (y/y) to USD $1.7 billion in February on the back of low global oil prices. Meanwhile, non-oil & gas imports fell 4.9 percent (y/y) to USD $9.8 billion, evidencing that the heavily depreciating rupiah exchange rate has succeeded in limiting imports into Southeast Asia’s largest economy. However, looking at prices only may cause a distorted picture as the +14.5 percent growth of imports in terms of volume (in the first two months of 2015), especially non-oil & gas imports, suggests that domestic consumption may have grown.

The weak rupiah has not yet impacted significantly on the country’s export performance. Theoretically, a weak rupiah should make Indonesian products more attractive on the international market. However, Indonesia’s exports fell 16.0 percent (y/y) to USD $12.3 billion due to a decline in shipments of both oil & gas and non-oil & gas products, such as palm oil and coal. Commodity prices remain sluggish especially as demand from China has reduced amid the country’s slowing economic growth pace. It should also be noted that Indonesian export products generally contain a high degree of imported materials meaning that export growth cannot exist without import growth.

Cumulatively, Indonesia’s trade surplus stands at USD $1.48 billion in the first two months of 2015.

Meanwhile, despite the positive news about the USD $738.3 million trade surplus in February, the Indonesian rupiah exchange rate continues to depreciate today as a growing number of investors expect that the Federal Reserve, which will start its two-day FOMC meeting on Tuesday (17/03), will raise its key interest rate soon. Based on the Bloomberg Dollar Index, the rupiah had depreciated 0.29 percent to 13,244 per US dollar at 15:25 pm local Jakarta time on Monday.

Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.35 percent to IDR 13,237 per US dollar on Monday (16/03).

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

The February trade surplus is positive for Indonesia as the country struggles to combat the wide current account deficit. This deficit makes the country vulnerable to capital outflows in times of economic turmoil and puts pressure on the rupiah. The Indonesian government plans to implement several new regulations to curb imports and boost exports.