Indonesia Investments wishes all Muslims a happy & generous Ramadan
25 May 2018 (closed)
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Based on data from Statistics Indonesia (BPS), Indonesia's trade balance showed a USD $1.63 billion deficit in April 2018. The deficit, which surprised most analysts' expectations, is the nation's biggest monthly trade deficit in four years (April 2014). While exports grew 9.0 percent year-on-year (y/y) to USD $14.47 billion, imports grew much more impressive - at a pace of 34.7 percent (y/y) - to USD $16.09 billion last month.
It is usual that imports rise ahead of the Ramadan month (the holy fasting month for Muslims) and the subsequent Idul Fitri celebrations (that mark the end of the Ramadan) as both events give rise to an increase in consumption. However, few expected to see such a major increase in imports last month. Imports into Indonesia soared 35 percent (y/y) to USD $16.09 billion in April 2018. Although the trade deficit puts additional pressure on the Indonesian rupiah, soaring imports could also be seen as a positive sign, namely that household consumption in Indonesia is improving.
Retailers only increase their stockpiles significantly when they have good reasons to expect rising demand from Indonesian consumers. BPS data show that the growth of imports in April 2018 is primarily carried by rising non-oil and gas imports. More precisely, imports of consumer goods grew 38.0 percent (y/y) in April 2018, while imports of raw materials rose 33.0 percent (y/y) and imports of capital goods grew 40.8 percent (y/y). The rise in imports of capital goods (a durable good that is used in the production of goods or services) and the rise in imports of consumer goods could very well be signs that economic activity is rising on the back of improving household consumption in Indonesia.
The overall trade balance of Indonesia in the first four months of 2018 shows a USD $1.3 billion deficit. This is a significant decline compared to the USD $5.4 billion surplus in the January-April 2017 period. The trade deficit so far in 2018 will also put pressure on the country's current account deficit (CAD). The CAD widened to 2.15 percent of Indonesia's gross domestic product (GDP) in Q1-2018, up significantly from 1.0 percent of GDP in Q1-2017.