After the massive USD $2.29 billion trade deficit in April 2019 (which was the biggest monthly trade deficit in six years), Indonesia managed to turn the balance into a USD $206.7 million surplus in May 2019. Albeit small, Indonesian policymakers must have been relieved seeing the surplus as previously there were mixed opinions whether Indonesia would record a surplus or deficit in May.
Overall, the outlook of Indonesia’s trade balance remains gloomy. Subdued global economic growth (fed by the tariff war between the United States and China) undermines global trade. Moreover, in terms of its export performance, Indonesia is too dependent on (raw commodities) and therefore the country is vulnerable in times of downswings in commodity prices.
In other words, it will require a major improvement in the global economy (hence giving rise to higher commodity prices) in order to improve Indonesia’s trade balance significantly. However, with the Chinese economy still in 'slowdown mode', while the economies of the USA, Japan, and the European Union are also experiencing challenges, this scenario is unlikely to unfold in the foreseeable future.
In order to improve Indonesia’s trade balance in a structural manner, it will require massive investment in the country's value-added manufacturing that is export-oriented.
This article discusses the following:
• Details related to the trade balance (specifically Indonesia's export/import performance) in May 2019
• Why the narrow May 2019 trade balance is not a positive matter
• Why Indonesia's declining exports and (even more rapidly declining) imports are a threat to the nation's economic expansion
• Our outlook for Indonesia's trade balance in the remainder of 2019
Read the full article in the June 2019 edition of our monthly research report. You can purchase the report by sending an email to firstname.lastname@example.org or a WhatsApp message to the following number: +62(0)8788.410.6944
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