In July 2023 we saw a relatively modest trade surplus for Indonesia at USD $1.31 billion, down heavily from USD $3.45 billion in the previous month when it was the weak import performance that allowed Southeast Asia’s largest economy to enjoy a wide trade surplus.
In July 2023 the story is different, though: imports rebounded, while exports (more-or-less) stayed at the same level, hence triggering a shrinking trade surplus.
Nonetheless, as we have been stating over the past two months, chances are that we are going to see a trade deficit for Indonesia in the near future as exports continue to be plagued by sliding international commodity prices and the possible slowdown in the global economy, while imports should stay more stable amid strong domestic economic growth (Indonesia’s recent Q2-2023 gross domestic product growth data in fact beat expectations).
But before we take a look at the latest trade data that were released by Indonesia’s Statistical Agency (Badan Pusat Statistik, or BPS) we first take a look at international trade.
International trade is experiencing a hiccup. For example, China, often referred to as the “world's factory”, saw its exports plunge 14.5 percent year-on-year (y/y) to USD $281.8 billion in July 2023 (a decline that is even sharper than June’s 12.4 percent fall). Demand for Chinese exports cooled after the Federal Reserve and central banks in Europe and Asia started raising interest rates in 2022 to combat inflation that was at multi-decade highs.
Meanwhile, imports into China (a country that ranks among the biggest markets for industrial materials, food, and consumer goods) tumbled 12.4 percent (y/y) to USD $201.2 billion in July 2023 (which is wider than the previous month’s 6.8 percent y/y decline).
The weak trade data come a few weeks after Chinese’s National Bureau of Statistics announced that GDP expanded 6.3 percent (y/y) in Q2-2023, which was well below the forecast for growth of 7.3 percent (y/y). This suggests that China's post-COVID boom is over. Besides weak trade, the world’s second-biggest economy is currently facing weak retail sales and weak private fixed-asset investment, while it’s also being harmed by the prolonged downturn in the property market. And while authorities are likely to roll out more stimulus, analysts don’t expect to see a quick turnaround in the near future.
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