Although at a slower pace, Indonesia's exports and imports continued to contract in August 2016. In August Indonesia exported USD $12.63 billion worth of goods down 0.75 percent on a year-on-year basis (much better than analysts had forecast). Meanwhile, Indonesia imported USD $12.34 billion worth of goods in August, down 0.49 percent (y/y). As such, the trade balance in August showed a USD $293.6 million surplus. However, Indonesia's Statistics Agency (BPS) added that it was the 23rd month of declining imports and exports for Indonesia.

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Indonesia's Statistics Agency (BPS) announced on Monday (15/08) that the trade balance of Indonesia showed a surplus of USD $598 million in July 2016, down from a USD $879.2 million surplus in the preceding month and considerably below analyst forecasts. Although Indonesia, Southeast Asia's largest economy, booked a USD $4.2 billion trade surplus in the first seven months of 2016, concern about Indonesia's weakening exports and imports persist. Faster falling imports (compared to exports) explains the trade surplus.

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Indonesia's latest trade data beat forecasts by quite a distance. According to Statistics Indonesia (BPS), Indonesia's trade balance recorded a monthly surplus of USD $900.2 million in June 2016. Previously, median forecasts expected a USD $300 million surplus. Meanwhile, the nation's trade surplus more than doubled in June from the monthly surplus in the preceding month, supported by strong exports of electronics, auto parts, finished garments, and rubber products. Despite this positive result, there remain some concerns.

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Today (15/06) Statistics Indonesia (BPS) announced that Indonesia's May trade balance showed a surplus of USD $375.6 million, below analyst estimates (at USD $680 million) and below the (revised) USD $660 million trade surplus recorded in the preceding month. Although having a trade surplus is good, there remain concerns about Indonesia's falling exports and imports as these declines are signs of weakening domestic and global economic activity.

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The central government of Indonesia has officially declared the Patimban Seaport project in Subang (West Java) a national strategic project through Presidential Decree No. 47/2016, signed by Indonesian President Joko Widodo. This declaration implies that the project is regarded a priority project that benefits the economy and society as a whole. The priority status further means that all ministers, government agencies and governors need to support the development of the project.

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Cement exports from Indonesia have surged sharply in the first five months of 2016. Rising cement export is a good strategy to tackle the domestic oversupply of cement in Indonesia. Due to the influx of new cement producers as well as the expansion programs of existing cement producers in Southeast Asia's largest economy, the nation's cement production capacity has nearly reached 100 million tons per year, while domestic demand may only reach 65 million tons in 2016.

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State-owned Pelindo II, the company that is involved in port services across ten Indonesian provinces, plans to conduct another test related to the New Priok Port on 2 July 2016. Full commercial operations are scheduled to start on 15 July 2016. The New Priok Port is one of the large government infrastructure projects involving the construction of a new port (an extension of the Tanjung Priok) in North Jakarta in order to tackle Indonesia's severe logistics trouble, while bringing Indonesia's port facilities on par with other world-class ports such as Singapore.

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Based on the latest data from Statistics Indonesia (BPS), Indonesia booked a USD $670 million trade surplus in April 2016, primarily caused by a bigger-than-expected decline in imports. Most analysts expected to see a monthly trade surplus around USD $200 million last month. In the first four months of 2016, Indonesia's trade balance has now accumulated into a USD $2.3 billion trade surplus. Although the surplus is positive, there remain deep concerns about the persistently falling import and export figures.

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Indonesian cosmetic companies listed on the Indonesia Stock Exchange have not yet seen earnings gain momentum in the first quarter of 2016. Martina Berto is the only listed cosmetic producer that managed to post rising net sales and net profit in Q1-2016. Meanwhile, the two other cosmetic firms - Mustika Ratu and Mandom Indonesia - saw their net sales decline in the same period due to weak purchasing power and household consumption in Southeast Asia's largest economy. Moreover, cosmetic firms have been offering discounts in order to raise sales volumes.

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Efforts to raise people's purchasing power and household consumption in Indonesia will be key to push for higher economic growth in 2016. According to the latest data from Statistics Indonesia (BPS), Indonesia's gross domestic product (GDP) growth reached 4.92 percent (y/y) in the first quarter of 2016. Although this result failed to meet analysts' projections (which generally stood around 5 percent y/y), it was higher than the 4.73 percent (y/y) economic growth pace that was posted in the same quarter one year earlier.

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Again positive news for Indonesia's trade balance. Last week, Statistics Indonesia announced that the largest economy of Southeast Asia posted a USD $776.8 million trade surplus in November 2013 (the largest monthly trade surplus since March 2012). After the (revised) USD $24 million trade surplus in October 2013, November was the second straight month in which the country posted a surplus. This development is important to gain investors' confidence as Indonesia's current account deficit has been a major cause for concern.

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The central bank of Indonesia (Bank Indonesia) estimates that Indonesia's current account deficit will ease to 3.5 percent of the country's gross domestic product (GDP) by the end of 2013. Indonesia's wide current account deficit has been one of the major financial troubles this year and managed to weaken investors' confidence in Southeast Asia's largest economy. Thus, Indonesia became one of the hardest hit emerging countries after the Federal Reserve started to speculate about an ending to its quantitative easing program.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the November 2013 edition, a number of important issues that are monitored include Indonesia's inflation rate, the trade balance, the current account deficit, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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Although widespread concerns about Indonesia's prolonged trade deficit (and current account deficit) are far from unfounded, the country's October 2013 trade data show a positive result. On Monday (02/12), Statistics Indonesia announced that Southeast Asia's largest economy posted a small trade surplus of USD $42.4 million in October after having recorded a trade deficit of USD $810 million in the previous month. This calender year (January to October 2013), the trade deficit has accumulated to USD $6.36 billion.

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Currently, one of Indonesia's main financial issues (and one which puts serious pressures on the Indonesian rupiah exchange rate) is the country's wide current account deficit. According to data from Statistics Indonesia, Indonesia's current account deficit totaled USD $8.4 billion in the third quarter of 2013. This figure is equivalent to a whopping 3.8 percent of Indonesia's gross domestic product (GDP). Generally, a current account deficit that exceeds 2.5 percent of GDP is considered unsustainable.

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This week, a group of Dutch politicians and businessmen, led by prime minister Mark Rutte, will pay a four day visit to Indonesia. The aim of the visit is to smoothen bilateral relations and search for business opportunities between both countries. This Dutch group, which includes more than one hundred Dutch company delegates, forms the largest Dutch trade delegation that has visited Southeast Asia's biggest economy in the modern history. However, relations between the Netherlands and Indonesia are still complex today.

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Despite rising concerns about the slowing pace of the Indonesian economy, the deputy minister of Finance Bambang Brodjonegoro reminded investors that Indonesia's economic growth in the third quarter of 2013 still constitutes one of the highest growth rates around the globe. Economic expansion in Q3-2013 slid to 5.6% in Southeast Asia's largest economy. With the exception of China (7.8% GDP growth in Q3-2013), Indonesia's growth continues to outpace growth in other emerging markets, such as Brazil (3.3%) and Turkey (4%).

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Bank Indonesia decided to raise the BI rate by 25 bps to the level of 7.50 percent, with the Lending Facility rate and Deposit Facility rate raised to 7.50 percent and 5.75 percent respectively. This policy was taken in light of the persistently large current account deficit amid widespread global uncertainty. Therefore, the decision was taken in order to ensure that the current account deficit is reduced to a more sound level and inflation in 2014 returns to around 4.5±1 percent, thereby supporting sustainable economic growth.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the October 2013 edition, a number of important issues that are monitored include Indonesia's inflation rate, the trade balance, the current account deficit, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt:

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Indonesia's October inflation rate was well-received by investors. On Friday (01/11), Statistics Indonesia (BPS) announced that the country's inflation in October 2013 grew 0.09 percent. Easing inflation was mainly due to falling prices of raw foods and clothes. Year-on-year (yoy), however, Indonesia's inflation is still high at 8.32 percent, although showing a moderating trend from 8.40 percent (yoy) in September 2013 and 8.79 percent (yoy) in August 2013. Inflation had skyrocketed after subsidized fuel prices were raised by an average 33 percent in June.

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