Indonesia books wider trade surplus

- Advertisement -

JAKARTA- Indonesia’s exports and imports hit record highs in March amid rising commodity prices due to the impacts of the Ukraine war, helping the resource-rich country book a wider-than-expected trade surplus, statistics bureau data showed on Monday.

March exports from Indonesia were worth $26.5 billion, up 44.36 percent on a yearly basis and beating a 23.83 percent prediction in a Reuters poll.

Imports were up 30.85 percent to $21.97 billion, more than the 18.30 percent rise seen in the poll.

- Advertisement -

Southeast Asia’s largest economy booked a $4.53 billion surplus last month, the largest since October and far greater than the poll’s forecast of a $2.89 billion surplus.

Prices of Indonesia’s top export products, such as coal, natural gas, palm oil, tin and nickel – which were already high due to recovering demand – surged further in global markets in March following Russia’s invasion of Ukraine on Feb. 24.

Moscow calls its action a “special operation” to destroy its neighbor’s military capabilities.

Most of the increase in coal exports were bought by China, India and the Philippines, but shipments to European countries such as the Netherlands, Italy and Germany also rose, statistics bureau head Margo Yuwono said.

High commodity prices also affected imports, as Indonesia is a net oil importer and a major buyer of wheat and soybean.

The statistics bureau also recorded an increase in imports of meat, fruits and pharmaceutical products, some of which it said may be due to rising demand ahead of the Muslim fasting month of Ramadan, which began in early April.

Meanwhile, Indonesia raised its royalty rate for coal miners from 13.5 percent to a range of 14 percent to 28 percent depending on government-set coal benchmark prices, Lana Saria, a director at the Energy and Mineral Resources Ministry said on Monday.

The maximum royalty is set for general sales when prices hit more than $100 per ton, Lana said. Coal sold under the so-called domestic market obligation (DMO) to power plants and some other industries will be charged 14 percent royalty as those prices are capped at $70 and $90 per ton.

The new royalty scheme has been set as coal miners convert their current licenses into the new licensing system known as special mining permits (IUPK) when their contracts expire.

The new royalty rate takes effect immediately for IUPK that were issued prior to 2022, while IUPK issued this year will be charged the new royalties next year, Lana said.

“The objective is for an increase in state revenue while at the same time maintaining coal mining continuity and the investment climate,” she said.

Previously, the royalty was set at single tariff of 13.5 percent.
Under the new scheme, miners who hold IUPK that were converted from the so-called ‘first generation’ contracts of work will be charged with production royalties ranging from 14 percent to 28 percent depending on the price brackets.

For IUPK converted from later generation contracts, the royalty ranges from 20 percent to 27 percent, Lana added.

Miners whose contracts are not yet expired will continue to be charged with royalties according to their current agreement with the government.

Meanwhile, holders of coal mining licenses known as IUP will be charge royalties based on caloric value according to a 2019 rules.

Indonesia expects its economy to grow between 5.3 percent to 5.9 percent next year, above 2022’s 5.2 percent growth target, even as it gradually withdraws pandemic-era fiscal support and reinstates strict fiscal rules,its finance minister said.

The government will use this growth assumption to set 2023 spending plans, adding that the budget will be designed with a deficit of under 3 percent of gross domestic product, Finance Minister Sri Mulyani Indrawati said.

- Advertisement -spot_img

Indonesia is in the process of gradually rolling back its fiscal stimulus, even as some analysts and lawmakers argue its economic recovery from the COVID-19 pandemic is not yet on a firm footing.

By law, Indonesia must reinstate a budget deficit ceiling of 3 percent of GDP next year, after waiving it since 2020 to make room for more spending and debt to help Southeast Asia’s largest economy weather the pandemic.

Last year’s fiscal deficit was 4.65 percent of GDP and this year’s gap is seen around 4 percent, according to Sri Mulyani’s latest estimate.

Next year, Indonesia’s traditional main growth engines, household consumption and investment, should accelerate, while the contribution of exports is seen declining, Sri Mulyani said.

“We have also identified new sources of economic growth,” she said, citing healthcare services as well as manufacturing of electronics, communication equipments, chemical and mineral processing as potential post-pandemic growth drivers.

Plans for low carbon developments and energy transition to renewables will also aid growth, she said, adding that the state budget will be geared to support these sectors.

However, the minister said policymakers would monitor the potential spillover impact from global monetary tightening, which could trigger capital outflows and push government bond yields up.

“We also must be alert because inflation has risen in other emerging countries. Rising inflation could threaten an economic recovery because it hurts people’s purchasing power,” she said.

Indonesia’s inflation rate in January was 2.18 percent, near the bottom of the central bank’s 2 percent-4 percent target range.

Author

- Advertisement -

Share post: