JAKARTA- Indonesia’s trade surplus in May narrowed to the smallest in three years amid surging imports, data by the statistics bureau showed on Thursday.
The resource-rich country last year saw exports jump to a historic high on rising global commodity prices.
The prices of commodities such as coal and palm oil have since eased, prompting policymakers and economists to predict trade surplus in Southeast Asia’s largest economy to shrink and economic growth to slow this year.
In May, Indonesia reported a surplus of about $440 million, the smallest since April 2020, significantly less than the $3.02 billion surplus economists had expected in a Reuters poll and a $3.94 billion surplus recorded in April.
Imports last month were worth $21.28 billion, up 14.35 percent on a yearly basis. The poll had predicted an 11 percent yearly drop.
There was an over 60 percent annual increase in imports of capital goods in May.
Indonesia exported $21.72 billion worth of goods in May, up 0.96 percent on a yearly basis from the same month a year earlier, compared with a 8.7 percent annual drop economists in the poll had expected.
Indonesia’s economy grew faster than expected in the first quarter, as consumer and government spending offset a slowdown in exports and investment in Southeast Asia’s largest economy.
Gross domestic product (GDP) expanded 5.03 percent in the January to March quarter from a year earlier, data from Statistics Indonesia showed last month. That was quicker than the 4.95 percent median forecast in a Reuters poll and the 5.01 percent growth in the fourth quarter.
Indonesia’s post-pandemic recovery has been helped by a commodities-led export boom, though analysts expect economic momentum to cool in the coming months as commodity prices ease and monetary tightening around the world hits global demand.
“We think the economy is set to struggle over the coming quarters,” Capital Economics’ analyst Gareth Leather said in a note, citing weakening exports and the impact of Bank Indonesia’s (BI) tightening on demand. He forecasts the economy will expand 4.8 percent in 2023.
BI’s monetary tightening, including interest rate hikes totalling 225 basis points between August and January to fight inflation, could hit domestic demand.
The central bank has paused tightening since and some economists expect it to keep interest rates unchanged for the rest of the year, although others argued concerns over growth may push BI to ease later this year.
BI estimates Indonesia’s economic growth to be at the upper end of a 4.5 percent to 5.3 percent range, down from 5.3 percent in 2022.
Josua Pardede, Bank Permata’s economist, expects growth of around 4.9 percent to 5 percent this year, with shipments of commodities moderating and foreign investment likely trailing off in the later quarters ahead of general elections due in February 2024.
Chief Economics Minister Airlangga Hartarto described GDP expansion in the first quarter as solid, adding he remained optimistic the government’s 2023 growth target of 5.3 percent could be achieved.
“Our economic prospect going forward remains quite strong,” he said, noting high consumer confidence and purchasing managers’ indexes, as well as easing inflation.
