National Trade Balance Is Predicted Surplus But Decline

Trade Balance

The Central Statistics Agency (BPS) will release Indonesia’s international trade data for the July 2022 period on Monday (15/7). However, Indonesia’s trade balance surplus is estimated to decline in July 2022. The shrinking trade balance surplus that widened in July has been reflected in foreign exchange reserves.

This is because the price of crude palm oil (CPO) has started to decline.

The market consensus from 12 institutions predicts a trade balance surplus in June of US$ 3.81 billion. A significant decrease compared to the previous month which reached US$ 5.09 billion.

The consensus also shows that exports will grow by 29.21% (year on year/yoy) while imports will increase by 31.02%.

For the record, last June, the value of Indonesia’s exports reached US$ 26.09 billion or rose 40.68% (YoY) and increased by 21.30% compared to the previous month. Imports reached US$ 21 billion, up 21.98% (YoY) and up 12.87% compared to the previous month.

Bank Indonesia reported that the position of foreign exchange reserves at the end of July was recorded at US$ 132.2 billion, down from June 2022 which was recorded at US$ 136.4 billion.

Bank Danamon economist Irman Faiz said Indonesia’s export performance in July 2022 will still be driven by commodities. He explained that the value of exports will likely fall in July compared to the previous month due to the sloping price of crude palm oil (CPO).

“On a month-to-month basis, exports will decline by 2.1%. This is related to the correction of export commodity prices, especially CPO,” said Irman.

Referring to Refinitiv data, the average CPO price in July was in the range of MYR 3,940/ton, much lower than in June which was recorded at MYR 5,473 per ton.

Referring to BPS data, CPO and its derivative products contribute about 15% of Indonesia’s total exports. The rise and fall of CPO prices certainly have a major impact on export performance.

Sucor Sekuritas economist Ahmad Mikail Samuel said Indonesia’s exports might be helped by the CPO export flush-out program. The program is expected to boost Indonesia’s CPO export volume in July. With the soaring volume, export performance is expected to be helped.

“Flush out of CPO exports is likely to increase our CPO exports by around US$1 billion. Plus coal prices are still high at US$350, the trade balance is likely to remain stable at US$5 billion,” said Mikail.

For the record, in mid-June, the government even issued a flush-out program or acceleration of export distribution for CPO commodities and their derivatives. The policy is valid from June 14, 2022, to July 31, 2022.

The flush-out program caused the price of CPO to collapse due to the abundance of supply. However, slowly CPO prices are getting better.