The Indonesia trade balance performance has improved as by October 2013. The Indonesia trade balance which registered deficit of USD 0.8 billion in September 2013, became a surplus once again of USD 0.04 billion in October 2013. Improvement in the performance of the trade balance was in part attributable to the increase in exports, which rose by 6.9% over the level registered in September 2013, while imports increased by 1.06% during the same period.

Figure 15:  Indonesia Trade Balance, 2011 – 2013*
Trade balance posted a surplus in October 2013.


Source: Badan Pusat Statistik and CEIC (2013)
*= October 2013

The improvement in trade balance in October 2013 is as result of a deficit in trade of oil and gas has reduced as well as a surplus in trade of non oil and gas has increased.The surplus in trade of non oil and gas increased from USD 0.5 billion in   September 2013 to USD 0.79 billion in October 2013, while during the same period the deficit on trade of oil and gas decreased from USD 1.3 billion to  USD 0.7 billion.  The decline in the deficit on trade of oil and gas in October 2013 was as a result of an increase of 12.8% in oil and gas exports while at the same time imports of oil and gas decreased by 6.5% from the level posted in September 2013. The decline in the value of imports of oil and gas was largely attributable to imports of premium or RON 88. The decline in imports of premium oil and gas attests to the fact that consumption of premium in the domestic economy decreased.   Meanwhile, the increase of 5.7% in the value of non oil and gas exports is the main factor responsible for the increase in non oil and gas trade surplus.

In cumulative terms, during January-October 2013 period, Indonesia trade balance registered deficit of USD 6.4 billion.  The deficit shows a drastic increase from USD 0.85 billion recorded during the same period in 2012.

Figure 16: Indonesia Oil and Gas Export-Import, 2011 – 2013*
Deficit in trade of oil and gas has decreased


Source: National Bureau for Statistics and CEIC (2013)
*= October 2013

Trade of oil and gas showed an improvement in October 2013.  The deficit in trade of oil and gas amounted for USD 1.3 billion in September 2013 had decreased to USD 0.7 billion in October 2013.  It is due to an increase of 12.8% (m-t-m) in oil and gas exports, whereas imports of oil and gas decreased by 5.7% (m-t-m).

The increase of oil and gas exports in October 2013 was boosted by an increase in exports of oil and gas products. In October 2013, oil exports increased by 27.2% and gas exports rose by 43.4% compared with the level in September 2013. On the contrary, during the same period, exports of crude oil decreased by 26.6%.  Exports of oil and gas also showed an increase of 2.8% in October 2013 compared with the level posted in September 2013. Nonetheless, the increase in exports of oil in October 2013 masks the fact that production of oil in Indonesia has shown a downward trend over the last five years by as much as 30%.  What makes things more worrying is the reality that the acceleration of exploitation of existing oil fields is not matched by discovery of new fields, an indication that Indonesia is likely to face oil and gas reserves in the not-too-distant future.  Besides, the price of Indonesian crude oil (ICP) has experienced a decrease from USD 109.69/barrel in September 2013 to USD 106.39 barrel in October 2013. The decline in the price of ICP is attributable to among other factors, weakening global economy, which is gauged by a decrease in projections of economic growth in US, sluggish performance of the European Union, and increase in the production of crude oil as a consequence of improvement in political stability in the Middle East.

Furthermore, the declining in the value of imports of oil and gas induced an improvement in trade deficit.  The decline in imports of oil and gas in October 2013 is largely as a result of 24.8% decrease in imports of gas and a decrease of 6.6% in imports of crude oil as well as a decrease of 4.2% in imports of oil products compared to the level registered in September 2013. 

Overall, during the period January-October 2013, the trade of oil and gas recorded a deficit of USD 10.6 billion. The performance is worse than that registered during the same period in 2012, which posted a lower deficit of USD 3.5 billion.  The worsening deficit during January-October 2013 is due to a decrease in exports of oil and gas as well as an increase in imports of oil and gas.

Figure 17: Indonesia Non Oil and Gas Export-Import, 2011- 2013*
The surplus in non oil and gas export-import has increased.


Source: National Bureau of Statistics and CEIC (2013)
*= October 2013

Non oil and gas export showed an improvement in October 2013. The surplus in trade of non oil and gas, which amounted for USD 0.5 billion in September 2013, has increased to USD 0.79 billion in October 2013. It was as a result of a 5.7% (m-t-m) increase in exports of oil and gas, which was higher than an increase of 3.4% (m-t-m) in imports of non oil and gas.

The highest increase in exports of non oil and gas registered in October 2013 was in   the mineral energy commodities, accounted for USD 107.5 million (m-t-m), cereal commodities, kerak, and iron ashes increased by USD 86.8 million (m-t-m), and rubber and rubber products posted an increase of USD 70.9 million (m-t-m). The main destination of Indonesia export of non oil and gas products in October 2013 were in descending order China, Japan, and United States.  The largest increase in non oil and gas imports in October 2013 was in cereal products which registered an increase of 85.5% (m-t-m). The high interest of Indonesian population has in consuming wheat products have led to a drastic increase in imports of cereals. On an annual basis, the value of imports of wheat in Indonesia is put at USD 5 billion. Imports of non oil and gas by percentage of increase by October 2013 were: food industry products which posted 67.6% (m-t-m), organic chemicals registered an increase of 13.74% (m-t-m), and vehicles and components 9.36% (m-t-m).

In cumulative terms during the period January-October 2013, non oil and gas exports recorded some improvement from the level achieved during the same period in 2012. The surplus on non oil and gas trade has increased from USD 2.6 billion during January-October 2012 to USD 4.3 billion in January-October 2013.  Meanwhile, share of non oil and gas import during January-October 2013 was largely attributable to imports of machinery and mechanical equipments, accounted for 18.92%; and machinery and electrical instruments by 12.98%. Thus, despite the decrease in the growth of the industrial sector, imports of industrial components during January-October 2013 continue to be markedly high.

Figure 18:  Current Account, 2009 – 2013*
Though still in  deficit,  Indonesian current account posted some  improvement


Source: Bank Indonesia and  CEIC (2013)
*= quarter III-2013

The current account is still facing deficit during quarter  III-2013.  Despite slight improvement in quarter III-2013, the performance of the curent account is not any different from the previous quarter.  The deficit on the current acount decreased from  USD 9.9 billion in quarter  II-2013 to  USD 8.4 billion in quarter III-2013. The decrease in current account deficit occurred as a result of a decline in the goods trade balance, service trade balance, and income account.

The deficit on goods trade balance decreased in quarter III-2013. The deficit on goods trade balance decreased from USD 0.7 billion in quarter  II-2013 to  USD 7 million in quarter  III-2013.  The same applies to the deficit on service trade balance which decreased from USD 3.1 billion to USD 2.6 billion.  The decrease in the deficit on the balance of trade in goods was largely as a result of an increase in trade balance surplus which is attributable to a decrease in imports of non oil and gas.  Meanwhile, the decrease in service trade balance deficit is attributable to the reduction in freight payments as a result of a decline in non oil and gas imports.  This is because Indonesian  exports and imports  by and large use services of foreign registered ships. Improvement in the current account is also in line with a decrease in deficit on income account.  The income account in quarter  III-2013 registered  a deficit of USD 6.7 billion, which is lower than USD 7.1 billion registered in the previous quarter. The decrease in the deficit on the income account was a result of a decrease in the of payments of interest and dividends to foreign holders of government securities. In general, despite improvement in the current account position,  the uncertainty continues to cast a shadow over over Indonesian current account.  Global economic uncertainty  continues to have adverse effect on trade balance which correlates postively with other components of the current account.  To that end, high current account deficit remains unavoidable. 

Compared with the same quarter last year, the current account deficit in quarter III 2013 increased. In quarter III-2012 , Indonesian current account registered a deficit of  USD 5.3 billion, which was smaller than that registered in quarter  III-2013.

Figure  19: Capital and Financial Account, 2009 – 2013*
The decline in portfolio investment and other investments contributed to weakening performance of the capital and financial account.


Source: Bank Indonesia and CEIC (2013)
*= quarter III-2013

Capital and financial account also deteriorated in quarter III-2013. There was a decrease in the surplus on the capital and financial account from initially USD 8.4 billion in quarter II-2013 to USD 4.9 Billion in quarter III-2013.  The decline capital and financial account is attributable to a smaller surplus on the investment portfolio and deteriorating performance on other investments, which initially posted a surplus but plunged into a deficit. This is despite a significant increase in direct investment in the same period. High value of direct investment is attributable to high business optimism, which is attested by an increase in business tendency index from 103.88 in quarter II-2013 to 106.12 in quarter III-2013.  

Portfolio investment decreased from USD 3.4 billion in quarter II-2013 to USD 1.9 billion in quarter III-2013.  The decline in portfolio investment is as a consequence of global economic uncertainty caused by among other factors Government Shutdown, Debt Ceiling, and impending Tapering Off policy to be implemented by the United States government.   Consequently, investors have opted to withdraw their funds from Indonesia as they wait for the conditions to return to normal.  With respect to domestic economy, high inflation which is in part attributable to the increase in basic rates for electricity and prices of fuel contributed to increased investment wariness and reluctance to bring their funds into Indonesia. This is compounded by persisting infrastructure problems and worker wage uncertainty, which have had adverse impact on investment.  Besides, poor performance of the Indonesia current account has also contributed to discouraging investors from investing their funds into Indonesia.

The performance of other investments has deteriorated.  The other investments decreased from a surplus of USD 1.2 billion in quarter II-2013 into a deficit of USD 2.1 billion in quarter III-2013. The deterioration is as a result of an increase in deposits of private sector in foreign banks, which turned an initial surplus of USD 4.6 billion in quarter II-2013 into a deficit of USD 2.1 billion in quarter III-2013.

In comparative terms, the performance of capital and financial account in quarter III-2013 shows an improvement compared to quarter II- 2012.  Capital and financial account posted a surplus of USD 5.9 billion in quarter III-2013 which is larger than the level recorded in the same period in 2012.  

Figure 20: Balance of Payments, 2009 – 2013*
The deficit on balance of payments continues.


Source: Bank Indonesia and  CEIC (2013)
*= quarter III-2013

In general, Indonesia balance of payment has not registered significant improvement.  Nonetheless, the current account decreased slightly in quarter III-2013.  The deficit on the balance of payments increased from USD 2.4 billion in quarter II-2013 to USD 2.6 billion in quarter III-2013.

The deterioration in balance of payments is as a result of a 41.5% (q-to-q) decrease in the surplus of capital and financial account. The decrease in the surplus of the capital and financial account is higher than the 15.11% (q-to-q) decrease in the deficit on the current account.  Thus, despite improvement in the current account, the larger decrease in the surplus of capital and financial account resulting balance of payments posted in quarter III-2013 had the same level of deficit as it had in the previous quarter. The current account deficit continues to be large due to the large deficit on the income account, service trade balance, and goods trade balance. This is despite the fact that quarter III-2013, has recorded the smallest deficit on the both service trade balance and income account. In the meantime, the plummet which capital and financial account experienced is largely attributable to the weaker performance of portfolio investment and other investments in quarter III-2013 , which is in turn is a consequence of  uncertainty on the global economy.

In comparative terms, balance of payments in quarter III, 2013 is worse than that in the same quarter in 2012. The balance of payments in quarter III-2012 registered a surplus of USD 0.8 billion, which decreased drastically into a deficit of USD 2.6 billion in quarter III-2013.