Based on month-to-month trajectory, Indonesia’s trade balance moved from a surplus of USD 0.67 billion in March 2014 into a deficit of USD 1.96 billion in April 2014. The decline was due to a combination of factors that included contraction of exports by USD 0.9 billion and an increase in imports of USD 1.73 billion compared with the level in the previous month. The total value of exports declined because of a contraction in both oil and gas as well as non-oil and gas exports. Meanwhile, total value of imports increased, driven largely by imports of non-oil and gas commodities. In general, Indonesia’strade balance posted a deficit of USD 0.89 billion during January-April 2014 period. That said, the deficit posted during January-April 2014 period, is smaller than USD 1.94 billion recorded during the same period in 2013.
Figure 1: Indonesia’sTrade Balance, April 2012-April 2014 (USD billion)
Indonesia’s trade balance deteriorated
Source: Central Bureau of Statistics and CEIC (2014)
Observation of the January-April 2014 period shows that the oil and gas trade balance continued to be in deficit. The deficit on the oil and gas trade balance during January-April 2014, was USD 4.2 billion, which was smaller by USD 0.3 billion compared with the level recorded during January-April 2013 period. The decrease in the deficit is as result of a lower imports during January-April 2014 period that was smaller by USD 0.4 billion than that registered during the same period in 2013. However, signs of improvement in the deficit on the oil and gas trade balance. This is reflected in the level of the deficit in the oil and gas trade balance which was USD 1.06 billion in April 2014, that was USD 0.29 billion smaller than the level recorded in March 2014. In terms of percentage, the deficit on the oil and gas trade balance showed a decrease of 21.6%. The improvement was shored up by decrease of USD 0.3 billion in the value of oil and gas imports. On a month-to-month basis, the decline in imports of oil and gas in April 2014, was attributable to a decrease in imports of crude oil and oil products. Imports of crude oil posted a decrease of 24.78% from USD 1.42 billion to USD 1.07 billion. Meanwhile, imports of oil products recorded a decrease of 0.5% from USD 2.36 billion. Contrariwise, imports of gas posted a steep increase of 29.63%.
Figure 2: Indonesia’s Oil and Gas Trade Balance April 2012 – April 2014 (USD billion)
The deficit on oil and gas trade balance posted a slight decrease
Source: Central Bureau of Statistics and CEIC (2014)
Apparently the relatively long period of surplus, which was recorded on the Indonesia’s non oil and gas trade balance that is traced as far back as July 2013, came to an end in April 2014 as the account posted a deficit. The decline in the performance of the non-oil and gas trade balance was contrary to the condition that obtained in quarter I-2014, which showed a positive trend. Since January until April 2014, the trade balance had a surplus of USD 4.2 billion, but in June 2014 plunged into a deficit of USD 0.9 billion. Overall, however, an on observing the trend on month-to-month basis, it becomes evident that the surplus on non oil and gas trade balance experienced a decline of 144.58 %. The steep decrease is largely due to contraction of non-oil and gas exports by USD 0.89 billion in April, while non-oil and gas imports increased sharply by USD 2.03 billion in March.
Contraction of non-oil and gas exports is by and large, attributable to a decline in the exports of animal or vegetable fats and oils commodities. Commodity exports decreased by 45.02% in April 2014 on a month-to-month basis, followed by pearls,precious and semi precious stone(23.15%), vehicles other than railway(23.15%), mineral fuels and mineral oil products(9.78%) and electronic machinery, sound recorder, tv, etc(3.75%). As regards the destination of Indonesian non-oil exports that posted a decline, India recorded the largest percentage (23.93%), China (16.47%), Thailand (17.70%), and Malaysia (10.15%). The growth of non-oil and gas imports is by and large driven by increase in imports of nuclear reactor, boilers, mechanical appliance and machinery and electric equipment. Import value of the two items above posted an increase of USD 0.36 billion and USD 0.27 billion, respectively. Meanwhile, with respect to exports, footwear posted the largest increase of 29.49%.
Figure 3: Indonesia’s Non Oil and Gas Trade Balance April 2012-April 2014 (USD billion)
Balance of trade on non-oil and gas has plunged back into deficit
Source: Central Bureau of Statistics and CEIC (2014)
Compared with quarter I-2013, current account deficit shows some slight improvement. During quarter I-2014, the current account posted a deficit of USD 4.19 billion. Meanwhile, during quarter I-2013, the deficit on the current account was USD 6.01 billion. A similar positive trend is discernible on a quarter-to-quarter basis, in the performance of the current account, which also recorded slight improvement. The deficit on the current account posted a slight decrease of USD 0.12 billion compared with USD 4.31 billion. Improvement in the performance of current account is attributable to the decrease in the deficit on income account and services trade balance .
Figure 4: Indonesia’s Current Account, 2011:Q1-2014:Q1 (USD billion)
The deficit on the current account posted slight improvement
Source: Bank Indonesia and CEIC (2014)
The deficit on the income account and services trade balance recorded a decrease in quarter I-2014. During quarter IV-2013, the two accounts had deficits of USD 6.98 billion and USD 3.11 billion, respectively. In the subsequent quarter, the deficit on the two account decreased to USD 6.49 billion and USD 2.21 billion, respectively. The decrease in the deficit on the income account was a result of a decline in the payment of interest on public and private external debt as well as the decrease in profits for foreign direct investment companies. Meanwhile, the decrease in the deficit on services trade balance was as a result of a decline of USD 0.23 billion in the deficit on the transportation sector and an increase of USD 0.4 billion in the surplus recorded on the travel sector.
The surplus on the goods trade balance and current transfer declined in quarter I-2014. In comparative terms, the surplus on the two accounts posted a decrease of 25.52% and 4.96% to reach USD 3.55 billion and USD 0.97 billion, respectively. The surplus on the goods trade balance decreased as a result of a USD 3.06 billion drop in the value of non-oil exports. Besides, the decrease in the surplus was also attributable to an increase in the deficit on Indonesia’s oil trade balance. Meanwhile, the slight decrease in the surplus on the current transfer account was as a result of a decline in government revenues and worker remittances.
The surplus on the capital and financial account decreased in quarter I-2014. The surplus on the capital and financial account decreased USD 8.85 billion in quarter IV-2013 to USD 7.83 billion in quarter I-2014. The decline in the surplus was attributable to a deficit on the other investments. The other investments, which initially recorded a surplus of USD 6.52 billion in quarter IV-2013, became a deficit of USD 4.14 billion. This was largely due to the deficit recorded on both the assets and liabilities. Assets posted a deficit of USD 3.36 billion, while liabilities had a current account deficit of USD 0.77 billion. Nonetheless, the performance of capital and financial account shows an improvement on a year on year basis. During quarter I-2013, capital and financial account posted a deficit of USD 0.55 billion.
There was a surge in direct and portfolio investment during quarter I-2014. Portfolio investments posted the largest surplus from USD 1.79 billion in quarter IV-2013 to USD 8.97 billion in quarter I-2014. Improvement in the performance of portfolio investment came as a result of an increase in foreign capital flows to Indonesia that took forms of various financial instruments issued by the private and public sector. By the same token, foreign direct investment also posted an increase, reaching the level of USD 4.53 billion, which led to an improvement in the surplus on foreign direct investment from USD 0.53 billion to USD 2.99 billion.
Figure 5: Capital and Financial Account, 2011:Q1-2014:Q1 (USD billion)
The surplus on the capital and financial account decreased
Source: Bank Indonesia and CEIC (2014)
The upward trend in the performance of the balance of payments seems to have halted in quarter I-2014.This is reflected in a lower surplus in the balance of payments than in the previous quarter. During quarter IV-2013, the surplus on the balance of payments was USD 4.41 billion, but dropped by 53.15 % to USD 2.07 billion in quarter I-2014. The decrease in the surplus on the balance of payments is attributable to a decline in the surplus on the capital and financial account which failed to make any gains from improvement in the current. However, in relative terms, the performance of the balance of payments in quarter I-2014 shows some improvement compared with the position in quarter I-2013. During quarter I-2013, the balance of payments recorded a deficit of USD 6.61 billion, but by quarter I-2014, had bounced back into a surplus. This implies that on year on year basis, the balance of payments registered an increase of USD 8.68 billion.
Figure 6: Balance of Payments, 2011:Q1 -2014:Q1 (USD billion)
An upward trend in the surplus on the balance of payments came to a halt in quarter I-2014
Source: Bank Indonesia and CEIC (2014)