Indonesia's Trade Deficit, Biggest Ever Recorded

In the most recent economic report released Monday (13/5), Indonesia’s trade balance is shown to have experienced a deficit of $2.5 Billion in April. Indonesian exports decreased 13.1 percent year-on-year (y/y) to USD $12.60 billion, while imports into Indonesia fell at a rate of 6.6 percent (y/y) to USD $15.10 billion in April 2019. In other words, both exports and imports fell, but exports fell much more. The figure is the biggest deficit ever recorded since 2013 and the biggest during President Joko Widodo’s administration, surpassing the $2.05 Billion trade deficit in December 2018. The deficit is caused primarily due to the month-to-month decline in oil and gas exports, but a month-to-month increase in oil and gas imports.

As Indonesia faced a trade deficit in April 2019 several things have been affected. Firstly, the Rupiah fell 0,07% to the level of Rp14,435 / Dollar. As Rupiah’s exchange rate is predicted to depreciate further, it is worried that many stocks will be sold by the country’s stock market players. This will lead to a fluctuating instability of the national economy. Another effect is that instruments such as stocks and bonds are also forecasted to turn unattractive for foreign investors. Recent net sales numbers show that foreign investors are more inclined to leave the Indonesian stock market after release of the international trade data for the period of April. Before the report was released, the net sales value of foreign investors was approx. Rp12.3 billion. After the release, net sales jumped more than threefold, reaching a number of Rp37,9 billion.

As a result of largest trade deficit in the Indonesian history, The JCI (Jakarta Composite Index) almost went down to the level of 6.000, dropped 1,01% to a level of 6.009,85, reaching its weakest level in the financial year of 2019. Stocks of a number of leading companies in Indonesia such as PT Bank Central Asia Tbk/BBCA (-0,82%), PT Bank Negara Indonesia Tbk/BBNI (-3,25%), PT Unilever Indonesia Tbk/UNVR (-1,52%), PT Astra International Tbk/ASII (-1,43%), and PT Telekomunikasi Indonesia Tbk/TLKM (-1,06%) have significantly burgeoned the weakening of IDX stock composite. However, Dennies Christoper Jordan, Artha Sekuritas analyst, predicts that this condition will actually rebound the index to a more positive position, as the market is in a condition of overselling. He said that as more investors will be pressured to buy, transactions will return to its usual volume, predicting a rebound to a 6.035 - 6.100 ballpark.

Sources:

CNBC Indonesia

CNN Indonesia

Financial Times

Got something you want to discover more next week?

Let us know through comments!