ECONOMIC UPDATE - External trade review
A clear sign of recovery
Flat Price brought export growth remained single digit
According to BPS, Indonesia’s exports booked single digit annual growth of 7.86% YoY (-2.81% MoM) ij. Oil and gas exports grew 1.11% YoY (-14.85% MoM) and non oil and gas exports increased by 8.57% YoY (-1.45% MoM). BPS recorded Indonesia export price experienced deflation at -1.49% YoY (-0.05% MoM), making the export value growth remained single digit. CPO still became the main laggard of Indonesia export price as its price was down around 23.9% YoY in January. We see that commodities price will have weaker gain than 2017 as it has experienced significant gain in previous year. Indonesia exports volume grew 9.49% YoY (-2.76% MoM), better than previous month at 7.77% YoY (2.5% MoM) and showing Indonesia export was not worrying in real term. Even, it was still higher to our full year estimation at 8.0% YoY and higher than 2017 average growth at 6.09% YoY.
Sustained high imports growth reflected better domestic demand
January imports data continued posting significant growth at 26.44% YoY (0.26% MoM). Oil and gas imports grew 17.35% YoY (-16.31% MoM) and non oil and gas grew 28.08% YoY (3.65% MoM). Import volume experienced 11.96% YoY growth, making it had 4 months in row of double digit import volume growth. We see it as the clear indication of domestic recovery. Moreover, consumption growth in 4Q17 showed an indication of recovery at 4.97%. Even this growth would have a higher potential if transportation & communication segment had not been affected by Mount Agung eruption which lowered tourism demand and transportation sector itself We see that the recovery will continue further in 2018 as the consumption goods import growth became the main driver at 32.98% YoY. Furthermore, capital goods import also posted a significant growth at 30.9%, indicating that high investment growth will remain in 2018.
CAD to face higher pressure in this year
Significant growth of imports brought trade balance to deficit territory for two months in a row. However, we see that the deficit was much driven by higher import goods price while the export goods price was tend to be stable. In term of volume, there was no huge difference of export volume growth and import volume growth, indicating that net export in real term (which is used for GDP calculation) did not have significant decline. However, it may endanger both current account deficit (CAD) and Rupiah. Moreover, Rupiah is facing high global volatility in past few weeks due to FFR increase expectation of more than 3 times. Higher CAD may give additional pressure to Rupiah this year.
Maintain CAD forecast at 2.1% of GDP, will review Rupiah forecast soon
The performance of both exports and imports were still in line with our view, especially in volume term. We maintain our view of real export and import at 8.0% YoY and 8.5% YoY , respectively. Current account deficit (CAD) is expected to widen at 2.1% of GDP in this year. We will review our Rupiah estimation soon in our monetary review in the beginning of next week.