Indonesia posts record trade gap in 2018

Indonesia, classified as a newly industrialised country, posted wider-than-expected trade deficit in December, bringing the gap for 2018 to the largest ever, the statistics bureau said on Tuesday.

December’s trade deficit was $1.10 billion (853.18 million pounds), in a third consecutive month where the gap was wider than market expectations. A Reuters poll had expected a deficit of $930 million.

Southeast Asia’s largest economy had a deficit of $8.57 billion in 2018, the widest ever, a stark contrast to its $11.84 billion surplus in 2017, Suhariyanto, the statistics bureau chief said.

Last year was challenging because exports had slowed at a time when imports surged due to a recovering domestic economy, said Josua Pardede, an economist with Bank Permata in Jakarta.

Pardede expects that this year would probably be equally challenging, reports Reuters.

“Global economic growth is stagnating. Growth in our major trading partners such as China, the United States, Japan and Europe is slowing. If we can’t find new destinations for our products, export growth could slow further,” he said, noting that falling oil prices could cool down imports.

Economists also warned the trade data could mean Indonesia’s current account deficit in the final quarter of 2018 was also wider than expected.

Central bank governor Perry Warjiyo has previously said the current account gap in the fourth quarter was expected at more than 3.0 per cent of gross domestic product (GDP), though full-year gap was seen at about 3.0 per cent.

Authorities issued a slew of measures to control imports last year, including mandating a wider use of biodiesel, raising import tax and delaying big, import-heavy infrastructure projects.

Bank Indonesia also raised interest rates six times by a total of 175 basis points last year to try to bring the current account gap down, and Warjiyo said the deficit in 2019 was expected at 2.5 per cent.

Fakhrul Fulvian, Trimegah Sekuritas economist, said December trade data proved that Indonesia may need to slow its GDP expansion further to “bring back the balance” and improve the current account deficit.

In December, exports dropped 4.62 per cent to $14.18 billion on a yearly basis, a second month of contraction, compared with the poll estimate of 1.81 per cent increase, largely because of a slump in shipments of mining products.

Exports to China, Indonesia’s largest trading partner, also fell in December mostly because of a drop in coal and steel sales.

Meanwhile, December imports were worth $15.28 billion, 1.16 per cent up from a year ago, but slower than the forecast of 6.60 per cent.