Indonesia not sharing in intra-regional trade uplift

JAKARTA - Both Indonesia’s export and import growth in January continued to remain weaker than the consensus was expecting, with a modest trade surplus the surprise outcome. Exports fell by 20.72% y/y in January (consensus -15.20%) following a revised 17.46% y/y fall in December. Imports fell by 17.15% y/y (consensus -8.65% y/y), following a revised 16.33% y/y fall in December.

The trade balance was a small surplus of USD50 milion (consensus was for a deficit of USD241 million) following a revised deficit of USD161 million in December.
ANZ Bank says the numbers continue to speak of the ongoing nature of the ‘trade recession’, but more importantly, renewed downward pressures on Indonesia – as an undiversified commodity exporter – from renewed commodity price weakness. 
“The details of the trade figuring point to renewed weakness in commodity exports as the principal factor behind the consensus miss on the export forecast. This trend is certainly likely to endure for a few more months, given the renewed weakness in commodity prices into the end of the year,” ANZ says. 
“In terms of the direction of exports, we note that on a m/m % basis, non-oil exports to the ASEAN dropped sharply by 9.90%. This is particularly noteworthy as we note that intra-regional ASEAN trade is actually rising. 
“The explanation for this is relatively straightforward. As an undiversified commodity exporter, Indonesia is not enjoying the regional uplift to trade in the electronics sector – both end-demand and fragmentation.
“We continue to assess Indonesia as the ASEAN economy with the most problematic near term outlook. In contrast with Thailand, where GDP figureswarrant a degree of optimism, (Indonesia’s) trade figures highlight that caution is still warranted on the Indonesian outlook. 

“It is for this reason we expect Bank Indonesia to ease monetary policy this week, with further easing likely through Q2.”  www.live.anz.com (ATI).