In May 2024, Indonesia recorded significant progress in the international trade sector. Exports reached US$22.33 billion, up 13.82% month-on-month (MoM) and 2.86% year-on-year (YoY). Imports reached US$19.40 billion, increasing 14.82% MoM but decreasing 8.83% YoY. Indonesia's trade balance in May 2024 recorded a surplus of US$2.93 billion, exceeding the consensus forecast of US$2.74 billion, mainly driven by the non-oil and gas sector.

Indonesia's export growth of 2.86% in May 2024 indicates an economic recovery after a prolonged contractionary period. Significant increases were seen in machinery and electrical equipment and their parts. Conversely, a sharp decline was observed in exports of animal/vegetable fats and oils. Increased exports drive economic growth by generating foreign exchange earnings and creating jobs. The increase in exports to major countries such as China, the United States, and India helps reduce dependence on a single market.

On the import side, despite a monthly increase of 14.82%, imports experienced an annual decline of 8.83%. This decline was mainly due to a decrease in imports of oil and gas and cereals. However, there was a significant increase in imports of machinery and mechanical equipment.

Key Points:

  • Indonesia's trade balance has improved significantly from Q1 to Q2 in 2024.
  • The Current Account is facing pressure due to significant outflows of foreign investors and a lower trade surplus in the first five months of 2024, posing a risk of rupiah depreciation.
  • If rupiah depreciation continues, it could lead to import inflation risk, potentially increasing overall Indonesian inflation, especially for oil and food.
  • Going forward, with the ongoing global economic recovery, there will be healthy adjustments to rebalance the Indonesian economy.

Simpan views:

Overall, while the trade balance shows improvement, external financial pressures and seasonal factors pose their own challenges. The Federal Reserve's stabilizing interest rate policy suggests potential rupiah appreciation by the end of the year, balancing positive trade dynamics with external financial challenges. These forecasts and strategic adjustments indicate cautious optimism for rupiah performance by the end of 2024.

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