36 consecutive months of trade surplus and the fate of IDR
Key Takeaways :
▪️ Indonesia's trade balance posted a surplus of USD3.94bn in Apr-23, exceeding consensus estimate of USD3.33bn due to deeper imports and exports contraction. Both exports and imports recorded monthly and annual decline and attributable to by Eid Fitr long holiday.
▪️ Exports volume and prices have declined since 3Q22 as a sign of weaker demand evidenced by major trade partners dropped in manufacturing activities on top of commodity prices decline. Meanwhile imports volume was relatively stable despite softening prices trend and increasing trend in capital goods imports in-line with the still expansive domestic manufacturing activities.
▪️ DHE policy to be game changer for the fate of IDR going forward, in spite of still considerably small exports receipts repatriation amidst BI's effort to attract flow by adjusting the interest rates for its monetary operation. Under an optimistic scenario of DHE policy stipulation using FY22 exports value, Indonesia has a potential to attract sizeable amount of liquidity amounting to USD45.2bn.
▪️ Weak USD amidst spreading Fed's pivot narrative has propelled precious metals and IDR to the bullish side. Massive inflows to government bond markets during the flattening yield curve triggered IDR appreciation against USD and outperforming peers.
▪️ We maintain our view on the IDR to be traded at IDR14,700-15,100/USD in the near time with a correction after breaking its upper limit bullish case recently.
MNCS Research
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