Indonesia's trade surplus is expected to narrow in the second half of 2023 due to slowing export performance, according to economist Faisal Rachman from Bank Mandiri. The decline in commodity prices and sluggish global demand, coupled with high inflation and ongoing increases in benchmark interest rates, are anticipated to contribute to the slowdown in export growth. In April 2023, exports registered a year-on-year decline of -29.40%, and on a monthly basis, they fell by -7.62% due to reduced exports of coal and crude palm oil (CPO), the main commodities. Meanwhile, imports also experienced a decrease of -22.32% year-on-year in April, marking the third consecutive monthly contraction. The decline in imports can be attributed to the effects of the Eid holiday and ongoing exchange rate fluctuations. As a result, Faisal projects that the trade surplus will likely continue to narrow in the coming months.
Faisal also anticipates that Indonesia's current account balance in 2023 will record a controlled deficit, which can still support external sector stability to some extent. Factors contributing to the prolonged surplus include the gradual decline in commodity prices due to the reopening of the Chinese economy, production cuts by OPEC+, lower production of certain commodities amidst the potential El Nino, and the easing global energy crisis. As a result, Faisal has revised the projection for the 2023 current account deficit to a smaller -0.65% of GDP, down from the previous estimate of -1.10% of GDP.
