Shipments from Indonesia's manufacturing industry dropped 2.8 percent to $11.5 billion, due to lower palm oil demand. (Antara Photo/Nyoman Budhiana)

Indonesia Posts Lower-Than-Expected Trade Deficit in July

AUGUST 15, 2019

Jakarta. Indonesia posted a $60 million trade deficit in July, beating market expectations, thanks to lower imports and a surge in spice shipments, which tempered the impact of a decline in palm oil and copper exports.  

The country saw a 15 percent year-on-year decline in imports to $15.51 billion last month, according to data the Central Statistics Agency (BPS) released on Thursday. This was the first deficit after two consecutive months of surpluses, but still better than an expected deficit of about $420 million, according to a Reuters poll. 

Exports also declined 5.1 percent year-on-year to $15.45 billion in July, the data showed.

Shipments from Indonesia's manufacturing industry dropped 2.8 percent to $11.5 billion, due to lower palm oil demand. Indonesian palm oil faces a major hurdle in the European Union,  one of its main markets,  where the commodity is considered a serious environmental threat.

The European Commission also slapped tariffs of between 8 percent and 18 percent on palm oil on Tuesday, in a move that may further undermine demand for the commodity. 

Mining exports also declined 26 percent to $2 billion, due to fewer copper ore shipments. Freeport Indonesia, the country's largest copper miner, expects a dip in output this year as it transitions from open-pit to underground operations at its Grasberg mine in Papua. 

Indonesia's agricultural exports, on the other hand, increased 4 percent, thanks to demand for medicinal plants, aromatics and spices, according to BPS head Suhariyanto. 

In terms of imports, Indonesia brought in fewer consumer goods, raw materials and capital goods, such as machinery. Imports for consumer goods – ranging from garlic to smartphones – fell 15 percent to $1.5 billion, while those of raw materials dropped 18 percent to $11.3 billion and capital goods by 3.5 percent to $1.8 billion.

China, the United States, Japan and Singapore were the main export destinations for Indonesian goods last month. The country's imports last month came mainly from China, Japan, Singapore and Thailand.

Cumulatively, Indonesia still posted $1.9 billion trade deficit between January and June.