A coal barge unloads its cargo at Tanjung Priok Port in Jakarta on Feb 3, 2022. (Antara Photo/M Risyal Hidayat)

Trade Surplus Provides Cushion Against Worldwide C. Banks Hawkishness


FEBRUARY 16, 2022

Jakarta. Indonesia's goods trade balance has remained in the black for the past 21 months, providing robust footing for the country, which used to be so prone to capital outflow, to maintain stability in the wave of hawkishness that has swept central banks worldwide. 

The Central Statistics Agency (BPS) reported on Tuesday that Indonesia's trade surplus reached $930 million in January, representing a 14.8 percent decline from $1.09 billion in December and being the lowest in over one and a half years.


Still, the surplus was significant after the country temporarily stopped the shipment of coal, its biggest export commodity after palm oil. 


Indonesia's exports in January 2022 reached $19.16 billion, down 14.3 percent compared to exports in December, which amounted to $22.4 billion. Still, when compared to exports in January 2021, which amounted to $15.29 billion, there was an increase of 25.3 percent.

Imports value also declined 14.6 percent to $18.2 billion in January from $21.4 billion a month earlier. Year on year, however, the imports increased 36.8 percent from January 2021's $13.33 billion.

Setianto, the head of distribution statistics at the BPS, said that January's trade balance was a surplus for 21 consecutive months since May 2020. The largest contributors to Indonesia's surplus are the United States, the Philippines, and India.

According to a multinational investment bank Morgan Stanley, these surpluses that came from stellar export performances were vital in maintaining external stability in Indonesia and its peers in Asia, as the global market expects the United States Federal Reserve to increase its benchmark interest rate to a higher terminal rate by December 2024. 

"If we had told [six months ago] you about this hawkish repricing of the Fed policy path, most would have, at the very least, instinctively predicted that Asian currencies would weaken and central banks in the region would have already started to hike rates," Morgan Stanley wrote in the recent research note to clients. 

"Instead, the opposite has happened. Asian currencies have been remarkably stable, even for the [emerging market] part of our region, whose currencies tend to depreciate when US rates are rising," Morgan Stanley wrote.

The investment bank viewed Covid-19 mitigation in the region as far less disruptive to goods and labor supply and more limited fiscal interventions than some developed economies, especially the US. 

"Perhaps most importantly, while Asia is growing relatively strongly, the strength of the recovery stems from a sharp pickup in exports and private [capital expenditure] — which have
both moved above their pre-Covid path — rather than consumption," Morgan Stanley wrote.