Indonesia's March 2014 trade balance recorded a surplus of USD $673 million as the value of exports reached USD $15.21 billion, while imports stood at USD $14.54 billion. It was the second consecutive monthly trade surplus for Indonesia. In February 2014, the country posted an USD $843.4 million trade surplus. In the first three months of this year, Indonesia's trade balance now accumulated to an USD $1.07 billion surplus. Market participants will be pleased to see this balance as it eases pressures on the current account deficit.

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Head of Statistics Indonesia (Badan Pusat Statistik or BPS) Suryamin said that inflation in April 2014 is estimated to be low or will turn into deflation as food stockpiles in a number of regions are sufficient amid the peak of the harvest season. Suryamin based his estimation on BPS monitoring conducted from 17 April. The monitoring indicated that prices of the main food commodities (which include rice, chili, chicken meat, cooking oil as well as beef) are stable or even declining from the previous month.

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Indonesian exports are expected to rise 6.7 percent to IDR 1,399.7 trillion (USD $123.9 billion) in 2014 as a number of advanced markets (including the United States) have been showing signs of improving economies (the calculation of the figures was done by the Ministry of National Development Planning also known as Bappenas). Increased demand from these advanced markets will result in more exports of Indonesian manufactured products. Indonesian exports of natural resources, on the contrary, are expected to slow.

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After announcing the low March inflation rate (0.08 percent), Statistics Indonesia (BPS) also released positive news about Indonesia's trade balance. In February 2014, Indonesia recorded a USD $785.3 million trade surplus, supported by a USD $1.58 billion surplus in the non-oil and gas sector (the oil and gas sector recorded a deficit of USD $797.4 million). According to BPS Head Suryamin, exports in February rose 0.68 percent (month-to-month) to USD $14.57 billion, while imports declined 7.58 percent (mtm) to USD $13.78 billion.

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Agus Martowardojo, Governor of the central bank of Indonesia (Bank Indonesia) expects a trade surplus of around USD $700 million in February 2014. If Martowardojo's forecast is realized, it would be a sharp contrast to the USD $430.6 million trade deficit that was recorded one month earlier. In January, the trade deficit was mainly due to declining exports of coal and vegetable oil (which together account for 26.7 percent of total non-oil & gas exports), among others, due to ongoing annual contractual negotiations at the year-start.

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Tomorrow (13/03), Bank Indonesia will hold its next Board of Governor's Meeting to discuss general policies in the monetary field. As usual, market participants are highly interested in the central bank's assessment of the country's economic fundamentals and interest rates policy. However, predictions about Bank Indonesia's stance toward its benchmark interest rate (BI rate) are mixed. Some expect it to be kept at 7.50 percent as inflation has been under control. Others anticipate a 0.25 percent hike due to the country's weak exports.

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After recording three months of consecutive trade surpluses at the end of 2013, Indonesia's trade balance slipped back into deficit in January 2014. Indonesia - Southeast Asia's largest economy - posted a USD $430.6 million deficit in the first month of 2014. Exports fell 5.79 percent (year-on-year) to USD $14.48 billion, while imports fell 3.46 percent to USD $14.92 billion. The decline in exports were caused by the implementation of the ban on raw minerals (per 12 January 2014). Mineral ore exports fell over 70 percent (month-to-month).

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On 16 February 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as Bank Indonesia's benchmark interest rate, the rupiah exchange rate, tourism, trade balance, the eruption of Mount Kelud, cement sales, an update on the MP3EI, and more.

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Indonesia's Ministry of National Development Planning (Bappenas) is optimistic that economic expansion in Southeast Asia's largest economy will exceed the 6 percent mark in 2014, thus outpacing growth last year which reached 5.78 percent (yoy). According to Minister Armida S Alisjahbana, two factors will contribute positively to Indonesia's GDP growth in 2014. These are the legislative and presidential elections (scheduled for April and July 2014) as well as the improvement of Indonesia's trade balance.

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Amid an improving trade balance, Indonesia’s foreign exchange reserves rose to USD $100.7 billion at the end of January 2014, according to a press release of Indonesia's central bank (Bank Indonesia). Compared to December 2013, the reserves increased USD $1.3 billion. These reserves are sufficient to finance 5.7 months of imports or 5.6 months of imports and servicing of government external debt, which is well above the international standard of reserve adequacy at 3 months of imports.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the June 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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Inflation in June 2014 increased by 0.43 percent (month-to-month, mtm) in accordance with the traditional pattern ahead of the holy fasting month of Ramadan and Idul Fitri celebrations. These occasions always trigger inflationary pressures as consumers increase spending. However, June inflation remains under control and is even lower than the historical average in June in recent years (0.56 percent mtm). On a year-on-year (yoy) basis, inflation stood at 6.70 percent, thus continuing the downward trend since the beginning of 2014.

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The Indonesian rupiah exchange rate is appreciating sharply on Monday (30/06). By 15:13pm local Jakarta time, the currency of Indonesia had strengthened 1.31 percent to IDR 11,838 against the US dollar. Main factors that cause this performance are the weakening US dollar (as a slowdown in the US economic recovery evokes expectations that the Fed Rate will not be raised soon) and falling oil prices; the US benchmark West Texas Intermediate declined 30 cents to USD $105.44 in mid-morning trade while Brent crude fell 22 cents to USD $113.08.

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The Indonesian rupiah exchange rate depreciated 0.07 percent to IDR 12,099 per US dollar on Thursday (26/06) based on the Bloomberg Dollar Index, thus extending its recent weakening trend. This trend is expected to continue further as Bank Indonesia said it would allow rupiah depreciation in order to make the country’s exports more competitive (in an attempt to curb the current account deficit). However, this also dampens demand for Indonesian bonds. The 10-year yield rose to the highest level since February 2014.

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The Indonesian rupiah exchange rate depreciated considerably on Wednesday (25/06) after Indonesia’s central bank (Bank Indonesia) said it would allow rupiah depreciation in an attempt to boost competitiveness of the country’s exports, while curbing imports. This strategy will have a positive impact on the country’s troubled trade balance. Based on the Bloomberg Dollar Index, the currency had weakened 0.67 percent to IDR 12,070 per US dollar by 14:30pm local Jakarta time.

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The Indonesia rupiah exchange rate depreciated 0.16 percent to IDR 11,992 per US dollar on Monday (23/06) according to the Bloomberg Dollar Index, thus extending the currency’s recent depreciating trend. Meanwhile, Bank Indonesia's benchmark rupiah rate (known as the Jakarta Interbank Spot Dollar Rate, or, abbreviated JISDOR) depreciated 0.03 percent to IDR 11,971 against the greenback. What were the factors that influenced the rupiah’s performance today?

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) declined 0.34 percent to 4,847.70 points on Friday (20/06). Trade was thin on this week’s last trading day with only about 3.4 billion shares - valued at IDR 3.8 trillion (USD $319 million) - being traded on the Indonesia Stock Exchange (well below the average daily value of IDR 6.1 trillion). Foreign investors accounted for 48 percent of total trading, recording net buying worth of IDR 31.3 billion (USD $2.6 million).

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After the Indonesian rupiah exchange rate temporarily surpassed the psychological boundary of IDR 12,000 per US dollar on Wednesday (18/06), concerns about the fundamentals of the currency emerged. The currency has been under pressure recently due to external factors (monetary policy of the Federal Reserve and geopolitical tensions in Iraq) and domestic factors (large private debt, significant US dollar demand, the wide trade deficit and political uncertainty ahead of the presidential election).

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The Indonesian rupiah exchange rate depreciated 0.62 percent to IDR 11,893 per US dollar on Tuesday (17/06), a four-month low. The main reason behind this poor performance is increased concern about the impact of violence in northern Iraq - namely higher global oil prices - on Indonesia’s trade and budget deficits as Indonesia subsidises a significant amount of domestic fuels). As oil and gas imports accounted for about 23 percent of total imports of Indonesia in April 2014.

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ICRA Indonesia, an independent credit rating agency and subsidiary of ICRA Ltd. (associate of Moody's Investors Service), publishes a monthly newsletter which provides an update on the financial and economic developments in Indonesia of the last month. In the May 2014 edition, a number of important topics that are monitored include Indonesia's inflation rate, the trade balance, the BI rate, the IDR rupiah exchange rate, and gross domestic product (GDP) growth. Below is an excerpt of the newsletter:

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