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Indonesia's current account balance - the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers - showed a deficit of 1.7 percent of gross domestic product (GDP) in 2017, narrowly improving from a 1.8 percent deficit in the preceding year and constituting the lowest deficit since 2012.
Enggartiasto Lukita, Indonesian Trade Minister, said the nation's full-year 2017 exports climbed 16.2 percent year-on-year (y/y) to USD $168.7 billion. This is a positive growth pace. However, Indonesian President Joko Widodo, expressed his anger at Minister Lukita as Indonesia's export performance (especially in terms of value) lags far behind its counterparts in the Southeast Asian region.
Indonesian Foreign Minister Retno Lestari Priansari Marsudi said the Indonesian government imposed zero tariffs for certain Palestinian products entering Indonesia since the start of the year. This policy aims at supporting Palestine economically.
The economy of China grew 6.8 percent year-on-year (y/y) in the third quarter of 2017. An improving Chinese economy is important for the Indonesian economy as China is the biggest trading partner of Indonesia. Slightly over 10 percent of total Indonesian exports are shipped to China, the world's second-largest economy.
Indonesia's private shipping companies have raised tariffs for container freight to the eastern region of Indonesia by 25 percent. Carmelita Hartoto, General Chairwoman of the Indonesian National Shipowner's Association (INSA), said shipping companies hiked these tariffs as the previous tariffs were set too low.
Indonesia's Statistics Bureau (BPS) said Indonesia recorded a USD $1.72 billion trade surplus in August 2017, exceeding analysts' expectations and significantly higher than the USD $0.3 billion surplus that was recorded in the same month one year earlier. In fact, it was Indonesia's biggest surplus in nearly five years (in November 2012 Indonesia recorded a USD $1.8 billion trade surplus).
Indonesian entrepreneurs urge the central government to sign more bilateral free trade agreements because Indonesia's export products currently miss out on competitiveness as regional counterparts - such as those in Malaysia, Thailand and Vietnam - can enjoy little or zero import duties under such agreements with specific trading partners, while the Indonesian government remains hesitant to be engaged in these deals.
Chile and Indonesia are on track to sign a comprehensive economic partnership agreement (CEPA) before the end of 2017. Both nations concluded the fourth round of negotiations on 23 August 2017 in Jakarta, while the final round is scheduled for October in Chile. Iman Pambagyo, Chief of the Indonesian negotiating team, said that in the first stage of the partnership a number of specific goods are prioritized to be free from import tariffs.
Contrary to expectations Indonesia posted a trade deficit in July 2017. The nation's Statistics Agency (BPS) announced on Tuesday (15/08) that Southeast Asia's largest economy experienced a USD $271.2 million trade deficit last month, the country's first deficit in 19 months.
Globalization and free market conditions (such as the ASEAN Economic Community), offer opportunities to enhance the exchange of goods and services between countries. However, it also requires good language and communication skills. Without these skills nations only have limited advantage of the freer flow of trade and services because the difficulty of communicating can undermine the flow of trade and investments.
Latest Columns Trade
The economic stabilisation policies launched by Indonesia's central bank (Bank Indonesia) and the Indonesian government in recent months have brought a steady improvement in the country's current account balance. The current account deficit moderated from the previous quarter’s record USD $9.9 billion (equivalent to 4.4 percent of the country's GDP) to USD $8.4 billion (3.8 percent of GDP) in the third quarter of 2013. A shrinking current account deficit is highly awaited by investors. The text below is the official press release of Bank Indonesia.
Despite rising concerns about the slowing pace of the Indonesian economy, the deputy minister of Finance Bambang Brodjonegoro reminded investors that Indonesia's economic growth in the third quarter of 2013 still constitutes one of the highest growth rates around the globe. Economic expansion in Q3-2013 slid to 5.6% in Southeast Asia's largest economy. With the exception of China (7.8% GDP growth in Q3-2013), Indonesia's growth continues to outpace growth in other emerging markets, such as Brazil (3.3%) and Turkey (4%).
Indonesia's October inflation rate was well-received by investors. On Friday (01/11), Statistics Indonesia (BPS) announced that the country's inflation in October 2013 grew 0.09 percent. Easing inflation was mainly due to falling prices of raw foods and clothes. Year-on-year (yoy), however, Indonesia's inflation is still high at 8.32 percent, although showing a moderating trend from 8.40 percent (yoy) in September 2013 and 8.79 percent (yoy) in August 2013. Inflation had skyrocketed after subsidized fuel prices were raised by an average 33 percent in June.
On 12 October 2013 Finance Minister and Central Bank Governors from Korea and Indonesia agreed to establish a bilateral KRW/IDR swap arrangement in the near future. The size of the swap arrangement is up to KRW 10.7 trillion/IDR 115 trillion (equivalent to USD $10 billion). The effective period of the facility will be three years, and could be extended by agreement by both sides. This Bilateral Currency Swap Arrangement (BCSA) aims to promote bilateral trade and further strengthen financial cooperation, an objective of mutual interest to both countries.
The World Bank has revised down its forecast for economic growth in Indonesia in 2013 to 5.9 percent from its original estimate of 6.2 percent. Similarly, the institution has altered its forecast for economic growth in 2014 from 6.5 percent to 6.2 percent. The revised figures were published in July's edition of the Indonesia Economic Quarterly (IEQ), titled 'Adjusting to Pressures'. The World Bank's forecast is also in sharp contrast with the GDP assumption of the Indonesian government, which puts economic growth in 2013 at 6.3 percent.
Indonesia and Sweden intend to increase business relations between both countries. Last month, Indonesia's president Susilo Bambang Yudhoyono made a state visit to Sweden, while in 2012 Sweden prime minister Fredrik Reinfeldt visited Indonesia. A number of topics were discussed during these visits, including trade and investment. After the discussions, both countries agreed that trade and investment between the countries should be expanded. Up to early 2013, 77 Swedish companies are in operation in Indonesia.
Indonesia already is a strong trade partner to a number of countries in Europe. Based on data released by Indonesia's Ministry of Trade, the Netherlands and Spain are two European countries that import a considerable amount of Indonesian products and thus are important contributors to Indonesia's trade surplus in the non oil & gas sector. But other European nations, such as Germany and Russia, pressure Indonesia's trade surplus. It indicates that, despite the wide distance, Indonesia and Europe have a close and valuable trade relationship.
Although the United States continues its traditional focus on direct investments in developed countries, primarily in Western Europe, there has been a significant rise in US investments in Indonesia in recent years. Whereas US investments in the developed economies of Western Europe is mostly found in the financial sector and through holding companies, in developing Asia, the US is more focused on the manufacturing sector due to lower production costs. In the last two years, the US emerged as the second-largest investor in Indonesia after Japan.
Indonesia's central bank (Bank Indonesia or BI) announced on Wednesday (15/05/13) that the country's external balance has improved during Q1-2013 as non-oil and gas trade were up. Indonesia's current account deficit stood at USD $5.3 billion (2.4 percent of GDP) in Q1-2013, compared to the previous quarter's deficit of USD $7.6 billion (3.5 percent of GDP). Indonesia has experienced a widening trade deficit, although it recorded a trade surplus of USD $304.90 in March, the first trade surplus since September 2012.
The central bank of Indonesia (Bank Indonesia, or BI) decided to maintain its record low policy rate for the 15th straight month at 5.75 percent as it is considered consistent with its inflation target range of 3.5-5.5 percent in 2013 and 2014. The central bank also stated that the global economic recovery is accompanied by many uncertainties which result in a lower forecast for Indonesia's economic growth. The full press release of Bank Indonesia can be read below.
