Jakarta, CNBC Indonesia – The trade balance is projected to remain in surplus territory for May 2024. However, there are now some voices predicting a deficit in this poll amid the dominance of surplus projections.
For reference, the Central Statistics Agency (BPS) will release Indonesia’s international trade data for May 2024 on Wednesday (June 19, 2024).
A market consensus compiled by CNBC Indonesia from 10 institutions predicts a trade balance surplus of US$2.65 billion in May 2024.
This surplus is lower than April 2024’s figure of US$3.56 billion. If the trade balance records another surplus, Indonesia will have maintained a surplus for 49 consecutive months since May 2020.
The consensus also indicates that exports will grow by 1.34% (year on year/yoy) while imports will decline by 9.39% (yoy) in May 2024.
This projected trade balance surplus is expected to occur amidst relatively stable prices of Indonesia’s key commodities, namely coal and palm oil (CPO).
Throughout May 2024, coal prices experienced a slight decline of 1.57%, from around US$143/ton to US$140.75/ton. The average coal price in May 2024 hovered around US$142/ton.
The stability in coal prices recently is due to a heatwave across Asia that has increased regional demand, thereby supporting global coal prices.
China remains a key factor in preventing deeper declines in coal prices, as demand for coal in the country remains high. China is the world’s largest coal consumer.
This is because China’s economic projections are expected to be positive, leading to higher growth in China, which will boost business activities and electricity demand, subsequently increasing coal demand.
Earlier last month, the International Monetary Fund (IMF) raised its forecast for China’s economic growth to 5% in 2024. This is supported by recent improvements in economic data.
This new projection comes after China ramped up efforts to support an uneven recovery in the world’s second-largest economy, which has been struggling with a prolonged property crisis and its negative impact on investors, consumers, and businesses.
Meanwhile, palm oil prices tended to rise from MYR 3,818/ton to MYR 4,076/ton, strengthening by 6.75% throughout May 2024, with an average price movement of MYR 3,892/ton.
Furthermore, in a press release from the Ministry of Trade regarding the Reference Price (HR) of CPO for setting the Export Duty (BK) and the tariff of the Public Service Agency of the Palm Oil Plantation Fund Management Agency (BLU BPD-PKS), commonly known as the Export Levy (PE), for the period of May 2024, it was set at US$877.28/MT. This value increased by US$19.67 or 2.29% from April 2024’s figure of US$857.62/MT.
The increase in the HR of CPO is influenced by rising demand as a preemptive measure for Eid al-Fitr, while palm oil production in Malaysia and Indonesia decreased due to weather anomalies and the ongoing conflicts between Ukraine and Russia, as well as Iran and Israel, impacting crude oil and other vegetable oil prices.
Despite the beneficial rise in CPO prices for Indonesia, which is an exporter of the commodity, the Indonesian Palm Oil Association (Gapki) predicts a decline in palm oil exports this year. This is driven by the potential increase in domestic consumption if the B40 biodiesel program is implemented.
It should be noted that palm oil export rates have been declining since 2019. At that time, export volumes reached 37.4 million tons, then dropped to 34 million tons in 2020.
This downward trend continued in 2021, with export volumes reaching only 33.6 million tons, then rising slightly to 33.9 million tons in 2022.
Amid the optimism that exports will exceed imports in May 2024, CIMB Niaga Group has a different perspective compared to the other nine institutions.
CIMB Niaga Group projects a deficit of US$0.65 billion in the trade balance for May 2024. CIMB also forecasts that during the Bank Indonesia Board of Governors Meeting (RDG BI) on June 20, BI will maintain its interest rate at 6.25%.
If this occurs, Indonesia’s trade balance surplus will halt at 48 consecutive months, failing to surpass the 48-month surplus streak during President Soeharto’s era from March 1987 to February 1991.
Source:
