Indonesia booked a US$3.48 billion trade surplus last month, bigger than predicted, as exports and imports fell less than expected, official data showed on Wednesday (Nov 15), bolstering some predictions the central bank could keep rates on hold next week.

The October trade surplus, which compares with a US$3 billion surplus economists had expected in a Reuters poll, would be one of a set of data Bank Indonesia (BI) considers when it reviews monetary policy from Nov 22 to Nov 23.

Shipments from Southeast Asia’s largest economy have been declining in value in recent months amid falling global commodity prices.

However, the resource-rich country has continued to post a trade surplus, albeit smaller than last year’s, as imports have also weakened. Indonesia has recorded a surplus every month since May 2020.

The central bank last month unexpectedly resumed its rate hikes to defend against a weakening rupiah currency, taking its total rate increases since August 2022 to 250 basis points (bps).

Irman Faiz, Bank Danamon’s economist, said the October trade data showed a recovery in domestic demand even as exports weakened.

The surplus and the rupiah’s appreciation of over 1 per cent on Wednesday should convince BI to keep its benchmark rate unchanged next week, he said.

However, Enrico Tanuwidjaja, a UOB economist, pencilled in two more rate hikes of 25 bps each by BI this and next month.

“Indonesia’s external balance, in our view, remains relatively resilient and this should anchor the rupiah’s stability. However, Indonesia’s monetary authority carries the view of upside inflation risks ahead, and it may imply that BI is probably not done yet with its resumption of rate hikes,” he said.

Exports in October were down 10.43 per cent on a yearly basis to US$22.15 billion, compared with economists’ prediction of a 15.35 per cent drop.

Imports fell 2.42 per cent on a yearly basis to US$18.67 billion, versus the poll’s expectation for a 7.40 per cent contraction.

While imports of raw materials shrank last month, overseas purchases of capital and consumer goods rose by 11.08 per cent and 3.83 per cent, respectively, cushioning the overall import drop.

SOURCE: Reuters