Behind the Trade Surplus

There are a number of notes that should not be ignored in order to maintain trading performance.

Indonesia's trade balance in March 2024 will return to a surplus. This means that the value of exports is greater than imports. This surplus was recorded for 47 consecutive months.

Looking solely at the term "surplus," exports and imports may seem fine. However, there are a number of things that must be considered in the performance of exports and imports. Moreover, in the 5.05 percent growth of gross domestic product (GDP) in 2023, net exports - or exports minus imports - contributed only 0.66 percent. Last year, exports grew 1.32 percent annually, while imports decreased by 1.65 percent.

There are a number of things that must be considered in export-import performance

The value of exports in March 2024 is lower compared to March 2023. The value of imports in March 2024 is also lower than in March 2023. Meanwhile, the quarterly surplus, namely from January to March 2024, is lower than in January-March 2023. This is because exports have declined by nearly 5 billion US dollars. On the other hand, the value of imports during that period tends to remain stable.

Also read: Yellow Export Light

Indonesia, which relies on commodities, bears the impact of decreasing commodity prices on export performance. One example, as presented by the Central Statistics Agency (BPS), the price of coal was 101.92 US dollars per ton in March 2023, dropping to 76.85 US dollars in March 2024. Similar impacts will continue to be received if Indonesia continues to rely on commodities without vigilance.

The slow recovery of China's economy also played a role in the decrease of Indonesia's exports. Low demand has caused exports of non-oil and gas products from Indonesia to China to decline. However, in March 2024, Indonesia's exports to China accounted for about 22.44 percent of total non-oil and gas exports. This portion is the largest compared to exports to other countries.

During January-March 2024, the majority of Indonesia's imports are in the form of raw materials or aides, reaching 72.81 percent. Meanwhile, capital goods constitute around 17.2 percent and consumer goods 9.99 percent. In the first quarter of 2024, the import of raw materials or aides declined by 21.72 percent annually, while capital goods imports decreased by 12.63 percent annually. This indicates that there are issues in Indonesia's production process because raw materials or aides and capital goods are used in the production process.

KOMPAS/PRIYOMBODO

Stacks of US dollars at the PT Bank Mandiri (Persero) Tbk cash center in Jakarta, Friday (27/4/2018).

One more thing that is no less important is the exchange rate. There are various things to consider in maintaining the exchange rate, including balance between exports and imports. The weakening rupiah exchange rate against the US dollar will benefit exporters, but will cause headaches for importers. A more complicated situation will be faced by producers who import raw materials and capital goods, but market their products domestically at rupiah prices.

Also read: Trade Surplus in March due to Decrease in Imports and Seasonal Factors

Exchange rate balance is becoming increasingly important for Indonesia, which exports oil and gas worth 3.899 billion US dollars but imports up to 9 billion US dollars in January-March 2024.