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Publication Date : 05-09-2012
Indonesian foreign trade will continue to face pressure in the next few months, as demand will remain low amid the slow recovery in the global economy, analysts say.
Latif Adam, an economist at the Indonesian Institute of Sciences, said the improved trade data in July was due to the slight improvement in prices of certain commodities, rather than due to an increase in overall demand.
"I don't see an indication of export recovery in the next few months. The rise will not be sustainable until the end of the year," he said.
Institute for Economics and Financial Development economist Ahmad Erani Yustika shared a similar view, saying that Indonesia's exports remained under pressure as the prices of commodities would remain low. There has been no significant recovery in demand due to the slow recovery in the economies of the United States and Europe.
Apart from this, imports might not fall due to the country's heavy reliance on the domestic industry, which utilises imported raw materials, intermediary goods and capital goods, he said.
Meanwhile, the government is still expecting to reach the export target of US$203 billion, despite the country continuing to suffer from a trade deficit in the last four months, due to a dwindling of overseas demand for local commodities and manufactured goods.
The country's trade balance suffered a deficit of $176.5 million in July, the fourth monthly deficit recorded since April. Indonesia suffered a trade deficit of $1.33 billion in June, $489.5 billion in May and $641.1 million in April.
The trade deficit during the last four months has raised widespread concerns in the government, as this has resulted in a deficit in the country’s current account, totalling $3.2 billion in the first quarter and $6.9 billion in the second quarter of this year.
Monthly exports picked up in July, up by 4.6 per cent from June to $16.15 billion, on the back of non-oil and gas exports that expanded by 5.04 per cent, data from the Central Statistics Agency shows. However, compared to the same month last year, exports in July were still down by 7.3 per cent, albeit lower than the year-on-year drop of 16.2 per cent in June and 8.2 per cent in May.
An improvement in monthly exports in July provided some hope toward a recovery in exports in the upcoming months, Trade Minister Gita Wirjawan said yesterday in Jakarta.
"I am still sticking with our target of reaching an export level of $203 billion at the minimum. With the current situation in the global economy, it will be good if we can achieve that," he said during a press briefing. Gains in exports in the upcoming months would also depend on export diversification in the non-traditional markets and the cyclical factor, as demand usually picked up in the second half of each year, Wirjawan further said.
To meet the export targets, the government will continue its efforts to diversify export destinations, as well as products, especially with more value-added products and further intensification of export promotions, according to Wirjawan.
At present, Indonesia's exports are comprised of around 65 per cent natural commodities, such as coal, palm oil and rubber, whose prices are volatile in the international market.
Monthly imports slowed in July, down by 2.39 per cent to $16.33 billion from a month earlier, which was partly attributable to a drop in oil and gas imports, which slumped by 18.51 per cent from June.