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Written by Akhyari Hananto Member at GNFI
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Indonesia has posted a robust monthly trade surplus while inflation eased in April, data shows, in a sign Southeast Asia’s top economy is on the road to recovery.

The country was hit hard in 2013 as trade plunged to record deficit, the currency dived and inflation spiralled, but all three indicators have improved in recent months.

Trade stood at a surplus of $US673.2 million in March – narrowing from the higher-than-expected $US785 million posted in February thanks to a jump in palm oil prices and a slowdown in imports, but staying well out of trouble.

March exports rose 1.24 per cent year-on-year, while imports fell 2.34 per cent.

Inflation also eased in April to 7.25 per cent year-on-year from 7.32 in March as the price of gold fell and the harvest season boosted food supplies, statistics agency chief Suryamin, who goes by one name, told reporters.

David Chang, a director at UOB Kay Hian Securities in Jakarta, said there had been fears of economic instability in the run-up to Indonesia’s July 9 presidential election.

“But the easing of inflationary pressures mean we are unlikely to see a rise in interest rates, and the rupiah has strengthened, so the outlook is fairly positive,” Chang told AFP.

Economists have said, however, that the bank is unlikely to further loosen its stance as inflation is still well above its target range of 3.5 per cent to 5.5 per cent.

The signs of recovery follow a period of monetary tightening last year after a price hike in subsidised fuel triggered a spike in inflation and as the rupiah dropped, losing more than 20 per cent of its value by the year-end.

The central bank raised the benchmark interest rate by 1.75 percentage points from June last year, but has held it at 7.50 per cent since December.

Like many emerging economies, Indonesia was slammed last year by speculation the US Federal Reserve would start to wind down its stimulus program, which had been credited with a rally in emerging markets since it was unveiled in late 2012.

The Fed began tapering its bond-buying in January and on Wednesday announced another widely-expected $US10 billion cut to the program.


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