04/12/2012 (Jakarta Globe) - Indonesia posted a record monthly trade deficit of $1.5 billion in October, indicating that weak external demand is likely to continue weighing on the nation’s economic growth.

The all-time highest deficit was the result of weaker-than-expected exports and soaring imports amid stronger demand for capital goods and subsidized fuel.

Exports were down 7.6 percent in October compared to the same month last year, the Central Statistics Agency (BPS) announced on Monday. From a month before shipments fell 1.5 percent to $15.67 billion.

Shipments of non-oil and gas products to Britain, Germany, India, the United States, Japan and South Korea all dropped.

The October figure was a sharp swing from the surplus the nation booked in the previous two months — $553 million in September and $233 million in August.

“Export growth came in slightly disappointing ... compared to our forecast for a ... 5.4 percent [drop] and [is] still indicative of negative sequential growth on the seasonally adjusted month-on-month basis,” Gundy Cahyadi, an economist from OCBC Bank in Singapore, wrote in an e-mail.

Bank Danamon economists wrote in a note to clients on Monday that the drop in exports was caused mainly by some manufactured products and falling prices of crude palm oil, which contributed to the reduction in the value of overall exports.

“Declining global prices are still the main factor behind this,” according to a report prepared by Dian Ayu Yustina, Anton Hendranata and Anton H. Gunawan.

“Price of CPO has come down by 16 percent since August, while external demand remained weak, leading to unabsorbed supply in Indonesia and Malaysia,” the world’s two biggest CPO producers.

Meanwhile, imports rose 11 percent year-on-year to $17.21 billion in October, as more companies brought in capital goods to expand production and as the government stockpiled more subsidized fuel on high domestic demand.

On a month-on-month basis, imports climbed 12 percent.

Chris Kanter, the chairman of the advisory board of the Indonesian Employers Association (Apindo), said Indonesian exporters should push efforts to diversify overseas markets.

“The situation in traditional markets has yet to improve. Demand from Europe was still weak. What’s needed are efforts to diversify the market,” said Chris, who is also the founder of Sigma Sembada, a diversified holding group with major operations in transportation and logistics.

A deputy director general at the World Trade Organization had said in October that developing nations, including Indonesia, can unlock trade potential with their peers if they remove trade barriers.

President Susilo Bambang Yudhoyono also recently argued for the removing of non-tariff barriers to trade but has taken little action on the issue so far.