MARKET DEVELOPMENT
PREVIEW-Indonesia May Post Trade Surplus on Stronger Commodity Prices
PREVIEW-Indonesia May Post Trade Surplus on Stronger Commodity Prices
29/03/2014 (Reuters) - Indonesia is likely to post a modest trade surplus in February, which could relieve some pressure on the country's beleaguered currency, while inflation eases on lower food prices.
A Reuters poll of 14 analysts projected a trade surplus of $60 million in February, after a shortfall in exports flipped the trade balance into a deficit of $440 million in January.
Southeast Asia's largest economy has benefitted from the recent recovery in commodity prices such as crude palm oil, coal and processed minerals, as well as stronger manufacturing exports.
"On the export front we expect growth to still be negative...on the import side, we see a sharper slowdown led by a reduction in imports from China," ANZ's Singapore Daniel Wilson said in a research report.
Bank Indonesia, however, forecast that the trade surplus could come in at $760 million in February.
Deputy Governor Perry Warjiyo said the country's trade balance was supported by a $1.6 billion surplus in non oil and gas, while the deficit in oil and gas shrank to $800 million from $1 billion previously.
He said there had been no signs of improvement in exports since the mining law came into effect. "We hope to see improvement in the second quarter," Warjiyo added.
Indonesia remains vulnerable to capital flight due to its dependency on imports and weak structural reforms, which may threaten efforts to achieve a sustainable current-account deficit.
Despite recent improvements, the central bank will closely monitor the progress in its balance of payments, as well as the economic policies of the United States and China, in reviewing its key reference rate.
"If the country produces a trade surplus, BI has no strong reasons to hike the rate. But definitely no rate cut," said Rangga Cipta, Jakarta-based economist at Samuel Sekuritas.
Indonesia stunned investors in June when it lifted its reference rate by 25 basis points to help the ailing rupiah , due to growing concerns over the country's ability to fund the economy.
Bank Indonesia raised its benchmark rate by a massive 175 basis points between June and November and will likely maintain a tight monetary policy this year to ensure the economic recovery stays on track.
The Reuters poll predicts annual inflation will ease further to 7.35 percent in March from 7.75 percent the previous month, due to a moderation in food prices.
Core inflation, which excludes administered prices and volatile foods, is likely to surge to 4.58 percent.
Bank Indonesia revised down its projection for economic growth this year to around 5.5-5.9 percent, on slowing domestic demand and investment, as well as sluggish exports.
The central bank's inflation target was maintained at 3.5-5.5 percent, easing from 8.38 percent in 2013.
A Reuters poll of 14 analysts projected a trade surplus of $60 million in February, after a shortfall in exports flipped the trade balance into a deficit of $440 million in January.
Southeast Asia's largest economy has benefitted from the recent recovery in commodity prices such as crude palm oil, coal and processed minerals, as well as stronger manufacturing exports.
"On the export front we expect growth to still be negative...on the import side, we see a sharper slowdown led by a reduction in imports from China," ANZ's Singapore Daniel Wilson said in a research report.
Bank Indonesia, however, forecast that the trade surplus could come in at $760 million in February.
Deputy Governor Perry Warjiyo said the country's trade balance was supported by a $1.6 billion surplus in non oil and gas, while the deficit in oil and gas shrank to $800 million from $1 billion previously.
He said there had been no signs of improvement in exports since the mining law came into effect. "We hope to see improvement in the second quarter," Warjiyo added.
Indonesia remains vulnerable to capital flight due to its dependency on imports and weak structural reforms, which may threaten efforts to achieve a sustainable current-account deficit.
Despite recent improvements, the central bank will closely monitor the progress in its balance of payments, as well as the economic policies of the United States and China, in reviewing its key reference rate.
"If the country produces a trade surplus, BI has no strong reasons to hike the rate. But definitely no rate cut," said Rangga Cipta, Jakarta-based economist at Samuel Sekuritas.
Indonesia stunned investors in June when it lifted its reference rate by 25 basis points to help the ailing rupiah , due to growing concerns over the country's ability to fund the economy.
Bank Indonesia raised its benchmark rate by a massive 175 basis points between June and November and will likely maintain a tight monetary policy this year to ensure the economic recovery stays on track.
The Reuters poll predicts annual inflation will ease further to 7.35 percent in March from 7.75 percent the previous month, due to a moderation in food prices.
Core inflation, which excludes administered prices and volatile foods, is likely to surge to 4.58 percent.
Bank Indonesia revised down its projection for economic growth this year to around 5.5-5.9 percent, on slowing domestic demand and investment, as well as sluggish exports.
The central bank's inflation target was maintained at 3.5-5.5 percent, easing from 8.38 percent in 2013.