02/04/2014 (Jakarta Post) - After being in the red in the first month of the year, Indonesia’s trade balance swung back to surplus in February on the back of a decline in imports and a slight improvement in commodity exports.

The country recorded a surprise surplus of US$785.3 million in February after a deficit of $430.6 million in January, the Central Statistics Agency (BPS) reported Tuesday.

The February trade surplus, which was higher than the average $760 million projected by analysts, helped reduce the overall deficit in the first two months of the year to $354.7 million.

BPS chief Suryamin attributed the surplus to the decline in imports of oil and gas as well as raw materials and goods generally used by export-oriented companies.

Imports fell 9.98 percent to $13.78 billion in February from a year earlier as purchases of raw materials, intermediary goods and capital goods declined by 11.51 percent to $10.32 billion, while imports of oil and gas dropped 5.07 percent to $3.46 billion.

On the other hand, exports dropped 2.96 percent on a yearly basis to $14.57 billion, particularly on the still weak non-oil and gas exports, which dipped 4.32 percent to $11.91 billion.

“We see there’s still an opportunity for the surplus to continue in the coming months, particularly on the recovery of exports. The prices of the seven main commodities saw gains and this may contribute to faster export growth,” Suryamin said, citing, among others, coal, palm oil, cocoa and tin.

Exports of palm oil rose 26.1 percent to $375.4 million month-on-month, while other commodities that climbed significantly included gemstones and precious metals, of which exports surged 42.77 percent to $151.5 million.

Officials have expressed confidence that exports will improve over the next few months as the global economy begins to rebound, providing plenty of room for demand both in commodities and manufactured goods.

On the other hand, the government is preparing ways to reduce dependence on imports.

Industry Minister MS Hidayat said that his office was preparing an industrial policy that would encourage investors to produce intermediary products so that the country’s dependence on imported raw materials could be decreased.

The World Trade Organization (WTO) has projected that global trade would be “much improved” this year, hovering between 4 and 4.5 percent, nearly double the 2.5 percent recorded last year.

Finance Minister Chatib Basri was also upbeat, saying that the positive trend of trade balance might persist in the coming months, helping the government to manage the country’s current-account deficit.

“I’m optimistic the trade balance will continue to improve, thereby a trade deficit will not become a major problem in 2014,” Chatib said, adding that based on the assumption, the Central Bank’s forecast of a current-account deficit of below 3 percent of gross domestic product would be achieved.

Indonesia’s current-account deficit reached $28.5 billion last year, representing 3.3 percent of GDP. The Finance Ministry has aimed to push down the figure to 2.5 percent of GDP this year.

Bank Danamon economists said that pressure on the oil balance still persisted, while export performance remained subdued as gains in exports of certain commodities, such as palm oil and coal, were unable to counter the losses in other export items, such as machinery, chemicals, textiles and footwear. “Another subsidized fuel price hike may also be an option, though we think it is less likely to happen this year as it is an election year.

Raising subsidized fuel prices would be best done around March or April, when inflation is seasonally low,” the economists led by Anton Gunawan wrote in their research note. Asian Development Bank deputy country director Edimon Ginting, however, warned that although the government had taken necessary measures to narrow the current-account deficit by slowing consumption and boosting exports, the effects would diminish in the coming years.

“The impact may be relatively short-lived. Longer-term strengthening of the current account requires structural reforms to achieve sustained gains in productivity and competitiveness,” he said in a statement.