03/06/2014 (Jakarta Post) - The rupiah tumbled to its lowest level in three months on Monday as the country reported its biggest trade deficit in nine months.

The local currency slid 0.8 percent to 11,765 per US dollar at the end of trading, prices from local banks compiled by Bloomberg show.

The country failed to keep its trade balance in check after a total surplus of US$1.52 billion in the first three months of the year.

It instead swung back to the red, with a monthly deficit of $1.96 billion in April, according to Central Statistics Agency (BPS) data.

BPS deputy head for distribution and service statistics Sasmito Hadi Wibowo said the trade gap might get wider as imports would likely increase further later this month and next month with Ramadhan and Idul Fitri, when domestic consumption usually peaked.

Imports of, among other items, cereal, which is used in the production of processed food like biscuits, before and during those periods, usually pick up at this time.

Imports of cereal jumped by 33.96 percent to 322.3 million in April.

“It will be hard for us to maintain the trade balance because domestic consumption peaks during the festivities. The pressure may only ease in August,” Sasmito said after the announcement of the foreign trade data.

Exports slid 5.92 percent to $14.29 billion on a monthly basis in April, driven by the lower overseas shipments of both key commodities, like palm oil and coal, and manufactured goods, particularly vehicles and their parts and jewelry.

The exports of palm oil and coal, the largest contributor to non-oil and gas exports, dropped by 45.02 percent to $1.12 billion and by 9.78 percent to $1,86 billion, respectively in April from March, while the sales of cars, auto-parts and jewelry tumbled by 12.92 percent to $411.5 million and 23.15 percent to $339.4 million, respectively.

In contrast, imports grew much faster than exports, climbing by 11.93 percent to $16.26 billion on the back of purchases of capital goods, intermediary components and consumption goods.

Economists said pressure on the country’s trade balance would lessen, however, and offered a positive outlook in the long run due to several factors.

A helping hand could be in the form of a possible ease in the mineral export policy, which was still under discussion in the government, said Purbaya Yudhi Sadewa, the chief economist at the Danareksa Research Institute.

The government is mulling relaxing its tax policy for miners committed to building facilities to process their mineral ores locally.

The future policy will affect major exporters like US-based Freeport and Newmont.

“The miners may resume their shipments and there will be additional revenue of between $1 billion and $1.5 billion from our exports when that happens,” said Purbaya.

A resurgence in the imports of capital goods — necessary to support investment and manufacturing activities — would also help generate bigger exports, he added.

Indonesian manufacturing activity jumped to a new high in May as new orders grew to a record, according to HSBC market purchasing managers’ index (PMI) survey released on Monday.

The index picked up to 52.4 in May from 51.5 a month earlier, the highest level since the series began in April 2011.

“Despite the disappointing print in manufactured goods exports, the improvement in capital goods imports and the resurgence in manufacturing activity suggested by the PMI give cause for optimism that the weakness in April’s trade data will prove temporary,” Barclays’ economists Wai Ho Leong, Bill Diviney and Hamish Pepper wrote in their research note.