Indonesia's Trade Balance Surplus, Rupiah Potentially Strengthens

JAKARTA - The rupiah exchange rate in trading Thursday, June 20, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Wednesday, June 19, 2024, the rupiah exchange rate on the spot market closed up 0.29 percent at the level of Rp. 16,365 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed higher by 0.03 percent to a price level of Rp. 16,368 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said US retail sales barely increased in May and data for the previous month revised much lower, data showed that economic activity was still sluggish in the second quarter.

"The market now estimates a possibility of 67 percent that the Fed will start lowering interest rates in September, according to the CME FedWatch, with an estimated drop of nearly 50 basis points for the remainder of the year," quoted Thursday, June 20.

Ibrahim said the market expects an opportunity of around 50 percent of the first interest rate drop in August and nearly half the percentage percentage of monetary easing by 2024.

From an internal point of view, the Central Statistics Agency (BPS) reported that Indonesia's trade balance in May 2024 again scored a surplus of 2.93 billion US dollars, up 0.21 billion US dollars on a monthly basis.

Cumulatively, Indonesia's trade balance surplus reached 13.06 billion US dollars, recorded a surplus for 49 consecutive months since May 2020. This surplus in May 2024 is higher than the previous month and the same month last year

Meanwhile, the May 2024 surplus is more supported by a surplus in non-oil and gas commodities, which amounted to 4.26 billion US dollars with a surplus contributor community, mainly HS 27 mineral fuel, animal fats and oils, namely HS 15, iron and HS 72 steel.

The non-oil and gas trade balance surplus in May 2024 is lower than last month but higher than in May 2023.

At the same time, the oil and gas commodity trade balance recorded a deficit of 1.33 billion US dollars with the main contributor commodities, namely crude oil and miyak.

The trade balance deficit in May 2024 was lower than last month and the same month the previous year. BPS noted that Indonesia's export value in May 2024 fell to 19.65 billion US dollars, up 13.82 percent compared to April 2024 (month-to-month/mtm).

The increase in export performance in May 2024 was driven by an increase in non-oil and gas exports, especially industrial and electronic equipment commodities and parts by 26.66 percent with a contribution of 1.34 percent, metal ore and ash by 25.96 percent with a contribution of 1.09 percent, vehicles and parts by 26.8 percent with a share of 1 percent.

Meanwhile, Indonesia's total import value in May 2024 reached 19.40 billion US dollars, an increase of 14.82 percent compared to the previous month's period (month-to-month/mtm).