Trade Balance Surplus Is Getting Smaller, Transaction Deficit Is Estimated To Be Widening In 2024

Rupiah (Photo: Antara)

JAKARTA - Head of Bank Permata economist Josua Pardede said that along with the trade surplus that continues to shrink, increasing expectations of widening the current account balance deficit (CAD) in 2024, which is projected to widen from 0.14 percent of Gross Domestic Product (GDP) in 2023 to 0.94 percent of GDP.

"This projection is based on several factors, including the moderate rate of normalization of commodity prices and the potential impact of increasing global uncertainty on demand from Indonesia's main trading partners," told VOI, Tuesday, July 16.

On the other hand, Josua conveyed that the downstream policy is expected to reduce Indonesia's current transaction dependence on commodity prices to a certain extent, thus limiting the deficit.

According to Josua, the widening account deficit is expected to have the potential to put pressure on the rupiah and foreign exchange reserves, especially amid the uncertainty of global markets whose global market uncertainty is caused by economic and political factors, which will account for the balance of financial transactions.

Josua said that in the short term, this could pose a risk of weakening the Rupiah exchange rate.

However, Josua estimates that this risk will be moderate by the end of the third quarter of 2024 due to a projected reduction in policy interest rates projected by the Fed.

"At the end of 2024, we estimate the Rupiah exchange rate against the US dollar will range from Rp15,900 - Rp16,200 US dollars," he explained.

According to Josua, this step is expected to encourage risk-on sentiment, attract incoming capital flows, and ultimately support the Rupiah exchange rate.

Josua explained that Indonesia's trade balance surplus in June 2024 was the lowest in the last four months and this is the smallest surplus since February 2024, as annual export growth lags behind import growth.

Previously, the Central Statistics Agency (BPS) noted that Indonesia's trade balance recorded a surplus in June 2024 reaching 2.39 billion US dollars. This surplus also makes Indonesia's trade balance a surplus of 50 consecutive months.

Acting Head of BPS, Amalia Adininggar Widyasanti said, Indonesia's trade balance had recorded a surplus in June 2024 reaching USD 2.39 billion, down USD 0.54 billion when compared to the previous month's 2.92 billion US dollars.

"This June 2024 surplus is certainly lower than the previous month, as well as the same month last year (down 1.06 billion US dollars)," Amalia said at a press conference, Monday, July 15.

Furthermore, Amalia said that Indonesia's trade balance in June 2024 was still in surplus because the export value was higher than the import value.

Meanwhile, Indonesia's export value was recorded at 20.84 billion US dollars, or a decrease of 6.65 percent on a monthly basis. Meanwhile, Indonesia's import value was recorded at 18.45 billion US dollars, or a decrease of 4.89 percent when compared to the previous month.

Amalia conveyed that the trade balance surplus in June 2024 was lower than the previous month and the same month last year.

The trade balance surplus in June 2024 was supported by non-oil and gas (oil and gas) commodities of US$4.43 billion, of which commodities that contributed surpluses were mineral fuels (HS 27), vegetable animal fats and oils (HS 15), iron and steel (HS 72) and several other commodities.

Meanwhile, the non-oil and gas trade balance surplus in June 2024 was 4.43 billion US dollars higher when compared to the previous month which amounted to 4.25 billion US dollars, as well as the same month last year which amounted to 4.41 billion US dollars.

At the same time, Amalia said that the trade balance of oil and gas commodities was recorded at a deficit of US$2.04 billion, with commodities contributing to the deficit coming from crude oil and oil products.

The oil and gas trade balance deficit in June 2024 was deeper than the previous month, which amounted to 2.92 billion US dollars, and compared to the same month last year of 3.45 billion US dollars.