Indonesia books preliminary $4.9 billion trade surplus in May, finance minister says

Indonesia recorded a preliminary trade surplus of $4.9 billion in May, the largest monthly surplus since February 2023, with exports reaching $25.3 billion and imports at $20.4 billion. While agricultural and manufactured goods exports saw strong growth, a steep drop in mining product shipments negatively impacted government revenues. The country's budget deficit for the first five months of 2024 reached 21 trillion rupiah ($1.29 billion), equivalent to 0.09% of GDP, as trade tensions and slowing global growth are expected to influence exports and overall economic growth.

Analysis

Indonesia reported a preliminary trade surplus of $4.9 billion for May, a significant increase from April's $160 million surplus and potentially the largest monthly surplus since February 2023. This was driven by exports reaching $25.3 billion against imports of $20.4 billion. While exports of agricultural products and manufactured goods demonstrated strong growth, a steep decline in mining product shipments negatively impacted government revenues. The Finance Minister, Sri Mulyani Indrawati, highlighted that despite the positive May trade figures, ongoing trade tensions and slowing global growth remain concerns that could influence future exports and the overall economic growth of Southeast Asia's largest economy. Concurrently, Indonesia's budget deficit for the first five months of 2024 stood at 21 trillion rupiah ($1.29 billion), or 0.09% of GDP. This represents a slight improvement compared to the 0.1% GDP deficit recorded in the same period of 2023, with revenues in January-May 2024 reaching 995.3 trillion rupiah and total spending at 1,016.3 trillion rupiah, down from 1,123.5 trillion rupiah and 1,145.3 trillion rupiah respectively in the prior year period. Final trade data is anticipated for release by Statistics Indonesia on July 1.

Key Decisions for Investors

• Investors should view the strong May trade surplus positively but remain cautious due to stated headwinds from global trade tensions and slowing growth, which could impact export sustainability.
• Monitor the final trade data release on July 1 and closely track developments in the mining sector, given its noted weakness and impact on government revenue.
• Assess the implications of declining government revenues, despite a slightly narrower budget deficit, on fiscal stability and potential policy responses, particularly in light of reduced mining income and global economic uncertainties.