Indonesia’s trade balance: significant declines in exports and imports in early 2022

(1) Russian-Western tensions over Ukraine;

(2) To what extent Indonesia’s temporary coal export ban imposed in January 2022 will disrupt the country’s exports;

3) To what extent were Indonesian imports from November to December 2021 boosted by the (seasonal) Christmas and New Year celebrations? Will there be a significant drop in imports of consumer goods and raw materials at the start of 2022?

(4) Developments related to the release of Omicron. While the situation appears to be under control (as Omicron is less dangerous than previous variants of COVID-19, resulting in fewer hospitalizations and deaths), the real question is how governments will respond.

It is interesting to begin this article with these four topics because there have indeed been significant developments. The only exception is point (1) since tensions persist (with various countries withdrawing their ambassadors from Ukraine) but the situation has not (yet) escalated into violent action. So we just have to wait for further developments. It is assumed that – if – Russia invades Ukraine, it may lead to a sharp rise in international commodity prices amid uncertainty, especially when the United States (US) and the European Union ( EU) decide to impose severe sanctions on Russia, which is rich in raw materials. However, the question is whether Russia is actually considering invading Ukraine.

While developments in Ukraine have yet to unfold, the other three points above show concrete developments.

The temporary coal export ban that the Indonesian government imposed in January 2022 (in an effort to preserve coal supply to the domestic market) has indeed proven to have a significant impact on the export performance of Indonesia. Indonesia, as the latest data shows a $2.00 billion decline in mineral resources. exports of fuels (the category that includes coal) in January 2022 compared to December 2021. Exports of mineral fuels fell 61.8% month-on-month (m/m) to 1, $24 billion. And so, this short-lived ban certainly seems to have had a big impact.

Meanwhile, regarding point (3), we have seen a (nearly) $2.0 billion decline in non-oil and gas imports to Indonesia in the first month of 2022, imports of goods consumption fell by 36.6% (m/m) and imports of raw materials and capital goods also fell by double digits. This certainly gives the impression that the recent peak in imports (in fact: a record) was particularly supported by the holiday season (Christmas and New Year). But we also assume that imports remain quite high overall, as the economic rebound from the COVID-19 crisis is still underway.

Finally, point (4), the Indonesian government decided to tighten social and commercial restrictions (or PPKM) at the beginning of February 2022 (which implies that this did not affect the data of January 2022, but can certainly have an impact on Indonesian trade in February 2022) due to the growing wave of confirmed cases of Omicron. It was a decision that surprised us as bed occupancy rates in Indonesian hospitals seemed at a safe level, while it is agreed in international discourse that Omicron is a much milder version of COVID-19. , resulting in relatively few hospitalizations and deaths. . Additionally, it is also assumed that Omicron is so contagious that simple restrictions (eg: “50% work from home” policies) will have no effect. So it looks like the tighter restrictions will only cause (unnecessary) damage to the economy, possibly disrupting the flow of imports and exports (although we don’t expect a big impact because, at the time of writing , we are already seeing reports of the government relaxing these restrictions, so the stricter level of “PPKM Level 3” may only be very temporary).

In sum, it was not the best environment (in January 2022) for Indonesia’s trade balance. And therefore, data from the Indonesian Statistical Agency (Statistics Badan Pusat, or BPS) show a 52.4% year-on-year (y/y) decline in Indonesia’s trade surplus in January 2022 (making it the lowest trade surplus in the countries since April 2020). It can be assumed that if the Indonesian government had not temporarily banned coal exports in January 2022, the trade balance would have been higher.

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