Macroscope

Macroscope
Economic | 18 March
Research 2019 2019
| 18 March

Huge Drop on Imports Likely Not Sustainable

Surplus Surprise! Trade balance was US$330mn in Feb19, turning its back from a four
Economic Forecasts month deficit run averaged –US$1.5bn, an unexpected result as our and consensus
forecast were –USD700mn and –US$782mn, respectively. The surplus was mainly on
2017 2018 2019F
behalf of the non-oil and gas trade balance, as the deficit on oil and gas slightly widened.
Real GDP (%)* 5.1 5.17 5.22
Overall, export contraction was lower than imports, each at -11.3% YoY and -14.0% YoY in
GDP/capita (US$)* 3,827 3,945 4,137 Feb19 from 0.30% and -4.4% respectively in the previous month.
Inflation (%) 3.61 3.13 3.80
7-DRRR 4.25 6.00 6.25 Exports slipped deeper than expected. It declined -11.3%, deeper than our estimate at
CAD/GDP (%)* -1.7 -2.98 -2.8 -6.8%. The aggregate price still recorded contraction (-15.8% from -16.5% in Jan19) which
Exc. Rate (Rp/US avg.) 13,398 14,267 14,450 was mainly on behalf of falling commodity prices. Meanwhile, the deceleration of export
volume (5.3% from 14.6%) could be explained by the slowing global demand which can be
seen in export drop to China (-25.6% from -10.0% in Jan19, according to Statistics
Indonesia data) as well as to other countries (see exhibit 3). Overall, notable declines or
deceleration were observed in commodities such as CPO, ores, coal, organic chemicals,
footwear, and tins (see exhibit 6).

Imports dropped the deepest in 19 months. The decline of imports by -14.0% was
triggered more by volume (-9.3% YoY from 5.0% YoY in Jan19) rather than price (-5.2%
from -6.8% in Jan19). Based on goods classifications, imports also contracted on all fronts:
consumers (-26.9% from -10.5%), raw (-15.0% from -0.4%), and capital (-0.8% from -5.0%).

Reason for import drop: more on seasonality. Besides the possible end of capex cycle in
the mining sector, the sharp decrease on import does not necessarily mean a weak
domestic demand, in our opinion. This is because import indicators such as cement sales,
PMI, motor cycle sales actually increased in Feb19. Hence, what caused imports to drop by
USD3bn? We believe it was partly the combination of two factors: First, non-oil and gas
import dropped by US$2.7bn in Feb19 and interestingly 40% of the drop was sourced from
China. We view it was mainly on behalf of the Chinese Lunar New Year, where the month
has shorter working days (Indonesia imports from China dropped US$585mn on average
during the Lunar New Year month; the highest drop was approximately US$1.0bn). Second,
the lagging impact of government’s efforts in reducing imports. Our calculation sees the
potential import drop in 2019 considering the “one-off surge” last year (on items such as
Leo Putera Rinaldy
machineries, iron and steel, and vehicles), combined with B-20 implementation that would
Chief Economist
reduce imports -USD900mn per month, all of which are in an optimistic scenario.
+6221 5296 9406
leo.rinaldy@mandirisek.co.id
Imports drop likely not sustainable. Hence, we believe that the huge import drop in
Feb19 will not be sustainable. In fact, import trend is expected to pick up in April and May
Aziza Nabila Amani this year due to the seasonality of Muslim fasting month & Eid. Oil imports are expected to
Economist rise than the usual during the homecoming tradition (mudik), especially with the
+6221 5296 9651 completion of Trans Java and the first section of Trans Sumatera, along with the re-
aziza.amani@mandirisek.co.id distribution of RON 88 product back to Java. We maintain our current account deficit
forecast at -2.8% of GDP with a higher risk on the export side, especially IMF has once more
revised down the global economic growth in Apr19. On the policy side, we also maintain
our policy rate forecast with the tendency to be flat along the year.

Page 1 Please see important disclosures at the back of this report

 Macroscope | 18 March 2019

EXHIBIT 1. TRADE SUMMARY

Jan-19 Feb-19
MS Forecast Market Consensus Actual
Exports (% YoY) -4.7 -6.8 -4.4 -11.3
Imports (% YoY) -1.8 -2.2 0.3 -14.0
Trade balance (US$ mn) -1160 -700 -782.0 330

Sources: CEIC, Mandiri Sekuritas estimate

EXHIBIT 2. TRADE DATA DEVELOPMENT EXHIBIT 3. INDONESIA’S EXPORTS TO MOST COUNTRIES

DECLINED IN 3MMA
Export growth by destination (% YoY 3mma)
Trade data development 
80.0%
60% 2.5
60.0%
50% 2.0
40% 1.5 40.0%
30% 1.0
20.0%
20% 0.5
10% 0.0 0.0%

0% ‐0.5 ‐20.0%
‐10% ‐1.0
Trade balance (US$ bn) ‐ RHS ‐40.0%
‐20% ‐1.5
‐30% Exports (%YoY) ‐2.0 ‐60.0%
Aug‐14

Aug‐15

Aug‐16

Aug‐17

Aug‐18
Nov‐14

Nov‐15

Nov‐16

Nov‐17

Nov‐18
Feb‐14

May‐14

Feb‐15

May‐15

Feb‐16

May‐16

Feb‐17

May‐17

Feb‐18

May‐18

Feb‐19
‐40% Imports (%YoY) ‐2.00 ‐2.5
Aug‐15

Aug‐16

Aug‐17

Aug‐18
Feb‐15

Nov‐15
Feb‐16

Nov‐16
Feb‐17

Nov‐17
Feb‐18

Nov‐18
Feb‐19
May‐15

May‐16

May‐17

May‐18

China United States ASEAN + Korea + India + Japan EU Total export

Source: CEIC Source: CEIC

EXHIBIT 4. ALL IMPORT GOODS CLASSIFICATION MARKED EXHIBIT 5. THE BIGGEST IMPORTS DROP IN FEB19
DOWNTRENDS; CAPITAL GOODS RELATIVELY FLAT
Import trends (%YoY, 3MMA) Imports (%YoY)
80%
40%
60%
30%

20% 40%

10% 20%
Consumer goods 0%
0%
Raw materials Organic chemicals
‐10% ‐20% Plastics and articles thereof
Capital goods Iron and Steel 
‐20% ‐40% Electrical Machinery
Apr‐17

Apr‐18
Feb‐17

Feb‐18

Feb‐19
Jun‐17

Jun‐18
Dec‐17

Dec‐18
Aug‐17

Oct‐17

Aug‐18

Oct‐18

Dec‐16

Dec‐17

Dec‐18
Aug‐16
Oct‐16

Aug‐17
Oct‐17

Aug‐18
Oct‐18
Apr‐16

Apr‐17

Apr‐18
Feb‐16

Feb‐17

Feb‐18

Feb‐19
Jun‐16

Jun‐17

Jun‐18

Source: CEIC Source: CEIC

Page 2 Please see important disclosures at the back of this report

Macroscope | 18 March 2019

EXHIBIT 6. FEB19 TRADE TABLE

US$ mn Feb-19 MoM Contribution YoY Contribution
Total export 12,532 -10.0% -10.0% -11.3% -11.3%
Oil & gas export 1,088 -11.8% -1.1% -21.7% -2.1%
Crude oil 157 117.6% 0.6% -64.8% -2.0%
Oil products 70 -6.5% 0.0% -34.5% -0.3%
Gas 861 -20.8% -1.6% 2.8% 0.2%
Non-oil & gas export by commodity 11,443 -9.8% -9.0% -10.2% -9.2%
Mineral Fuels Excluding Oil & Gas Products 1,658 -14.5% -2.0% -14.2% -1.9%
Animal or Vegetable Oils/Fats and Their Cleavage 1,366 -13.3% -1.5% -20.6% -2.5%
Natural and Cultured Pearls, Precious/Semi Precio 657 53.0% 1.6% 12.3% 0.5%
Footwear, Gaiters and the Like; Parts of Such Artic 331 -29.5% -1.0% -12.6% -0.3%
Organic Chemicals 209 -32.0% -0.7% -4.0% -0.1%
Ores, Slag, and Ash 148 -50.3% -1.1% -64.9% -1.9%
Pulp of Wood or of Other Fibrous Cellulosic Mater 193 25.1% 0.3% -8.1% -0.1%
Copper and Articles Thereof 135 87.4% 0.5% -19.9% -0.2%
Tin and Articles Thereof 117 39.4% 0.2% -42.7% -0.6%
Inorganic Chemicals 96 28.0% 0.2% 32.4% 0.2%
Others 6,533 -10.4% -5.4% -4.3% -2.1%

Non-oil & gas export by country 11,443 -9.8% -9.0% -10.2% -9.2%
China 1,536 -11.1% -1.4% -25.6% -3.7%
United States 1,273 -15.8% -1.7% -1.1% -0.1%
Japan 1,034 -13.6% -1.2% -18.3% -1.6%
India 954 -4.7% -0.3% 2.4% 0.2%
Singapore 661 0.7% 0.0% -24.5% -1.5%
Malaysia 604 16.3% 0.6% 0.7% 0.0%
South Korea 548 -11.0% -0.5% 8.3% 0.3%
Thailand 447 -5.5% -0.2% 2.2% 0.1%
Netherlands 257 -9.5% -0.2% -18.3% -0.4%
Taiwan 213 -34.2% -0.8% -2.1% 0.0%
Germany 168 -25.8% -0.4% -14.5% -0.2%
Australia 136 -18.5% -0.2% -11.0% -0.1%
Italy 105 -38.1% -0.5% -36.5% -0.4%
Others 5,311 28.5% 0.8% 42.6% 11.2%

Total import 12,202 -18.6% -18.6% -14.0% -14.0%

Oil & gas import 1,553 -6.3% -0.7% -30.5% -4.8%
Crude oil 312 -31.6% -1.0% -66.6% -4.4%
Oil products 1,049 2.5% 0.2% -5.1% -0.4%
Gas 192 7.8% 0.1% -2.7% 0.0%
Non-oil & gas import by commodity 10,650 -20.1% -17.9% -10.9% -9.2%
Nuclear Reactors, Boilers, Machinery and Mechan 2,064 -9.2% -1.4% 6.7% 0.92%
Electrical Machinery and Equipments; Sound Reco 1,240 -27.8% -3.2% -25.6% -3.01%
Iron and Steel 723 -39.6% -3.2% 1.0% 0.05%
Plastics and Articles Thereof 636 -23.5% -1.3% -6.4% -0.31%
Organic Chemicals 437 -25.9% -1.0% -21.0% -0.82%
Sugar and Sugar Confectionery 147 216.8% 0.7% 24.7% 0.21%
Dairy Products, Bird Eggs, Natural Honey 77 54.6% 0.2% -3.0% -0.02%
Ships, Boat, and Floating Structures 71 98.7% 0.2% -32.7% -0.2%
Ores, Slag, and Ash 59 81.5% 0.2% -23.9% -0.13%
Live Animals 54 99.7% 0.2% 33.0% 0.09%
Others 5,144 -21.3% -9.3% -14.0% -5.9%

Consumption Goods 1,007 -17.4% -1.4% -26.9% -2.6%

Raw Materials 9,006 -21.1% -16.1% -15.0% -11.2%
Capital Goods 2,189 -7.1% -1.1% -0.8% -0.1%

Source: CEIC, Statistics Indonesia

Page 3 Please see important disclosures at the back of this report

Macroscope | 18 March 2019

MACROECONOMIC INDICATORS AND FORECAST

2013 2014 2015 2016 2017 2018 2019F 2020F

National Account
Real GDP (% yoy) 5.6 5.0 4.8 5.0 5.07 5.17 5.22 5.37
Domestic Demand (% yoy) 5.5 4.6 5.0 4.4 5.12 5.60
Real Consumption: Private (% yoy) 5.4 5.1 5.0 5.0 4.95 5.05 5.10 5.23
Real Consumption: Non-Profit Institution (% yoy) 8.2 12.4 -0.6 6.6 6.9 9.1
Real Consumption: Government (% yoy) 6.9 2.0 5.4 (0.1) 2.14 4.80 4.50 4.00
Real Gross Fixed Capital Formation (% yoy) 5.3 4.1 5.1 4.5 6.15 6.67 7.10 7.50
Real Net Exports (% yoy) 130.8 (27.5) -
Real Exports (% yoy) 4.2 1.0 (2.0) (1.7) 9.09 6.48 6.80 6.70
Real Imports (% yoy) 1.9 2.2 (5.8) (2.3) 8.06 12.0 7.00 7.10
GDP (Rp tn) - nominal 9,525 10,543 11,541 12,407.0 13,588.8 14,837.4 16,108.1 17,572.0
GDP (US$ bn) - nominal 911 888 861.9 932 1,015 1,042 1,111
GDP per capita (US$) - nominal 3,662 3,520 3,377 3,589 3,847 3,945 4,137

External Sector
Exports (% yoy) - Merchandise (2.8) (3.7) (15.4) (3.2) 17.0 7.0 3.1 1.6
Imports (% yoy) - Merchandise (1.4) (4.5) (19.7) (4.6) 16.0 20.7 (1.3) 2.5
Trade Balance (US$ bn) 5.8 6.9 13.3 15.4 18.8 -0.43 7.5 6.0
Current Account (% of GDP) (3.2) (3.0) (2.0) (1.8) (1.6) (2.98) (2.8) (2.9)
Current Account (US$ bn) (29.1) (26.2) (17.6) (16.3) (16.2) (31.1) (29.9) (33.8)
Rp/US$ (period average) 10,452 11,878 13,458 13,308 13,398 14,267 14,450
Rp/US$ (year end) 12,189 12,440 13,795 13,436 13,548 14,481 14,548

Other
BI rate (% period average) 6.48 7.54 7.50 5.75 4.75 4.75
BI rate (% year end) 7.50 7.75 7.50
BI 7 days reverse repo rate (% year end) 4.75 4.25 6.00 6.25 5.75
Headline Inflation (% yoy, period average) 6.4 6.4 6.4 3.5 3.81 3.2 3.4 3.7
Headline Inflation (% yoy, year end) 8.08 8.36 3.35 3.00 3.61 3.13 3.8 3.7
S&P's Rating - FCY BB+ BB+ BB+ BB+ BBB- BBB- BBB- BB-
S&P's Rating - LCY BBB- BBB- BBB- BBB- BBB- BBB- BBB- BB-
Sources: CEIC, Mandiri Sekuritas estimate

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ECONOMIC AND FIXED INCOME RESEARCH TEAM

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Ali Hasanudin Aziza Nabila Amani

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+6221 5296 9629 +6221 5296 9651

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Credit Analyst
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