From: The Jakarta GlobeThe country’s exports for June slowed partly as a result of the stronger rupiah and a fall in some commodity prices, analysts have said.
By Dion Bisara
By Dion Bisara
The Central Statistics Agency (BPS) announced on Monday that exports for June were worth $12.29 billion, a 31 percent increase year-on-year. That was compared to May’s $12.66 billion, which was a rise of 37.4 percent year-on-year.
“Exports for June slowed due to a drop in international commodity prices,” Rusman Heriawan, head of the statistics agency, told reporters on Monday.
The price of one of the country’s main commodities, palm oil, slid from 2,418 ringgit ($764.83) per metric ton on June 1 to 2,353 ringgit on June 30.
But an analyst said the strong rupiah, which on Monday reached its highest level since June 2007, also contributed to the slowdown in export growth.
Drajad Wibowo, an economist with Sustainable Development Indonesia, an independent think-thank, said the currency was overvalued because of a surge in capital inflows into the country’s stock market, government bonds and central bank debt papers.
He warned that if the authorities did not take action, the strong rupiah could in the near future lead to even weaker exports, which account for about 24 percent of the country’s economy.
The rupiah strengthened from 9,256 per US dollar at the beginning of June to 9,061 against the US dollar by the end of the month.
Meanwhile, imports for June were recorded at $11.71 billion, up 47.6 percent year-on-year, supported by strong increases in capital goods and raw materials.
This left the country with a shrinking trade surplus, which contracted to $580 million in June from $2.68 billion in May.
“That should mean the trade surplus is under downward pressure and implies a pretty thin current account surplus,” said Edward Teather, a senior economist at UBS.
Enrico Tanuwidjaja, a regional economist at OSK-DMG Group in Singapore, however, said he was not too worried about the impact of a strengthening rupiah on the economy, with the strong currency helping businesses import more capital goods. When businesses import more capital goods, he added, it shows the domestic economy is stimulated.
He said the rupiah could strengthen further to around 8,800 per US dollar by year-end.
The BPS data showed that in the first six months of the year, exports rose 44 percent to $72.55 billion, while imports surged 51.99 percent to $62.89 billion from the same period last year. That resulted in a healthy $9.63 billion trade surplus for the first half of the year, up from $8.6 billion during the same period last year.
The secretary general of the Indonesian Textile Association (API), Ernovian Ismy, said he was not worried about the rupiah’s recent gains, though he hoped for a less volatile exchange rate so businesses could better estimate their profitability and be less vulnerable to potential losses from currency fluctuations.
“A fluctuation of Rp 100 to Rp 200 per dollar [in the exchange rate] is still acceptable,” he said.