The Week Ahead (Apr 15-19), Indonesia: Landmark Vote Falls In Wake Of Surplus Shrinkage

Elections are set to erupt across Indonesia’s volcanic archipelago in the week ahead, while weak export activity has fueled a narrowing in the country’s current account surplus from the prior year.

While landmark general elections are set Wednesday for Indonesian voters to cast ballots for its president, vice president and members of the People’s Consultative Assembly, the country has seen its annual surplus narrow.

Indonesia’s economy is generally reliant on the richness of its natural resources, including crude oil, natural gas, tin, copper and gold, with Japan, the U.S. and surrounding Asia-Pacific countries Malaysia, Singapore and Australia comprising its top trading partners.

While the nation’s trade surplus grew to US$540m in March from roughly US$330m in the prior month, the level has shrunk significantly from an excess of around US$1.12bn in the same year-ago month, led by a 10% fall in exports.

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According to Bloomberg, citing data from the statistics office, shipments of oil and gas, as well as mining and others, led the annual decline by 18% and 15.4%, respectively. Meanwhile, the first quarter of 2019 exports dropped by 8.5% year-on-year to just north of US$40.5bn, while imports fell 7.4% to US$40.7bn over the same period.

Among its strategies to prop-up inflation to a target of around 3.5% +/-1pp in 2019, Indonesia’s government has aimed at encouraging regional trade co-operation, as well as improving its infrastructure. However, slowing global growth seems to have dampened consumer prices and hampered exports.

The annual inflation rate in the country slowed in March to 2.48% from 2.57% in February, with a marked deceleration from 3.4% in the same year-ago month.

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EM fervor

Still, Indonesian stocks have been no exception to the positive performance enjoyed by other emerging market equities, amid the U.S. Federal Reserve Bank’s shift in monetary policy towards a more dovish stance. 

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