● Exports declined by 3.7% YoY, below market expectation (Consensus: 1.2%; Dec: 1.3%) due to lower shipment of both non-oil & gas and oil & gas products

-MoM: fell to a five-month low of -7.3% (Dec: 3.8%) to USD13.4b.

-Non-oil & gas: down by -0.7% (Dec: 5.8%), due to a broad based contraction led by agriculture (-80.5%; Dec: 24.5%), mining (-15.0%; Nov: -1.9%), and manufacturing goods (-3.2%; Dec: 6.9%).

-Oil & gas-based products: fell by 34.4% (Dec: -31.9%) due to weak exports of mining (-45.1%; Dec: -40.3%).

● Imports fell for seven straight months albeit at a slower pace of 4.8% YoY (Dec: -5.6%; consensus: -5.7%), weighed by weak imports of non-oil & gas products (-7.8%; Dec: -7.2%)

-By category, weaker imports were attributable to a decline in imports of raw materials (-7.3%; Dec: -7.3%) and capital goods (-5.3%; Dec: -8.5%). Meanwhile, the growth of consumer goods imports remained in a positive trend, further expanding to a 17-month high of 20.5% (Dec: 12.2%).

-MoM: imports fell by less at 1.6% (Dec: -5.4%) to USD14.3b.

● By destination, the performance of exports was associated with a broad-based moderation in key trading partner

-China: remained the top export destination though its growth moderated to 10% (Dec: 20.0%).

-US: eased to 7.1% (Dec: 12.7%), but the share of exports expanded to 12.1%, a 43-month record high.

-Japan: registered a sharp decline of -27.7% (Dec: -7.9%).

● Trade balance recorded a larger-than-expected deficit of USD0.9b (consensus: -USD0.3b; revised Dec: -USD61.7m).

Overall, total trade extended its fall for the fourteenth straight month at -4.3% (Dec: -2.4%).

● Exports may recover on the back of government measures and easing trade tension (1.0% to 4.0%; 2019: -7.0%)

-The positive development surrounding the US-China phase one agreement may boost local exports, compounded with the government’s effort to contain current account deficit.

-However, the COVID-19 outbreak may exert some downside pressure on total trade though there is no confirmed case in Indonesia so far. Meanwhile, Jokowi's ambitious development plan under the 2020-2024 National MediumTerm Development Plan (RPJMN) may elevate import spending and raise the probability for the trade balance to remain in deficits.

Source: Kenanga Research - 18 Feb 2020