● Exports fell lesser than the preceding month and beating market expectation at -0.5% (consensus: -7.2%; Aug: -8.2%)

− MoM: rebounded sharply (7.0%; Aug: -4.4%) to USD14.0b on signs of recovery.

● Growth was attributable to a rebound in non-oil & gas and a lesser decline in oil & gas-based products

− Non-oil & gas (0.2%; Aug: -6.9%): rebounded marginally driven by a sharp rebound in manufacturing (7.0%; Aug: -4.5%) and agriculture (16.6%; Aug: 1.2%). Meanwhile, mining exports fell sharply (-36.0%; Aug: -24.9%).

− By destination, exports to top trading partners accelerated led by the US (13.7%; Aug: 1.6%) and China (9.2%; Aug: 8.6%). Bucking the trend, exports to Japan continued to fall for the seventh straight month (-6.8%; Aug: -16.7%).

− Oil & gas (-12.4%; Aug: -29.0%): growth contraction eased due to a lower decline in O&G mining (-2.3%; Aug: -28.1%) which partially capped the steep fall in O&G manufacturing based products (-35.6%; Aug: -32.7%).

● Imports stayed in a contraction for the fifteen-straight month (-18.9%; consensus: -22.4%; Aug: -24.2%) due to continued fallin the purchase of non-O&G (-17.9%; Aug: -21.9%) and O&G product (-26.3%; Aug: -41.7%)

− By segment, it was attributable to the decline of consumer goods (-20.4%; Aug: -12.5%) but partially capped by the lesser decline in raw materials (-19.0%; Aug: -24.9%) and capital goods (-17.7%; Aug: -27.5%).

− MoM: expanded (7.7%; Aug: 2.7%) to USD11.6b reflecting a second successive month of MoM growth recovery.

● Trade balance remained in a surplus for the fifth straight month. It expanded to USD2.44b (consensus: USD1.98b; Aug: USD2.35b). Meanwhile, total trade fell for the seventh straight month (-9.8%; Aug: -16.2%), but at a smaller rate.

● 2020 export forecast revised down to -7.0% to -4.0% from previous projection of -5.0% to -2.0% (2019: -6.8%)

− Year-to-date, exports fell by 5.8% (Jan-Aug 2020: -6.5%) as external demand remained weak due to the impact of COVID-19 pandemic crisis despite some signs of recovery in recent months.

− Rising COVID-19cases domesticallyand globallywould continue to exert pressure on demand and supply, andeventually weigh on Indonesia’s growth recovery in the near term.

Source: Kenanga Research - 16 Oct 2020