● Exports moderated sharply in February (4.5% YoY; Jan: 16.4%), lower than the consensus forecast (5.0%)

- MoM: fell (-4.2%; Jan: -6.3%) for the sixth straight month, reflecting a continued downtrend amid weak commodity prices and muted external demand.

● February’s export growth was attributable to a slowdown in O&G and non-O&G products but partly supported by the lower base effect

- Non-O&G (3.8%; Jan: 14.0%): moderated due to growth contraction in manufacturing (-0.1%; Jan: -0.4%) and agriculture (-2.1%; Jan: -1.8%) products as well as a slowdown in mining (20.9%; Jan: 121.5%) product. By destination, moderate export growth was attributed to China (35.3%; Jan: 49.3%) and Japan (1.8%; Jan: 24.9%), while shipment to the US (-20.1%; Jan: -24.1%) remained weak.

- O&G (19.3%; Jan: 65.1%): moderated sharply due to weak shipment of manufacturing (-6.2%; Jan: 114.6%) and mining (31.8%; Jan: 45.6%) products.

● Imports plunged in February (-4.3%; Jan: 1.3%), far lower than market expectation (consensus: 9.7%) due to a weak import of both O&G (-17.1%; Jan: -30.4%) and non-O&G (-1.6%; Jan: -2.8%) products

- By category, the weaker growth was due to weak demand for raw materials (-8.1%; Jan: 0.4%) but supported by growth in capital (6.1%; Jan: 5.7%) and consumer (13.4%; Jan: 1.1%) goods, which partly due to base effect.

- MoM: growth fell sharply (-13.7%; Jan: -7.1%), its weakest growth since January 2022.

● Trade surplus widened (USD5.5b; Jan: USD3.9b) above market expectation (consensus: USD3.3b) as exports far exceed imports. Meanwhile, total trade grew marginally (0.6% YoY; Jan: 9.0%).

● 2023 export growth forecast maintained at 2.5% (2022: 26.1%) in anticipation of a slower global trade outlook

- We continue to expect moderate export growth going forward due to the waning effect of a lower base as well as weaker commodity prices amid subdued external demand weighed by the prospect of a global economic slowdown. Nevertheless, we believe that China’s economic reopening may continue to lend support to Indonesia’s exports.

Source: Kenanga Research - 16 Mar 2023