June 21, 2019 / 4:18 AM / 6 months ago

Indonesia's trade deficit likely narrowed in May: Reuters poll

JAKARTA (Reuters) - Indonesia’s trade deficit expected to have narrowed in May, following the biggest trade deficit in the country’s history in April, a Reuters poll showed on Friday.

A worker passes stacks of containers at Tanjung Priok port in Jakarta, Indonesia, May 6, 2019. REUTERS/Willy Kurniawan

The median forecast from 11 economists in the poll was for a $1.38 billion trade shortfall last month, compared with a revised $2.44 billion deficit in April which was the widest gap Indonesia has ever seen.

“We expect smaller trade deficit in May vs. April as commodity exports may have improved and imports may have begun to subside in the final week before the holiday season,” Citibank said in a research note, referring to Eid al-Fitr holidays.

However, Bank Indonesia (BI) Governor Perry Warjiyo said on Thursday there were signs that Southeast Asia’s largest economy may have swung back to a trade surplus in May, without elaborating details.

BI on Thursday cut banks’ reserve requirement ratios and Warjiyo said it was “a matter of timing and magnitude” before it made its first cut in the policy rate since September 2017, adding that one of the main indicators it was watching was the balance of payments, including the current account deficit.

The current account gap is a source of vulnerability for Indonesia because the economy relies on portfolio investment to fund it.

After April’s record trade deficit, BI revised its outlook for 2019’s current account deficit to a range of 2.5%-3% of GDP, from an initial forecast of 2.5%. The gap in 2018 was 3% of GDP.

In the poll, May exports were seen falling by 14.70% on year, against a 12.9% drop in April.

Shipments from the resource-rich nation had been falling in recent months, in line with slowing global trade amid the U.S.-China trade war.

Meanwhile, the decline in imports was expected to accelerate in May to 13.9% on year, from 6.8% the month before.

Polling by Nilufar Rizki and Tabita Diela, Writing by Gayatri Suroyo; editing by Gopakumar Warrier

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