Indonesia seen swinging back to trade deficit in April - Reuters poll

FILE PHOTO: A worker walks on the dock of the Tanjung Priok Port in Jakarta, Indonesia April 16, 2018. REUTERS/Darren Whiteside

JAKARTA (Reuters) - Indonesia is seen recording its first trade deficit in three months in April, with exports and imports predicted to continue their plunge, a Reuters survey showed on Monday.

Southeast Asia’s largest economy had a trade surplus for two months in a row up to March, helping it narrow its current account deficit in the first quarter to the smallest in a year.

However, analysts have expressed their doubts that this was a sustainable trend, especially because imports usually pick up before the fasting month of Ramadan in the Muslim-majority country. Ramadan began in early May this year.

For April, 10 analysts in the poll had a median forecast of $500 million trade deficit, compared with a revised surplus of $670.81 million in March.

Although imports prior to Ramadan are typically higher than normal, on a yearly basis they were seen falling by 12.10% due to base effect of high imports in April 2018. Imports dropped 7% on year in March.

Meanwhile, exports were seen contracting for a sixth straight month in April, by 7.15% from a year earlier, though the pace was less sharp compared with 9.40% in March.

Going forward, the current account deficit “is likely to widen in 2Q19 onwards as infrastructure development would start ramping of after the election”, DBS economist Masyita Crystallin wrote in a research note, adding that rising oil prices and re-escalation of U.S.-China trade war may also worsen the condition.

Indonesia held presidential and parliamentary elections last month and President Joko Widodo, who made infrastructure a priority in his first term, likely won a second five-year term beginning in October, based on unofficial counts. The official result is due by May 22.

Crystallin also said Bank Indonesia, which will conclude a policy meeting on Thursday, might refrain from cutting interest rates as the rupiah could stay under pressure due to the trade war and the widening of current account gap.

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