September 14, 2018 / 7:06 AM / in 2 months

Indonesia's trade deficit seen shrinking, though imports still high: Reuters Poll

Indonesia's Finance Minister Sri Mulyani Indrawati attends the World Economic Forum on ASEAN at the Convention Center in Hanoi, Vietnam September 12, 2018. REUTERS/Kham/File Photo

JAKARTA (Reuters) - Indonesia’s trade balance is expected to stay in the red in August although the size of the deficit may have narrowed, a Reuters poll showed on Friday.

The median forecast of 10 analysts in the poll was for a deficit of $680 million in August, shrinking from the revised $2.01 billion deficit in July.

July’s trade gap was the largest in five years and the import bill for the month was an all-time high. The July trade data, which came in the middle of last month, exacerbated the sell-off in Indonesian assets at a time when investors were already jittery about emerging markets due to a plunge in Turkish lira.

Bank Indonesia raised interest rates for the fourth time since mid-May to defend the rupiah after the trade data last month.

The narrower trade gap in August will not be enough to stem the rupiah weakness, said Prakash Sakpal, Asia economist at ING in Singapore who pencilled in a $750 million deficit in August.

The currency has stabilised in the past few days to trade around 14,800 a dollar, but it remained close to its weakest in 20 years.

“We expect no break in the BI rate hike cycle just yet,” Sakpal said.

Analysts in the poll expect import growth in August to remain strong, at 26.53 percent from a year earlier, albeit down from July’s revised growth of 31.73 percent. Exports are seen growing 10.03 percent in August, also decelerating from the revised 19.68 percent growth in July.

Analysts said importers may have frontloaded overseas purchases ahead of an import tax hike. Finance Minister Sri Mulyani Indrawati on Aug. 14 announced a plan to raise import tariffs on a wide range of consumer goods, which she went on to implement in September.

Polling by Nilufar Rizki; Writing by Gayatri Suroyo; Editing by Gopakumar Warrier

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