Global Markets Group. Trade Performance: Depressed by the Eid holiday Author: Juniman Chief Economist. Economic Research. Trade Outlook Monthly Report

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1 Global Markets Group Trade Outlook Monthly Report Economic Research August 2016 Trade Performance: Depressed by the Eid holiday Author: Juniman Chief Economist Trade Highlights Exports in June 2016 rose to US$ bn (up by 12.18% m-o-m). Meanwhile imports in June 2016 also increased to US$ bn (up by 7.86% m-o-m). Furthermore, the monthly increased in exports largely due to the rise in the export of oil & gas, machinery/electrical appliance, machinery/mechanical appliance, not-knitted apparel, ores/slag & ash, and knitted goods. The rise in the month-on-month imports mainly due to the increase in the import of oil & gas, machinery/electrical appliance, machinery/mechanical appliance, iron & steel, vehicles & parts, and the articles of iron & steel. On a yearly basis, exports fell by 4.36% y-o-y in June 2016, while imports also decreased by 7.41% y-o-y. The fell in the year-on-year exports indicates demand for Indonesia's exports in June 2016 was lower than in June The decreased in the year-on-year imports suggests relatively weakening domestic activity in June 2016 than in June We expect Indonesia's exports may decrease in July The fall in Indonesia's exports performance is due to the Eid holiday. As in previous years, every Eid holiday makes the activity of loading and unloading of goods at the port decreased, consequently the performance of exports also fell. In addition, the decreasing exports were also triggered by the declining of commodity prices such as crude oil, CPO, coal, and metal. Furthermore, the declining Indonesia s exports performance is also caused by the weakening in the economy of the countries of Indonesia's major trading partners that also impact the decreased demand for goods and services from these countries. We expect Indonesia s exports will decreased to US$ billion in July 2016 compared with US$ billion in previous month. Meanwhile, we expect Indonesia's import performance will decrease in July The increase in the performance of Indonesia's imports was also caused by the Eid holiday. As in previous years, every Eid holiday makes the activity of loading and unloading of goods at the port decreased, consequently the performance of imports also fell. We expect Indonesia s imports may fall to US$ billion in July 2016 compared with US$ billion in the previous month. Consequently, Indonesia s trade balance is expected to surplus US$ 0.46 billion in July 2016, narrowing compare than a surplus US$ 0.90 billion in one month earlier. Exports Review Exports in June 2016 rose sharply to US$ bn (up by 12.18% m-o-m) from US$ bn in May On a yearly basis, exports in June 2016 still fell by 4.36% y-o-y. The m-o-m rise in June 2016 stemmed from higher non-oil and gas exports (up by 11.12% m-o-m to US$11.73 bn from US$10.56 bn in May 2016), while the oil and gas exports also increased by 23.93% m-o-m to US$1.19 bn in June 2016 from US$0.96 bn in May Furthermore, the increased in oil and gas exports was attributable to higher exports of crude oil (up by 27.75% m-o-m to US$ 0.55 bn in June 2016), while exports of oil products rose by 7.20% m-o-m to US$ 0.07 bn in June 2016 and exports of natural gas increased by 22.60% m-o-m to US$ 0.57 bn in June The rise in exports of crude oil and natural gas stemmed from the increasing of production by 9.58% and 15.23% respectively. Meanwhile, the price of Indonesian crude oil on International markets actually slightly fell to US$ per barrel in June 2016 from US$ per barrel in the previous month. Meanwhile, higher exports of machinery/electrical appliance, machinery/mechanical appliance, not-knitted apparel, ores/slag & ash, and knitted goods pushed up non-oil and gas exports. Figure 1: Year on Year Growth of Indonesia s Exports yoy (%) 150 Exports Performance (yoy growth) Total exports Oil & gas exports Non-oil & gas exports Jan-16 Mar-15 May-14 Sep-12 Nov-11 Jan-11 Mar-10 May-09 Jul-08 Feb-08 Apr-07 Nov-06 Jun-06 Jan-06 Aug-05 1

2 In June 2016, the non-oil and gas exports to Singapore, China, Japan, the US, and India rose compare with previous month. The non-oil and gas exports to Japan rose by m-o-m to US$ mn, to the US they increased by 26.90% m-o-m to US$ mn, to Singapore they rose by 10.53% m-o-m to US$ mn, to China they increased by 23.33% m-o-m to US$ mn, and to India they rose by 6.48% m-o-m to US$ mn. In period of January June 2016, the US was Indonesia's largest trading partner in non-oil and gas products (12.50%) of Indonesia's goods were exported to this country, followed by Japan (10.19%), China (9.65%), Singapore (7.14%), and India (7.01%). Import Review The central bureau statistics also reported that in June 2016 Indonesia s imports reached US$ 12.02bn (up by 7.86% m-o-m from US$ bn in May 2016). The increase in June 2016 stemmed from higher non-oil & gas imports (up by 9.07% m-o-m), while oil & gas imports also rose by 1.02% m-o-m. Moreover, the increased in oil and gas imports was attributable to higher imports of oil products (rose by 27.19% m-o-m to US$ 0.98 bn in June 2016), while imports of natural gas decreased by 0.29% m-o-m to US$ 0.14 bn in June 2016 and imports of crude oil also fell by 25.16% m-o-m to US$ 0.57 bn in June Furthermore, non-oil and gas imports in June 2016 were pushed up of the increasing imports of machinery/electrical appliance, machinery/mechanical appliance, iron & steel, vehicles & parts, and the articles of iron & steel. On a yearly basis, imports in June 2016 still decreased by 7.41% y-o-y. The fell (y-o-y) in June 2016 imports stemmed from lower non-oil & gas imports (down by 0.66% y-o-y), while the oil & gas imports also fell by 34.61% y-o-y. Figure 2: Year on Year Growth of Indonesia s Imports Imports Performance (yoy growth) yoy (%) 170 Total import Oil & gas import Non-oil & gas import Jan-16 Mar-15 May-14 Sep-12 Nov-11 Jan-11 Mar-10 May-09 Jul-08 Feb-08 Apr-07 Nov-06 Jun-06 Jan-06 Aug-05 By type of good, monthly imports of consumer goods, raw material and capital goods rose in June 2016 (see the table below). For the January June 2016 period, the share of consumer goods, raw material, and capital goods imports are 9.34%, 74.42%, and 16.24% respectively. Attachment 1: Indonesia's Imports include Trade Zone by Type of Good (Mil US$) Value CIF (US$ mn) Value CIF (US$ mn) Jan-May Share of Import Category May Jun M-o-M growth Jan-Jun Jan-Jun growth (Y-o-Y) Jan-Jun (%) (%) (%) Import Total Consumer Goods Raw Material Capital Goods In June 2016, the non-oil and gas imports from Singapore, Thailand, China, Japan, the US, and South Korea rose compare with previous month. The non-oil and gas imports from China rose by 3.18% m-o-m to US$ mn, from the US they increased by 6.39% m-o-m to US$ mn, from Singapore they rose by 14.53% m-o-m to US$ mn, from Japan they rose sharply by 27.39% m-o-m to US$ mn, from South Korea they increased by 2.76% m-o-m to US$ mn, and from Thailand they also increased by 2.79% m-o-m to US$ mn. In period of January June 2016, China was Indonesia's largest trading partner in non-oil and gas products (26.10%) of Indonesia's goods were imported from this country, followed by Japan (10.93%), Thailand (7.88%), Singapore (6.32%), the US (5.82%), and South Korea (5.14%). In June 2016, Indonesia's trade balance was an increasing surplus due to the increasing exports faster than imports. Indonesia s trade balance was a surplus US$ 0.90 bn in June 2016, widening compare than in May 2016 when it stood at a surplus US$ 0.37 bn. 2

3 Analysis Indonesia's exports increase in June 2016 and they were still above the US$12.00 bn mark. This rise was due to the increasing of oil & gas and non-oil & gas exports. Furthermore, the increased in Indonesia s non-oil and gas exports in June 2016 mainly stemmed from the rise in Indonesia s non-oil and gas exports to Singapore, Malaysia, Thailand, Germany, Italy, China, Japan, the US, India, and South Korea. The rise in non-oil and gas exports to Singapore, Malaysia, Thailand, Germany, Italy, China, Japan, the US, India, and South Korea were attributable to higher demand for Indonesian goods in those countries due to the improving economic activities in those countries. The start recovery of global economic activity has also exerted a positive impact on exports of other ASEAN countries. Indonesia s exports show a similar trend compared to that of other ASEAN countries (Malaysia, Singapore, and Thailand).This indicates that Indonesian goods have not lost competitiveness to products from other ASEAN countries. Figure 3: Comparison Indonesia s Exports growth with Other ASEAN Countries Export Growth (Y-o-Y % ) ma,3 60 Indonesia Malaysia Philippines Singapore Thailand Nov-15 Sep-14 May-12 Mar-11 Jan-10 Nov-08 Apr-08 Feb-07 Jul-06 Dec-05 May-05 Oct-04 Mar-04 Aug-03 Jan-03 Jun-02 Nov-01 Apr-01 Sep-00 On a year to date basis, Indonesia s exports fell by 11.37% in January June 2016 period. The fell in the year to date exports indicates demand for Indonesia s exported goods in January June 2016 period was lower than the same period in Meanwhile Indonesia's imports also rose in June 2016 and they were above the US$12.00 bn mark. The increasing of imports was driven by improving domestic economy activities (Ramadan and Eid celebration effect). On a year to date basis, imports fell by 10.86% in January June 2016 period. The fell in year to date imports suggests relatively weakening domestic activity in January June 2016 period compare with the same period in Trade Outlook The economic growth of Indonesia s main trading partners was slowed. The US economic grow 1.2% y-o-y in 2Q 2016 slowing compare 1.6% y-o-y in 1Q Japan economic grow 0.1% y-o-y in 1Q 2016, slowing from 0.7% y-o-y in the previous quarter. Meanwhile, the China economic maintained growth at 6.7% y-o-y in 2Q 2016, unchanged compare with the previous quarter, and the Singapore economic grew 2.2% y-o-y in 2Q 2016 slightly improve compare from 2.1% y-o-y in 1Q Furthermore, the Euro Area economic was grew by 1.6% y-o-y in 2Q 2016 slowing from 1.7% y-o-y in the previous quarter. Leading Economic Indicator Index on Indonesia main trading partners was mixed. The US leading economic index rose to in June 2016 from in May 2016, Japan leading economic index increased to in May 2016 compare in previous month, and European leading economic index maintained at in June 2016, unchanged compare with the previous month. Furthermore, Singapore leading economic index increased to in 2Q 2016 from in 1Q 2016, and China leading economic index rose to in June 2016 from in the previous month. Industrial Production Index on Indonesia main trading partners was mixed. Industrial production measures changes in output for the industrial sector of the economy which includes manufacturing, mining, and utilities. The US industrial production index was improving growth to contracted 0.7% (y-o-y) in June 2016 from contraction 1.4 % (y-o-y) in May 2016, Japan industrial production index was improving growth to -1.8% y-o-y in June 2016 compare than -2.1% y-o-y in May 2016, and European industrial production index was slowing growth to 0.6% y-o-y in May 2016 from 2.1% y-o-y in the previous month. Meanwhile, China industrial production index was improving growth to 6.0% (y-o-y) in June 2016 from 5.9% (y-o-y) in May

4 All in all, we believe that the economic activities in Indonesia s main trading partners such as the US, India, Japan, and European were weakened. Furthermore, this will create slowing demand for Indonesian products in those countries. We expect Indonesia's exports may decrease in July The fall in Indonesia's exports performance is due to the Eid holiday. As in previous years, every Eid holiday makes the activity of loading and unloading of goods at the port decreased, consequently the performance of exports also fell. In addition, the decreasing exports were also triggered by the declining of commodity prices such as crude oil, CPO, coal, and metal. Furthermore, the declining Indonesia s exports performance is also caused by the weakening in the economy of the countries of Indonesia's major trading partners that also impact the decreased demand for goods and services from these countries. Meanwhile, we expect Indonesia's import performance will decrease in July The increase in the performance of Indonesia's imports was also caused by the Eid holiday. As in previous years, every Eid holiday makes the activity of loading and unloading of goods at the port decreased, consequently the performance of imports also fell. Against this backdrop, we expect exports to reach US$ bn in July 2016 lower than the US$ bn in June Indonesia s imports are expected to fall to US$ bn in July 2016 from US$ bn in June Consequently, Indonesia s trade balance is expected to surplus US$ 0.46 billion in July 2016, narrowing compare than a surplus US$ 0.90 billion in June Attachment 2: Indonesia's Trade Performance (Billions US$) January February March April May June JulF AugF Export Total Export YTD (Jan-Jun) Oil & Gas Total excl. oil/gas Import Total Import Oil & Gas Total excl. oil/gas Balance Total incl. oil/gas Oil & Gas Total excl. oil/gas Y on Y Growth (percent) Export Total Export Oil & Gas Total excl. oil/gas Import Total Import Oil & Gas Total excl. oil/gas M on M Growth (percent) Export Total Export Oil & Gas Total excl. oil/gas Import Total Import Oil & Gas Total excl. oil/gas

5 Economic Growth and Purchasing Manager Index Economic Growth Y-o-Y (%) Purchasing Manager Index Mar-16 Dec-15 Sep-15 Mar-15 Dec-14 Sep-14 Mar-14 Sep-13 Mar-13 Sep-12 Mar-12 Dec-11 Sep-11 Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 Dec-09 Sep-09 Mar-09 Sep-08 Jun-08 Mar-08 Dec-07 Jun-07 Mar-07 Dec-06 Sep-06 Jun-06 US China EU Japan Jul-16 Apr-16 Jan-16 Jul-15 Jan-15 Jul-14 Apr-14 Jan-14 Apr-13 Jan-13 Jul-12 Jan-12 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Jul-09 Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 Oct-07 Jul-07 Apr-07 Jan-07 Oct-06 Jul-06 US EU Japan China Leading Economic Indicator Index and Baltic Dry Index EU (LHS) US (LHS) Japan (LHS) Singapore LHS) China (RHS) Baltic Dry Index Aug-12 Apr-13 Aug-13 Apr-14 Aug-14 Dec-14 Feb-15 Dec-15 Feb-16 Apr Aug May Jan Jul Jan Jul Apr Sep Mar Sep Mar Dec Aug May Feb Nov May Feb Nov Jul Apr Jan Oct Jul Apr Jan Oct-07 Source: Conference Board & Maybank Indonesia Economic Research Industrial Production Index and Crude Oil Price Industrial Production Index Yearly Growth US$/barrel WTI MINAS Brent Feb-08 Jun-08 Oct-08 Feb-09 Feb-10 Jun-10 Oct-10 Feb-11 Feb-12 Feb-15 Feb US EU Japan China Aug-16 Apr-16 Feb-16 Dec-15 Feb-15 Dec-14 Aug-14 Apr-14 Aug-13 Apr-13 Aug-12 Feb-12 Dec-11 Aug-11 Apr-11 Feb-11 Dec-10 Oct-10 Jun-10 Apr-10 Feb-10 Dec-09 Aug-09 Apr-09 Feb-09 Oct-08 Aug-08 Jun-08 Apr-08 5

6 Macro Economic Indicators Indicators F Inflation (%YoY) Inflation (% avg) Core Inflation (%YoY) Core Inflation (% avg) Exchange Rate Eop (Rp/US$) Exchange Rate Avg (Rp/US$) Curent Account (% GDP) Fiscal Balance (% GDP) Interest Rate BI 7-Day (Reverse) Repo Rate (% p.a) BI 12 month Rate (% p.a) Time Deposit 3 month (% p.a) Lending rate working capital (% p.a) Credit Growth (% YoY) Property Credit Consumer credit Working Capital Credit Investment Credit Total Credit Deposit NPL Commercial Banks (%) Car Sales (1000 Units) Car Sales Growth (%) Motorcycle Sales (1000 Units) Motorcycle Sales Growth (%) Government Capex (Rp tn) Unemployment Rate (%) International Reserve (US$ bn) GDP Growth (%) Note : the red numbers are forecast Source : Maybank Indonesia Economic Research MAYBANK INDONESIA ECONOMIC RESEARCH Sentral Senayan III, 8th Floor Jl. Asia Afrika No. 8, Gelora Bung Karno - Senayan Jakarta 10270, Indonesia Ph: +62 (021) Fax: +62 (021) Juniman Chief Economist Juniman@maybank.co.id (29682) Anup Kumar Myrdal Gunarto Bond Analyst Economist AKumar@maybank.co.id MGunarto@maybank.co.id (29692) (29695) DISCLAIMER The information contained has been taken from sources we deem reliable. PT Bank Maybank Indonesia Tbk and/or its affiliated companies and/or their respective employees and/or agents disclaim any liabilities including the accuracy or completeness of the information and opinions contained in this report or as to any information contained in this report or any other such information or opinions thereof. The information contained in this report is not to be taken as any recommendation made by PT Bank Maybank Indonesia Tbk or any other person to enter any agreement with regard to any investment mentioned in this document. This report is prepared for general circulation. It does not have regards to the specific person who may receive this report. In considering any investments you should make your own independent assessment and seek your own professional financial and legal advice. ANALYST CERTIFICATION Each contributor to this report hereby certifies that all the views expressed accurately reflect our views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of our compensation. 6