Indonesia trade deficit widens in July

On the back of higher inflation.

According to BBVA Research, Indonesia’s July trade deficit widens, as inflation stays high.

Headline inflation accelerated to 8.79% y/y in August (consensus: 9.0%) from 8.61% in July, the highest pace since January 2009 after a June fuel price increase.

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To contain inflation and dampen currency pressures, Bank Indonesia has hiked its benchmark rate by a cumulative 125bps since May, with the most recent move (+50bps) delivered last Thursday.

Meanwhile, exports unexpectedly decelerated to -6.1% y/y in July (Consensus: -5.4%; June: -4.4%) and imports remained strong at +6.5% y/y (consensus: -3.5%), leading to a trade deficit of a record -USD 2.3 bn.

The Jakarta stock market declined by -2.2% today, and the rupiah slid by -1.6% to 11,300 per USD.