- The trade surplus was cut by half to USD 1.32 Bn in June, as domestic demand enjoyed a last hurrah before the 2nd lockdown (PPKM).
- Amid PPKM, external demand will become the more important driver of the economy – thereby continuing the pattern of export-oriented sectors growing faster than domestic-oriented ones.
- There are nonetheless threats to export prospects in Q3, namely (1) weaker commodity prices, (2) slowing Chinese growth, and (3) uncertainty regarding Fed policy.
- Assuming the Fed stays cautious in tightening policy, we expect relative stability in Indonesia’s external balance, as PPKM should narrow the outlook on current account deficit.
