Global Markets Group. Trade Performance: Still Surplus Author: Juniman Chief Economist. Economic Research. Trade Outlook Monthly Report

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1 Global Markets Group Trade Outlook Monthly Report Economic Research September 2016 Trade Performance: Still Surplus Author: Juniman Chief Economist Trade Highlights Exports in July 2016 fell to US$ 9.51 bn (down by 26.67% m-o-m). Meanwhile imports in July 2016 also decreased to US$ 8.92 bn (down by 26.28% m-o-m). The falling of exports and imports mainly came from reduced working days in July due to the Eid Al-Fitr holiday. Furthermore, the monthly decreased in exports due to the fall in the export of oil & gas, machinery/electrical appliance, jewelry, machinery/mechanical appliance, not-knitted apparel, and ores/slag & ash. The fall in the month-on-month imports mainly due to the decrease in the import of oil & gas, machinery/electrical appliance, machinery/mechanical appliance, plastics & the article there of, iron & steel, and organic chemical. On a yearly basis, exports fell by 17.02% y-o-y in July 2016, while imports also decreased by 11.56% y- o-y. The fell in the year-on-year exports indicates demand for Indonesia's exports in July 2016 was lower than in July The decreased in the year-on-year imports suggests relatively weakening domestic activity in July 2016 than in July We expect Indonesia's exports may increase in August The increase in Indonesia's exports performance was caused by back to normal activities of loading and unloading goods at the port after the Eid Al-Fitr holiday last month. In addition, the increasing exports were also triggered by the rising of commodity prices such as crude oil, CPO, coal, and metal. Furthermore, the increasing Indonesia s exports performance is also caused by the improving in the economy of the countries of Indonesia's major trading partners that also impact the increased demand for goods and services from these countries. We expect Indonesia s exports will increased to US$ billion in August 2016 compared with US$ 9.51 billion in previous month. Meanwhile, we expect Indonesia's import performance will increase in August The rise in the performance of Indonesia's imports was also caused by back to normal activities of loading and unloading goods at the port after the Eid Al-Fitr holiday last month. We expect Indonesia s imports may increase to US$ billion in August 2016 compared with US$ 8.92 billion in the previous month. Consequently, Indonesia s trade balance is expected to surplus US$ 0.45 billion in August 2016, narrowing compare than a surplus US$ 0.60 billion in one month earlier. Exports Review Exports in July 2016 fell sharply to US$ 9.51 bn (down by 26.67% m-o-m) from US$ bn in June On a yearly basis, exports in July 2016 also fell by 17.02% y-o-y. The m-o-m fall in July 2016 stemmed from lower non-oil and gas exports (down by 27.75% m-o-m to US$8.52 bn from US$11.79 bn in June 2016), while the oil and gas exports also decreased by 15.89% m-o-m to US$1.00 bn in July 2016 from US$1.11 bn in June Furthermore, the decreased in oil and gas exports was attributable to lower exports of crude oil (down by 26.17% m-o-m to US$ 0.41 bn in July 2016), while exports of oil products fell by 21.64% m-o-m to US$ 0.05 bn in July 2016 and exports of natural gas also decreased by 5.27% m-o-m to US$ 0.54 bn in July The fall in exports of crude oil, oil products, and natural gas stemmed from the decreasing of production by 28.93%, 36.11%, and 4.55% respectively. Meanwhile, the price of Indonesian crude oil on International markets actually fell to US$ per barrel in July 2016 from US$ per barrel in the previous month. Meanwhile, lower exports of machinery/electrical appliance, jewelry, machinery/mechanical appliance, not-knitted apparel, and ores/slag & ash dragged down 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 Feb-16 Apr-15 Jun-14 Oct-12 Dec-11 Feb-11 Apr-10 Jun-09 Jan-09 Aug-08 Oct-07 May-07 Dec-06 Jul-06 Feb-06 Sep-05 1

2 In July 2016, the non-oil and gas exports to Singapore, China, Japan, the US, and India fell compare with previous month. The non-oil and gas exports to Japan fell by m-o-m to US$ mn, to the US they decreased by 39.01% m-o-m to US$ mn, to Singapore they fell by 29.45% m-o-m to US$ mn, to China they decreased by 25.07% m-o-m to US$ mn, and to India they also fell by 15.63% m-o-m to US$ mn. In period of January July 2016, the US was Indonesia's largest trading partner in non-oil and gas products (12.39%) of Indonesia's goods were exported to this country, followed by Japan (10.13%), China (9.79%), Singapore (7.12%), and India (7.08%). Import Review The central bureau statistics also reported that in July 2016 Indonesia s imports reached US$ 8.92bn (down by 26.28% m-o-m from US$ bn in June 2016). The decrease in July 2016 stemmed from lower non-oil & gas imports (down by 27.91% m-o-m), while oil & gas imports also fell by 16.84% m-o-m. Moreover, the decreased in oil and gas imports was attributable to lower imports of oil products (fell by 29.38% m-o-m to US$ 0.75 bn in July 2016) and natural gas (fell by 16.59% m-o-m to US$ 0.12 bn in July 2016), while imports of crude oil rose by 6.51% m-o-m to US$ 0.61 bn in July Furthermore, non-oil and gas imports in July 2016 were dragged down of the decreasing imports of machinery/electrical appliance, machinery/mechanical appliance, plastics & the article there of, iron & steel, and organic chemical. On a yearly basis, imports in July 2016 also decreased by 11.56% y-o-y. The fell (y-o-y) in July 2016 imports stemmed from lower non-oil & gas imports (down by 4.43% y-o-y), while the oil & gas imports also fell by 35.77% 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 Feb-16 Apr-15 Jun-14 Oct-12 Dec-11 Feb-11 Apr-10 Jun-09 Jan-09 Aug-08 Oct-07 May-07 Dec-06 Jul-06 Feb-06 Sep-05 By type of good, monthly imports of consumer goods, raw material and capital goods fell in July 2016 (see the table below). For the January July 2016 period, the share of consumer goods, raw material, and capital goods imports are 9.19%, 74.62%, and 16.20% respectively. Attachment 1: Indonesia's Imports include Trade Zone by Type of Good (Mil US$) Value CIF (US$ mn) Value CIF (US$ mn) Jan-Jul Share of Import Category Jun Jul M-o-M growth Jan-Jul Jan-Jul growth (Y-o-Y) Jan-Jul (%) (%) (%) Import Total Consumer Goods Raw Material Capital Goods In July 2016, the non-oil and gas imports from Singapore, Thailand, China, Japan, the US, and South Korea fell compare with previous month. The non-oil and gas imports from China fell by 33.01% m-o-m to US$ mn, from the US they decreased by 14.62% m-o-m to US$ mn, from Singapore they fell by 13.83% m-o-m to US$ mn, from Japan they fell by 24.75% m-o-m to US$ mn, from South Korea they decreased by 22.04% m-o-m to US$ mn, and from Thailand they also fell by 19.89% m-o-m to US$ mn. In period of January July 2016, China was Indonesia's largest trading partner in non-oil and gas products (25.87%) of Indonesia's goods were imported from this country, followed by Japan (11.09%), Thailand (7.89%), Singapore (6.45%), the US (5.94%), and South Korea (5.17%). In July 2016, Indonesia's trade balance was a decreasing surplus due to the decreasing exports faster than imports. Indonesia s trade balance was a surplus US$ 0.60 bn in July 2016, narrowing compare than in June 2016 when it stood at a surplus US$ 0.88 bn. 2

3 Analysis Indonesia's exports decrease in July 2016 and they were still below the US$11.00 bn mark. The falling of exports mainly come from reduced working days in July due to the Eid Al-Fitr holiday. Furthermore, this fall was due to the decreasing of oil & gas and non-oil & gas exports. The decreased in Indonesia s non-oil and gas exports in July 2016 mainly stemmed from the fall in Indonesia s non-oil and gas exports to Singapore, Malaysia, Thailand, Germany, Netherland, Italy, China, Japan, the US, India, Australia, South Korea, and Taiwan. The rise in nonoil and gas exports to Singapore, Malaysia, Thailand, Germany, Netherland, Italy, China, Japan, the US, India, Australia, South Korea, and Taiwan were attributable to lower demand for Indonesian goods in those countries due to the weakening 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 60 Export Growth (Y-o-Y % ) ma,3 Indonesia Malaysia Philippines Singapore Thailand Dec-15 Oct-14 Jan-13 Jun-12 Apr-11 Feb-10 Jul-09 Dec-08 May-08 Oct-07 Mar-07 Aug-06 Jan-06 Jun-05 Nov-04 Apr-04 Sep-03 Feb-03 Jul-02 Dec-01 May-01 Oct-00 On a year to date basis, Indonesia s exports fell by 12.02% in January July 2016 period. The fell in the year to date exports indicates demand for Indonesia s exported goods in January July 2016 period was lower than the same period in Meanwhile Indonesia's imports also fell in July 2016 and they were above the US$12.00 bn mark. The falling of imports mainly come from reduced working days in July due to the Eid Al-Fitr holiday. On a year to date basis, imports fell by 10.85% in January July 2016 period. The fell in year to date imports suggests relatively weakening domestic activity in January July 2016 period compare with the same period in Trade Outlook The economic growth of Indonesia s main trading partners was mixed. The US economic grow 1.2% y-o-y in 2Q 2016 slowing compare 1.6% y-o-y in 1Q Japan economic grow 0.8% y-o-y in 2Q 2016, improving from 0.2% 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 July 2016 from in June 2016, Japan leading economic index maintained to in July 2016, unchanged compare with the previous month, and European leading economic index slightly fell to in July 2016, compare in 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 July 2016 from in the previous month. Industrial Production Index on Indonesia main trading partners was improved. 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 0.5% (y-o-y) in July 2016 from contraction 0.7 % (y-o-y) in June 2016, Japan industrial production index was improving growth to -0.5% y-o-y in July 2016 compare than -1.4% y-o-y in June 2016, and European industrial production index was maintaining growth at 0.4% y-o-y in June 2016, unchanged compare with the previous month. Meanwhile, China industrial production index was also maintaining growth at 6.0% (y-o-y) in July 2016, unchanged compare with a one month earlier. 3

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 improved. Furthermore, this will create increasing demand for Indonesian products in those countries. We expect Indonesia's exports may increase in August The increase in Indonesia's exports performance was caused by back to normal activities of loading and unloading goods at the port after the Eid Al-Fitr holiday last month. In addition, the increasing exports were also triggered by the rising of commodity prices such as crude oil, CPO, coal, and metal. Furthermore, the increasing Indonesia s exports performance is also caused by the improving in the economy of the countries of Indonesia's major trading partners that also impact the increased demand for goods and services from these countries. Meanwhile, we expect Indonesia's import performance will increase in August The rise in the performance of Indonesia's imports was also caused by back to normal activities of loading and unloading goods at the port after the Eid Al-Fitr holiday last month. Against this backdrop, we expect exports to reach US$ bn in August 2016 higher than the US$ 9.51 bn in July Indonesia s imports are expected to rise to US$ bn in August 2016 from US$ 8.92 bn in July Consequently, Indonesia s trade balance is expected to surplus US$ 0.45 billion in August 2016, narrowing compare than a surplus US$ 0.60 billion in July Attachment 2: Indonesia's Trade Performance (Billions US$) 2016 YTD (Jan-Jul) January February March April May June July AugF SepF Export Total Export 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 (%) Jun-16 Dec-15 Jun-15 Dec-14 Sep-14 Jun-14 Dec-13 Sep-13 Jun-13 Dec-12 Sep-12 Jun-12 Mar-12 Dec-11 Sep-11 Jun-11 Mar-11 Dec-10 Jun-10 Mar-10 Dec-09 Sep-09 Jun-09 Mar-09 Dec-08 Sep-08 Jun-08 Dec-07 Sep-07 Jun-07 Mar-07 Dec-06 Sep-06 Jun-06 US China EU Japan Purchasing Manager Index Aug-16 May-16 Feb-16 Aug-15 Feb-15 Aug-14 May-14 Feb-14 May-13 Feb-13 Aug-12 Feb-12 Aug-11 May-11 Feb-11 Nov-10 Aug-10 May-10 Feb-10 Aug-09 May-09 Feb-09 Nov-08 Aug-08 May-08 Feb-08 Nov-07 Aug-07 May-07 Feb-07 Nov-06 Aug-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 Jul-12 Sep-12 Jan-13 May-13 Jul-13 Sep-13 May-14 Jul-14 Sep-14 Jan-15 Jul-15 Jan-16 May Sep Jun Aug Feb Aug Apr Oct Jul Apr Jan Oct Jun Mar Dec Sep Jun Mar Nov Aug May Feb Aug May 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 Jul-08 Nov-08 Mar-09 Jul-09 Mar-10 Jul-10 Nov-10 Mar-11 Mar-12 Jul-12 Jul-13 Jul-14 Jul US EU Japan China Sep-16 May-16 Jan-16 Jul-15 Jan-15 Sep-14 Jul-14 May-14 Sep-13 Jul-13 May-13 Jan-13 Sep-12 Jul-12 Mar-12 Jan-12 Sep-11 May-11 Mar-11 Jan-11 Nov-10 Jul-10 May-10 Mar-10 Jan-10 Sep-09 Jul-09 May-09 Mar-09 Jan-09 Nov-08 Sep-08 Jul-08 May-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