Indonesia posted a small and unexpected trade surplus in October after the central bank tightened monetary policy to slow the economy and imports, a policy likely to remain in place to stem the risk of outflows once US tapering kicks in.
The trade surplus was $50 million in October, data from the statistics bureau showed on Monday, compared with an expected deficit of $650 million in a Reuters poll of economists.
News of the small surplus helped strengthen the rupiah, which has fallen more than 19 percent against the dollar this year over worries about a widening current-account deficit.
Export growth was 2.59 percent year-on-year in October, helping to push the trade balance into surplus — the first since August, which itself came after five consecutive deficits. Exports fell a revised 7.55 percent in September.
Inflation quickened slightly in November, partly due to pass-through costs from a depreciation in exchange rates, but was below Bank Indonesia's target of 9-9.8 percent this year.
Annual inflation picked up to 8.37 percent in October and was up 0.12 percent on a monthly basis. Core inflation, which excludes administered prices and volatile foods, picked up to 4.80 percent from 4.73 percent the previous month.
"It seems like there is a slightly more positive momentum in export growth going into 2014," DBS economist in Singapore, Gundy Cahyadi, wrote.
"On the other hand, imports had been rather weak in August and September and we had expected a sequential rebound in October. This data showed that this didn't happen," he said.
"It remains to be seen if this will continue in the coming months — probably as investment growth continues to moderate, taking the brunt from the turn in sentiment and the still weak confidence in the rupiah."
Inflation risks and a large current-account deficit, coupled with tight dollar liquidity, had forced Bank Indonesia to change its currency policy to "stabilization" from "finding a new equilibrium".
The Governor of Bank Indonesia Agus Martowardojo said last week that the central bank will not hesitate to intervene in the market, calling the current weakening "temporary".
The central bank has raised its reference rate by 175 basis points since June to push down demand for imported goods and prevent a heavy outflow of funds.
But further tightening by the central bank could well take place at its December 12 policy meeting to bolster confidence.
"Clearly the odds in favor of another hike have fallen, but it seems to us that another 25-bp increase (taking the total tightening since June to 200 bps) is both sensible and, on balance, likely," Credit Suisse economist Robert Prior-Wandesforde wrote in research note. "It would certainly serve to shore up the more hawkish credentials of the new BI leadership team."
Underscoring broader concerns over the economic outlook for Southeast Asia's biggest economy, growth in manufacturing activity eased in November as firms cut production volumes on worries over difficult conditions and a declining trend in new orders, an HSBC Markit survey showed.
The G20 economy has been struggling to stabilize its external balance due to its large current-account deficit and weak structural reforms.
In July-September, the current-account deficit narrowed to 3.8 percent of gross domestic product from 4.4 percent the previous quarter.
Despite aggressive rate hikes, the rupiah hit a key support level of 12,000 to the dollar last Thursday on higher dollar demand from local firms.
The government in August unveiled a policy package aimed at reducing imports and lifting investments, but details have not been announced.
The country is expected to announce a second policy package this month, which will further reduce imports and help boost exports as well as investments.