Why everyone's eyes are set on Indonesia's May trade data

No thanks to recent rupiah underperformance.

According to DBS, focus is on the May trade data this week. Part of the recent underperformance in the rupiah was triggered by the whopping USD 2bn trade deficit recorded for April.

That came after a series of decent numbers out of 1Q, which had kept up hopes that current account (C/A) deficit would narrow significantly this year.

Here's more from DBS:

Trade numbers remain volatile as long as the global economic growth is still lukewarm. The slump in exports in April was pretty much driven by shipments of crude palm oil (CPO) following the spike in prices in Feb-Mar.

In May, we expect the trade deficit to narrow to circa USD 400mn. Note that several government officials have even suggested of a possible surplus in the month. At the very least, a narrowing of the trade deficit is likely to be seen and sentiment in the
markets may get some support.

It is probably best to keep looking forward. C/A deficit is still on target to reach 2.7% of GDP, down from 3.3% in 2013. Export growth remains lacklustre for now, but we expect a much stronger recovery in 4Q.

The trade balance should see a more sustained turnaround by then. In 2015, C/A deficit is likely to narrow further to 2.3% of GDP, nearing the more sustainable 2% level.