India’s goods trade deficit jumped to a record high in Oct23 to $31bn compared to $19.4bn in September. Imports were underpinned by a higher oil bill (up 8% yoy) and pre-festive gold purchases (95% yoy). Exports fared better than expected on account of pick up in engineering goods, machinery, electronics, drugs & pharma, whilst the traditional gems & jewellery category declined. The wide goods deficit was offset by a surplus in service trade (technology & software, capability centres), helping to narrow the Apr-Oct23 goods and services trade deficit to -$58bn vs -$90bn last year. Counting on a service trade surplus and resilient remittances, we maintain our full year current account deficit forecast at a modest -1.5% of GDP, despite the likelihood of a wider 3Q23 CAD. For the markets, the weaker trade release limited the scale of dollar-driven recovery in the rupee on Wed, with the pair ending the day near 83.10-15. The authorities’ strong presence at lows also kept USDINR from testing below the 83-mark on a durable basis, along our expectations.
Indonesia posted a wider than expected trade surplus in Oct at $3.48bn on better faring exports and yoy decline in imports. Minerals fuel shipments rose notably, besides oil & gas. Here, price effects have been a bigger dampener on the commodity sector performance this year, with the trend likely to extend into the next year. Subdued imports have also helped the trade balance, led by lower raw material purchases, even as the fast-tracking of public infra spending has pushed by capital goods demand. Despite a firmer trade balance in Oct, the cumulative Jan-Oct23 goods surplus is 30% below the comparable period last year. The recent dollar pullback provided a respite to the currency, allowing the IDR to appreciate more than 1% yesterday. But policymakers are unlikely to let their guard down and will anticipate choppy price action in the US dollar and rates into late 2023. A narrower trade surplus and tepid portfolio inflows had driven the rupiah down 5% in 2H23, until the recent reprieve.
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