Asia Pacific Macro – February 1, 2022

| February 1st, 2022

Today’s piece is predominantly about the Reserve Bank of Australia’s decision, which was as expected, and the Indian budget for the upcoming fiscal year, which will feature in the dailies for quite some time. They are not the only key topics of today, however, as the housing market in both China and Australia is starting to show some cracks and Indonesia has tightened its rules regarding coal exports, further putting pressure on the energy market.


1.1 Shares rally, yields drop after RBA digs in on dovish stance – AFR

Shares rallied and the Australian dollar edged lower after the Reserve Bank disappointed the hawks by pushing back against market expectations of an early 2022 interest rate increase, despite upgrading its inflation forecasts.

As expected, the Reserve Bank on Tuesday kept the cash rate at a record low 0.1 per cent at its first policy meeting of the year and terminated its $350 billion bond buying program, citing faster-than-expected progress towards full employment and inflation.

[…] The central bank said it was prepared to wait for lagging wages growth to accelerate to a level consistent with inflation being sustainably in its 2 per cent to 3 per cent target, but refrained from giving the market a time frame. Wages growth has picked up to 2.2 per cent, but the RBA wants to see it above 3 per cent. It concluded its policy statement declaring: “The board is prepared to be patient.”

The currency initially fell a third of a cent to US70.34¢ after the policy statement but trimmed its losses to trade at US70.64¢, a touch under where it started the session. The Australian dollar has dropped more than US3¢ since mid-January. The Australian sharemarket rose 0.5 per cent, allaying investor fears of a rapid tightening of monetary policy.

Underlying inflation, its preferred measure for price growth, is now expected to peak at 3.25 per cent later this year, before falling to about 2.75 per cent over 2023.

Meanwhile, the jobless rate is forecast to fall below 4 per cent later this year and to stabilise at about 3.75 per cent by the end of 2023 – the lowest level since the early 1970s. The central bank on Friday will release the full suite of economic forecasts in the quarterly Statement on Monetary Policy and governor Philip Lowe will speak to the media on Wednesday.

Comment: The RBA has done what was expected and this may partly explain why the markets have not moved much. Moreover, it may be a bit premature to call the move dovish: Quantitative Easing got terminated and we still do not know whether Lowe will follow Powell’s footsteps tomorrow in his press conference. Moreover, the RBA will publish its forecasts on Friday, which would give an indication of what to expect from them.

Still, the RBA has the issue of how to handle the liquidity injected during the pandemic. It is in quite good company, as globally central banks have created about $US12 trillion ($AUD17 trillion) due to the impact of COVID-19. In these two years, its balance sheet tripled to $AUD640 billion, with the board considering the issue of the reinvestment of the proceeds of future bond maturities at its meeting in May.

Under a passive approach, it would take years to get rid of those bonds. There’s $24 billion of federal bonds that will be paid back in April 2024, another $20 billion to be paid back in November 2028 and even $670 million due in mid-2033.

How the RBA will deal with tightening is crucial, as it would have to do that while also trying to normalise interest rates (to give it a buffer with which to fight the next downturn). And it might be doing that as a federal government tries to get the budget back into some sort of order.

1.2 The SBP’s rising credibility issue – Profit

The State Bank of Pakistan has a growing credibility problem. For the past several months, Pakistan’s central bank has been chasing an elusive inflation target. While justifying an evolving near-term policy stance, ranging from dramatically ramping up rates to justifying negative real interest rates, the SBP has consistently argued one thing: medium-term inflation is likely to decline to a range of 5-7 percent. In addition, the SBP has gone from arguing that the 2022-23 budget was inflation neutral to arguing that the recently passed mini budget has lowered the inflation outlook.

Below are some quotes from the SBP’s Monetary Policy Statements with regards to its medium-term inflation outlook:

January 2020: “The MPC also viewed the current monetary policy stance as appropriate to bring inflation down to the medium-term target range of 5 – 7 percent over the next six to eight quarters.”

January 2021: “As a result, inflation is still expected to fall within the previously announced range of 7-9 percent for FY21 and trend toward the 5-7 percent target range over the medium-term.”

July 2021: “As a result, inflation is still expected to fall within the previously announced range of 7-9 percent for FY21 and trend toward the 5-7 percent target range over the medium-term.”

January 2022: “However, during FY23, inflation is expected to decline toward the medium-term target range of 5-7 percent more quickly than previously forecasted as demand-side pressures wane faster due to the Finance (Supplementary) Act.”

The SBP has also changed its position on the inflationary impact of the budget in recent months. In July 2021, the central bank argued that “the FY22 budget is expected to be broadly inflation-neutral as most tax rates have been left unchanged.” In the January 2022 statement, however, the central bank argues that “the enactment of the recent Finance (Supplementary) Act, 2022 represents significant additional fiscal consolidation compared to the budget and has lowered the outlook for inflation in FY23.”

The central bank’s contradictory language is not the only issue here. The SBP governor argued in a television interview that the mini budget will “give a contractionary impulse of around 1 percent of GDP.” The central bank’s presentation also made a similar point, showing that the primary deficit would decline by about 0.5 percent of GDP. This is an interesting point to make, mainly because the finance minister has argued, both in parliament and outside, that the mini budget’s withdrawal of tax exemptions was about documenting the economy, not taxing the citizens of Pakistan.

Comment: Pakistan is one of several countries hit harshly by the current market conditions, and especially by inflation. Public finances are also not in a good shape, despite a sharp rise in tax revenues. The problems are then compounded by the tensions coming from Afghanistan and from Balochistan.

The critical task now is to balance fiscal consolidations with rising social demands and efforts to improve weak governance. It may prove to be too difficult to do, however.


2.1 Budget 2022 lays foundation to steer economy for next 25 years: FM Sitharaman – Financial Express

Finance Minister Nirmala Sitharaman on Tuesday said the Union Budget lays down the foundation to steer the economic developments for the next 25 years with holistic and future priorities.

In her Budget Speech in the Lok Sabha, the minister said the Union Budget for 2022-23 seeks to lay the foundation and give a blueprint to steer the economy over the Amrit Kaal (golden era in Hindi) of the next 25 years – from India at 75 to India at 100. It continues to build on the vision drawn in the Budget of 2021-22.

“We are marking Azadi ka Amrit Mahotsav, and have entered into Amrit Kaal, the 25-year-long leadup to India@100,” the minister said.

The fundamental tenets of the Budget include transparency of financial statement and fiscal position, and reflect the government’s intent, strengths, and challenges, she said.

Sitharaman said the Budget continues to provide impetus for growth.

The Budget lays a parallel track of a blueprint for the Amrit Kaal, which is futuristic and inclusive, directly benefiting youth, women, farmers, the Scheduled Castes and the Scheduled Tribes.

It also stresses on big public investment for modern infrastructure, readying for India at 100.

This, Sitharaman said, shall be guided by PM GatiShakti and be benefited by the synergy of multi-modal approach.

Besides PM GatiShakti, the other three priorities of the government will be ‘inclusive development; productivity enhancement and investment, sunrise opportunities, energy transition, and climate action; and financing of investments”.

Comment: As stated in ‘Asia Pacific Macro – January 26’, India has a youth unemployment problem. There is more than that, as employment more broadly remains an issue. To better quantify the true extent, the Print provided the following chart, highlighting the number of people employed in key sectors.

Only agriculture has shown a growth in the number of people employed, which is not a good signal for a country which is striving to modernise.

In this regard, the current budget seems to be severely lacking. The Times of India provided the following 10 key takeaways:

  • No change in income tax and no raise in standard deductions, in light of the inflation concerns. The corporate tax rate too was kept at the same level
  • 30% tax on cryptocurrencies and digital assets
  • Introduction of a digital rupee by the RBI,
  • Capped surcharge on long term capital gain to 15% from the existing graduated rate (on specific assets)
  • E-passports
  • PLI scheme for domestic solar cell production, with the goal to make India an exporter (rivalling China)
  • Infrastructure investment, involving roads, railways, airports, ports, mass transport, waterways and logistics infrastructure
  • Incentives to electric vehicles (EVs)
  • Extension of the Emergency Credit Line Guarantee Scheme (ECLGS) for an additional year, in order to support micro, small and medium enterprises (MSME).

The only measure which may bring support to the economy, at a critical juncture, is the latter. Meanwhile, as said by the Economic Times, there is no actual support to households, as the budget is entirely looking at the supply side.

One category who may not like this is the farmers, as subsidies for fertilisers (which are already seeing high prices) are scheduled to be reduced. Given the recent protests, which forced the government to walk back reforms in the agricultural sector, they may go back onto the streets for this.

Overall, India will ramp up investment by more than a third in an attempt to reclaim its place as the world’s fastest-growing large economy. To finance all this, the government is targeting gross borrowing of 14.95 trillion rupees ($199.90 billion) to support a bigger annual budget of 39.45 trillion rupees. In response, the benchmark 10-year bond yield rose 15 basis points (bps), posting its biggest single-day rise since May 11, 2020. So far this year, the benchmark has already risen 38 bps on top of the 56 bps in 2021.

The bond action was also worsened by the absence of measures to ease inclusion of bonds into global indices. This will be a problem, as the RBI may decide next week to start tightening in order to deal with inflation and counteract the effects of the Fed.

Given the current political and economic environment in India, the budget is very much subject to change and we will follow the developments as they arrive.

2.2 China to become high-income country no later than the end of 2023: economists – Global Times

Could the Chinese economy sail through the year 2022? The world’s second-largest economy is well positioned to land at a growth rate above 5 percent this year, and the country is on trajectory to become a high-income country no later than the end of 2023, prominent Chinese economists said, sending an upbeat note for China to prelude a head start in 2022 while quashing a reverberating dim view of the prospects of the Chinese economy.

Skepticism has increased in recent days after Beijing released slower GDP growth of 4 percent in the last quarter of 2021, which prompted several international organizations including the IMF to cut China’s 2022 GDP growth forecast. Some economists pointed to further softness in the property and consumption sectors, while some Western politicians vilified China’s zero-tolerance COVID strategy, hinting at tremendous pain inflicted.

The above-mentioned remarks from renowned Chinese economists, coming after a slew of key interest rate cuts in recent weeks to shore up the economy, also offer a much-needed assurance to placate the market, against the backdrop of the US Federal Reserve’s indication of a looming interest rate hike that sends a tightening turnaround in global monetary policy.

Analysts said that in stark contrast to elsewhere in the world, China’s abundant policy toolbox and stability pledge will continue making it a haven for investment and a locomotive for global growth in the coming years.

Comment: This piece seems rather optimistic. As stated by Pettis in this thread, monetary policy within China functions very differently, as its economy functions very differently to the rest of the world. Moreover, there is the elephant in the room: the CNY. In theory, the PBOC could devalue it vis-à-vis other currencies (USD first and foremost) but not too much, as that would make imports (especially of energy) more expensive.

Secondly, the Chinese authorities once again focused on infrastructure to achieve the GDP target and the SCMP provided five megaprojects which could be used for this task:

  • Sichuan-Tibet railway: It would be quite an expensive project, as the remaining 1,011km will be built using tunnels and bridges and will travel through territories at a peak altitude of more than 9,000 feet. Moreover, as shown in the map below, Tibet is the poorest province in China.

The only reasonable explanation for such a railway is the current dispute with India, as the vast majority of disputed areas neighbour Tibet

  • South-North Water Transfer Project: China has been having water issues for quite some time, as there have been attempts to divert it to Northern provinces since the 1950s (and it is one of the major risks we highlighted for 2022). The estimated amount invested is 500 billion yuan for three canals. There are however concerns, involving not only the investment per se but also the environmental and social impacts, as per government data 330,000 people will be forcefully relocated to make room for one of the canals alone
  • Yantai-Dalian Undersea Tunnel: A project initially proposed in the 1990s, due to the engineering complications (it would require a 90 km tunnel, more than twice than the Channel Tunnel between UK and France), coupled with the low transport demand. The proposal was first sent in 2013, with an estimated cost of 260 billion yuan (which may be optimistic)
  • Yarlung Zangbo River Dam: Building a hydropower dam on the lower reaches of the Yarlung Zangbo River, which is known in India as Brahmaputra River, was mentioned by Yan Zhiyong, chairman of the state-owned Power Construction Corporation of China, in November 2020. This ties directly to the current dispute with India, which is worried that water will be weaponised by China. Bangladesh too would be impacted
  • Taiwan Strait Tunnel Project: Given the current tensions, with the Chinese ambassador to the US sabre rattling once again, this is clearly not going to happen. While there is obvious interest from the mainland, there is a just as obvious lack of interest from Taiwan, which views this as part of Beijing’s manifesto for reunification

The SCMP also cites a sixth one, the Hongqi River Project. This, however, has no government support because it is too ludicrous, even for them. It would involve building 6,188 km of canals (slightly less than the Yangtze River) from Tibet to Xinjiang, with an annual flow of 60 billion cubic metres of water (more than the Yellow River) and an estimated cost of 4 trillion yuan.

Given their track record, and given the current need of water, the most likely ones are the second and the fourth, in light of his end of the year address, although they may stir trouble (both internally and abroad). The remaining show that China has effectively finished all useful infrastructure already, which leaves only vanity projects of questionable economic value (aside from the benefit the SoEs building them would enjoy).

Once again, the Olympics prove to be an example here. Chongli, a county in Beijing’s administrative area, embarked on a building spree that filled it with five-star hotels, restaurants and conference facilities. Its fiscal spending tripled since 2013, reaching a peak of Rmb3.6 billion in 2019, while its revenue only rose by two thirds, reaching Rmb572 million during the same period.

The economic slump and pandemic restrictions have been devastating for jobs in the region, while the county reported one of the nation’s fastest-growing government gross domestic product to debt ratios, jumping from 30 per cent in 2018 to 48 per cent in 2020, according to public records.

The Olympics usually have a negative impact but this is more true in China, where other considerations take precedence over economic ones. The same is true for other kind of infrastructure investments, as shown by the examples provided.

2.3 Japan’s Factory Output Dips More Than Expected as Risks Emerge – Asia Financial

Japan‘s factory output shrank for the first time in three months in December as a decline in machinery production outweighed a small rise in autos, casting a cloud over the strength of the economic recovery.

Retail sales posted their third straight month of year-on-year gains in December as low coronavirus cases encouraged shoppers. Record infections this month driven by the Omicron variant, however, are expected to have hit consumer sentiment.

Factory output lost 1.0% in December from the previous month, official data showed on Monday, pulled down by a decline in output of general-purpose and production machinery, including chip-making equipment and engines used in manufacturing.

That meant that output, which fell faster than the 0.8% decline forecast in a Reuters poll of economists, dropped for the first time in three months.

“Output especially fell among capital goods makers, probably due to the strong impact from the chip shortages,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“It suggests its impact is widening even though the focus has been on the car industry.”

Comment: Factory output is not the only piece of data having a turn for the worse: consumer confidence has had the biggest drop since April 2020, caused by concerns generated by the current pandemic wave sweeping across the country, while the 10-year yield has hit a six-year high, due to the Fed hawkish position.

The yen also fell, which may cause more trouble due to how reliant Japan is on imports for energy and other key commodities. In this regard, South Korea’s recent data regarding its trade balance sheds some light on how Japan could be impacted.


3.1 Housing market shows ‘fragility’ despite small gains – AFR

House prices bounced 1.1 per cent in January, boosted by small gains in Sydney and Melbourne, but the longer-term trend shows a weakening in growth across the capitals, the latest CoreLogic data shows.

All capital cities posted a rise in the median dwelling values during the month, including Melbourne, which rebounded from December’s 0.1 per cent decline.

Brisbane and Adelaide led the charge. Brisbane’s dwelling values rose 2.3 per cent, and in Adelaide they climbed 2.2 per cent, while Hobart and Canberra each gained more than 1 per cent each.

Sydney and Perth rose by 0.6 per cent each, Darwin was up by 0.5 per cent and Melbourne by 0.2 per cent.

Comment: Listings have dropped considerably as of late, Canberra posted a 31.8 per cent decline in new listings – the largest drop across the capitals – followed by a 29.3 per cent fall in Melbourne. Sydney and Brisbane recorded a more than 14 per cent drop in new listings, Adelaide was down by 18.5 per cent, Perth fell by 10.3 per cent, Hobart by 25.7 per cent and Darwin by 24.2 per cent.

The market may however remain at these highs until the RBA starts raising rates later this year, given the rise in lending that has occurred since the start of the pandemic.

3.2 China’s property sector downfall creates ‘abnormal phenomenon’ for Beijing’s New Jersey-like commuter hub – SCMP

Buying property in the small town of Yanjiao was once the first choice for many white-collar workers who did not have a permit to buy a house in Beijing.

Like New Jersey is to New York, Yanjiao is less than two hours to downtown Beijing across the Chaobai River to the west and offers competitive property prices with a reasonable commute.

But many of those dreams have now been dashed with Yanjiao a microcosm of the downfall in China’s property sector, which has far-reaching implications on personal fortunes, economic growth, financial stability and commodity suppliers.

After property prices in Yanjiao halved, and some even dropped below the value of the mortgage, some owners chose to suspend their repayments.

But their decisions were not without consequences with one case highlighted on social media last year seeing a 35-year-old sued by the Bank of China for refusing to pay their 16,800 yuan (US$2,640) instalment and remaining 2.82 million yuan (US$443,000) mortgage.

It is, however, just the tip of the iceberg as there have been more than 600 similar disputes heard at local courts since 2019, according to verdicts published by China Judgements Online.

Comment: According to a central bank survey, property accounted for 59.1 per cent of household wealth in 2019, 28.5 percentage points higher than American families, while it accounted for 75.9 per cent of their total debt.

This shows how important this news is. The reason for this downturn is partly due to the crackdown on the property market, with authorities reiterating that properties are to live and not for speculation, and the restrictions related to Zero Covid Policy de facto killing commuting.

It is one of the several consequences of the current storm looming over the Chinese property market, something that could very well cause just as much trouble for Beijing than the downfall of large property developers (like Evergrande) or the liquidity crunch at the provincial government level.

Ultimately, Beijing would have to address this specific problem or indeed face the perfect storm between buyouts of private developers, subsides for provincial governments (in order to ensure key services are not impacted) and government support for families in order to keep loan payments going (or have to save the lenders too)


4.1 Indonesia to end coal export ban with tighter local supply rules – Nikkei Asia

Indonesia’s ban on coal exports is set to expire on Monday, but shipments from the archipelago may still be limited, with authorities allowing only those that fulfill their domestic market obligation (DMO) to resume overseas shipments.

A month after the ban was introduced, around 200 miners have been cleared to export, according to local media, as they have either fulfilled their DMO or paid fines. There are around 600 mining companies operating in Indonesia.

But even after the ban is lifted, only those that have complied with the DMO rules will be allowed to resume exports. Indonesia hopes to avoid imposing another sudden ban on overseas shipments, as it did Jan. 1. On that occasion, the government said state utility Perusahaan Listrik Negara (PLN) was running critically low on stockpiles, threatening to disrupt power on the islands of Java and Bali, as miners skirted domestic supply requirements.

Under the DMO, miners must supply a quarter of their annual production to the local market at a price of no more than $70 per ton, which is below the current global price. Many miners, particularly small and midsize producers, have been flouting the rule, selling overseas to plump up their profit.

The government had allowed some exports during the monthlong ban, as countries that depend on the commodity, including Japan, South Korea and the Philippines, all lobbied for exceptions.

In response to low compliance with the domestic supply rules, Jakarta put in place a new regulation that imposes harsher penalties on violators.

The new regulation, which came into effect on Jan. 19, says miners will not be allowed to export coal until they meet their DMO. It also requires monthly reporting of DMO fulfillment data; those that fail to meet their target will face a 60-day operating ban and fines. If they fail to pay the fine, they will have their permits revoked.

Changes to the DMO mechanism could be on the way as well, with lawmakers discussing the issue earlier in January. One option being considered is a mechanism whereby PLN would buy locally mined coal at the market price, rather than the DMO mandated price, with miners charged levies to make up the difference.

Comment: Indonesia is doubling down on the DMO, even after a month long export ban only brought a third of miners into compliance. In fairness, removing outright the price controls could spark protests akin to those in Kazakhstan and the sky-high coal prices are not helping.

Still, as shown yesterday, they are attempting this in several key commodities and subsequently severe disruptions are becoming increasingly likely (notwithstanding the outright ban on unprocessed metals arriving next year).

4.2 China bans Australian meatworks at centre of COVID-19 outbreak – AFR

China has temporarily banned meat from a South Australian meatworks, the latest in a string of import halts from Australia in two years as authorities in Beijing increase scrutiny of overseas processing plants.

The suspension applies to Teys Australia’s Naracoorte facility from January 29, according to an official notice from China’s General Administration of Customs. No specific reason was cited for the decision.

Still, the ban follows a COVID-19 outbreak at the processing plant which sparked controversy after workers were told they should still come to work even if infected with the virus, unless their symptoms rendered them too unwell. The company, which is part-owned by US agricultural giant Cargill, backed down from the mandate following a backlash.

Comment: The Chinese authorities have been cracking down on overseas food processors, which were blamed for some of the outbreaks. interestingly, the lack of reasons provided is peculiar, as they have usually used Covid as the reason. Regardless, it puts more strain in the relationship between the two countries while further complicating protein imports for China.


5.1 Goldman Sachs unveils big plans for China – Nikkei Asia

China is the world’s most populous nation and one of its biggest capital markets, and foreign investment banks are eager to grab a slice of the action. Goldman Sachs Group Inc. is right at the head of the pack.

In October, it became the second foreign investment bank to get the go-ahead to take 100% ownership of its Chinese securities joint venture, Goldman Sachs Gao Hua Securities Co. Ltd., ending a 17-year partnership with veteran financier Fang Fenglei. That followed approval in May to set up a majority-owned wealth management venture with Industrial & Commercial Bank of China Ltd. (ICBC), the world’s largest commercial lender by assets.

The Wall Street giant has big plans for China and is already ahead of its target to double its onshore workforce to 600, one of the goals laid out in a five-year growth strategy in 2019. The bank is looking to grow all of its four global business lines — investment banking, global markets, asset management, and consumer and wealth management.

“The short-term focus on our China business will still be to provide Chinese clients with investment banking and investing services,” Todd Leland, co-president of Goldman Sachs for Asia Pacific excluding Japan and head of the region’s investment banking division, told Caixin in an exclusive interview.

“At the same time, our investment in wealth management and asset management will increase. Although the base is not large, the growth rate will be very fast,” he said.

Sean Fan, chairman of the securities venture and co-head of investment banking in China, pointed to longer-term plans. “We hope to bring in all of Goldman Sachs’s global businesses into China when the opportunity arises,” Fan told Caixin. “Many of the businesses will need more than past experience. We will invest into IT platforms, AI technology and people to be consistent with the company’s global standards.”

Restrictions on foreign shareholdings and business licenses, and putting the right localization strategies in place have been the main challenges for foreign institutions looking to expand in China since the country started opening its financial sector more than two decades ago.

Comment: The following tweet from China Beige Book summarises the commentary rather nicely:

Goldman, like many other Wall Street banks and institutions, have been trying to push investments in China by de facto taking numbers at face value, which usually do not portray the real picture. An example is Shimao: a developer which looked solid on paper but then it did not.


6.1 Exports up 15.2 pct in January on robust chip shipments – Yonhap News

South Korea’s exports soared 15.2 percent in January from a year earlier on the back of brisk demand for chips, but the monthly trade deficit hit a record high due to high energy prices, data showed Tuesday.

Outbound shipments stood at US$55.32 billion last month, compared with $48 billion a year earlier, marking the 15th consecutive month of rise, according to the data compiled by the Ministry of Trade, Industry and Energy.

It is the highest figure for any January since the ministry began compiling the related data in 1956. The previous record was set in January 2018 when the figure came to $49.2 billion.

“The monthly exports marked double-digit growth despite the spread of the omicron COVID-19 variant, high prices of raw materials, and a high base effect,” the ministry said in a release.

By segment, shipments of semiconductors, a key export item, jumped 24.2 percent in January from the previous year. Chips accounted for about 20 percent of exports by South Korea, home to Samsung Electronics Co., the world’s largest memory chip maker, and its smaller rival SK hynix Inc.

Sales of petrochemicals advanced 40 percent and steel exports spiked 50.1 percent, according to the data.

By country, exports to China and the United States, South Korea’s two largest trading partners, climbed 13.1 percent and 1.6 percent, respectively, the data showed.

Imports surged 35.5 percent to an all-time high of $60.21 billion due to high oil prices and growing demand for energy in winter, causing the country’s trade deficit to reach an all-time high of $4.89 billion.

It is the second straight month that the country recorded a trade deficit.

South Korea imported $15.95 billion worth of oil, gas and coal combined last month, more than doubling from $6.89 billion a year earlier.

Comment: South Korea is one of the canaries in Asia, as it provides indications for what is to come. As many other countries are reliant on imports for energy, a general worsening of trade balances is to be expected (especially if the disruptions happening in Indonesia continue).