Indonesia Posts First Trade Deficit in Six Years as Imports Surge 22%
N.R. Finch
Indonesia recorded a $1.61 billion trade deficit in May, ending six straight years of surpluses; imports jumped 22% year-on-year while the rupiah's slide and weakening exports squeeze the central bank from both sides.
How did six years of surpluses end?
May exports hit $23.2 billion, down 5.73% year-on-year; imports reached $24.81 billion, up 22.16%.
The gap — $1.61 billion — marks the first trade deficit since April 2020.
This means → Indonesia's comfortable "sell more than you buy" position has flipped, and the foreign-exchange cushion is thinning.
Why did imports spike so sharply?
The biggest driver is oil and gas: May O&G imports surged 70.78% to $4.51 billion.
In plain terms = the Middle East conflict pushed up crude prices, and Indonesia is a net oil importer — when oil rises, the import bill balloons.
Non-O&G imports also climbed 14.89% to $20.3 billion, led by mineral fuels, cement and grains, mostly sourced from China, Australia and ASEAN.
What went wrong on the export side?
Precious metals, jewelry and gemstones plunged 59.35% year-on-year, dragging overall export growth down by 2.93 percentage points alone.
Coal — a traditional export pillar — weakened too: volumes fell 8.19% over the first five months, while value dropped 4.95%.
This reflects a broader fade in the commodity windfall — cocoa, coffee and tea also slipped on soft global demand and price pullbacks.
How does the rupiah's slide make things worse?
The rupiah weakened 6.5% against the dollar year-on-year in May and hit record lows multiple times this year.
This means → the same volume of imports costs more in rupiah terms, amplifying the trade bill through the exchange rate.
Confidence has eroded over President Prabowo's economic policies and financial-market governance; Bank Indonesia raised rates three times in two months, steadying the currency somewhat, but underlying pressure remains.
Inflation is rising too — what can the central bank do?
June annual inflation climbed to 3.34%, a three-month high, nudging the upper bound of Bank Indonesia's 1.5%–3.5% target band.
Transport — including gasoline and airfares — was the main driver, sharing the same root as the O&G import surge.
In plain terms = the central bank is caught in a two-way squeeze: raising rates supports the rupiah and curbs inflation, but slows the economy; holding steady risks losing control of both the currency and prices.
Is there a structural way out?
Economist Rahma Gafmi recommends expanding palm-oil-based biofuel policy to cut dependence on imported crude and refined products.
She also calls for re-targeting energy subsidies to curb above-quota fuel consumption.
The deeper issue: Indonesian manufacturing still lags regional peers on labor costs, technology adoption and logistics. This reflects a competitiveness gap that is structural, not just a short-term price problem.
Content is for reference only, not financial advice.