Indonesia swings back to trade surplus in July

JAKARTA — Indonesia posted its first trade surplus in three months in July as exports rose faster than expected, although analysts warned that strong imports could still strain the external balance.

Southeast Asia's biggest economy booked a surplus of about US$130 million (S$165 million), Statistics Indonesia data showed on Tuesday (Sept 1), compared with a US$200 million deficit forecast in a Reuters poll of economists. In June, the country had recorded a US$450 million deficit.

Resource-rich Indonesia had posted monthly trade surpluses for about six years before slipping into deficit in May, as imports surged on high fuel prices and President Prabowo Subianto's push to support growth.

Exports in July rose six per cent from a year earlier to US$26.22 billion, above the poll's 3.36 per cent growth estimate on the back of strong shipments of coal, refined nickel, basic chemical goods and aluminium products. 

Imports jumped 27 per cent to US$26.09 billion, topping the 24 per cent forecast.

The world's biggest exporter of thermal coal, palm oil and nickel has benefited this year from higher prices of some of its top commodities, with some gains driven by rising global crude prices following the US-Israeli war with Iran.

Indonesia's oil imports jumped around 50 per cent in July, while oil and gas exports dropped as the government asked contractors to prioritise domestic sales.

Bank Danamon economist Irman Faiz called the trade surplus "modest" and said it supported his view that the current account deficit would likely widen to 1.5 per cent of GDP in 2026 from 0.1 per cent in 2025.

"Commodity prices should provide near-term support to exports, but strong capital and intermediate-goods imports are likely to persist alongside the investment cycle," he said.

"Indonesia's trade buffer should therefore remain considerably thinner than in previous commodity upcycles."

Bank Permata economist Faisal Rachman said a widening current account gap would pressure the rupiah exchange rate, raising imported inflation risks.

Bank Indonesia's incoming governor, Destry Damayanti, said the central bank would prioritise stability and work with the government to control inflation.

Statistics Indonesia data showed inflation remained benign in August amid increased subsidies to keep fuel prices steady.

Annual inflation picked up to 3.19 per cent in August from 2.88 per cent in July, slightly above the poll's 3.13 per cent forecast and within the central bank's 1.5 per cent to 3.5 per cent target range.

Core inflation, which strips out government-controlled prices and volatile food prices, was 2.92 per cent, compared with the poll's 2.8 per cent forecast and July's 2.76 per cent.

Faisal said he expected headline inflation to be above three per cent at the end of the year.

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