Indonesia posts second straight trade deficit in June as imports surge

[JAKARTA] Indonesia recorded a second straight monthly trade deficit in June, but the gap was much smaller than expected as an increase in commodity exports helped offset a sharp rise in imports, while inflation slowed in July.

South-east Asia’s largest economy posted a trade deficit of US$450 million in June, official data showed on Monday (Aug 3), less than the US$790 million expected in a Reuters poll, and following a US$1.61 billion deficit in May, the first deficit in six years.

Indonesia’s trade data offered tentative signs of stabilisation, but economists cautioned that a slowing Chinese economy, rising import costs and lingering pressure on the rupiah mean the country’s external position remains fragile.

June exports rose 8.84 per cent to US$25.46 billion, versus 0.25 per cent growth forecast, boosted by stronger shipments of nickel products and palm oil-related exports.

“The narrower trade deficit is encouraging but it does not yet signal a sustained improvement in Indonesia’s external position,” Bank Danamon economist Faiz Irman said.

He noted that slowing growth in China, Indonesia’s largest export destination, and high prices of sulphuric acid, a key input for shipments of metal and chemical products, could weigh on export momentum.

“As a result, Indonesia’s external balance is likely to remain under pressure, limiting upside for the rupiah despite a more benign global energy backdrop,” he said.

Imports surged 34.27 per cent to US$25.91 billion. Analysts had expected June imports to grow 25.3 per cent.

A new Indonesian regulation mandating exporters of coal, palm oil and ferroalloys to notify a unit of sovereign wealth fund Danantara did not appear to affect shipment figures, Faiz said.

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June imports grew across the board, including a 105.15 per cent surge in purchases of oil and gas, Statistics Indonesia data showed.

Bank Indonesia (BI) has raised its benchmark policy rate by 100 basis points since May to support the rupiah, which hit a new historic low in June, and keep inflation within the central bank’s target band until 2027.

July inflation lowest in three months

Indonesia’s annual inflation rate in July cooled to 2.88 per cent from 3.34 per cent in June, below the median forecast of 3.20 per cent in a Reuters poll. The July rate was the lowest in three months and safely within BI’s 1.5 to 3.5 per cent target range.

Core inflation, which excludes volatile food prices and government-controlled prices, was at 2.76 per cent in July, close to the poll forecast of 2.8 per cent and unchanged from June.

Despite easing inflation in July, Bank Permata economist Faisal Rachman said there were still risks of prices rising further due to the impact of the El Nino weather pattern on food production and risks to energy prices from prolonged conflict in the Middle East.

He did not rule out the possibility of another rate hike from the central bank in 2026 if conditions deteriorate, but maintained a baseline scenario of an unchanged policy rate of 5.75 per cent for the remainder of 2026. REUTERS