Slowing demand and trade war adjustments hit Indonesia’s November exports

[JAKARTA] Indonesia’s exports fell in November as the post-tariff bonanza adjustment coincided with normalising prices for several key commodities, tempering the windfall gains the resource-rich country had enjoyed in recent years.

Analysts expect export growth to gradually stabilise as Indonesia finalises trade agreements with new partners.

The country’s exports contracted 6.6 per cent year on year (yoy) in November, according to data released by the statistics agency on Monday (Jan 5). The decline came in well below economists’ expectations, with a Reuters poll having projected a more modest 0.5 per cent drop.

South-east Asia’s largest economy saw a sharp decline in oil and gas exports in November 2025, with shipments falling 32.9 per cent yoy to US$880 million.

Non-oil and gas exports also softened, falling 5.1 per cent to US$21.6 billion. Coal exports dropped 4 per cent to 35.4 million tonnes, weighed down by slower demand from China and India, Indonesia’s two largest markets.

By destination, total exports to China fell 7.4 per cent and those to Japan declined 12.3 per cent, highlighting softer demand from key Asian partners and a slowdown across regional production networks.

Analysts attributed the drop in shipments to ongoing adjustments, following the 19 per cent reciprocal tariffs imposed in August.

In contrast, shipments to the US picked up to 9.5 per cent from 7.4 per cent in October, suggesting some front-loading in US-bound exports despite the imposition of new tariffs.

Permata Bank chief economist Josua Pardede said trade-war pressures have eased, and Indonesia’s export growth is expected to normalise following front-loading ahead of the US reciprocal tariffs in August 2025, though the adjustment is likely to be gradual.

He added that exports should continue to be supported by steady demand from major trading partners for selected commodities.

“Indonesia’s expanding network of trade agreements and deeper integration into global supply chains are expected to underpin export performance, with ongoing efforts to secure zero-tariff access to the US for key products providing further upside,” Pardede wrote in a note.

Indonesia recently concluded free trade negotiations with the European Union and signed a trade agreement with the Russian-led Eurasian Economic Union, as it seeks to diversify markets beyond the US. Jakarta is also aiming to finalise a tariff deal with the US by the end of this month.

Meanwhile, imports in November edged up 0.5 per cent yoy to US$19.9 billion, falling short of the 3.2 per cent increase forecast in a Reuters poll, suggesting more subdued domestic demand than expected.

The rise was largely driven by capital goods imports, while imports of raw materials and consumer goods moderated on a yoy basis.

The trade surplus widened modestly to US$2.7 billion in November 2025 from US$2.4 billion in October, marking the country’s 67th consecutive month in surplus, although the figure fell short of expectations as exports weakened more than anticipated.

Pardede expects Indonesia’s current-account deficit to narrow to around 0.11 per cent of gross domestic product in 2025, down from 0.62 per cent in 2024.

This year, he expects the deficit to widen slightly to about 0.59 per cent of GDP, indicating a stable external position with limited pressure on foreign exchange reserves.

Floods drive price

Meanwhile, floods that hit three provinces in Sumatra at the end of November disrupted supply chains, contributing to higher prices.

Indonesia’s consumer price index jumped 0.6 per cent month on month (mom) in December 2025, from 0.2 per cent in November, according to the statistics agency.

The increase was largely driven by volatile food prices, which surged 2.7 per cent mom, as supply and distribution disruptions from the recent floods coincided with elevated year-end demand during the Christmas and New Year holidays. Core inflation rose 0.2 per cent mom, with gold prices remaining the primary driver.

Analysts at Samuel Sekuritas Indonesia expect inflation to remain mixed in the coming months.

They foresee moderation in early 2026 as seasonal effects ease, but anticipate a possible rise ahead of Chinese New Year and the Ramadan-to-Eid period between February and March, driven by food supply volatility.

Core inflation, however, is expected to stay relatively stable in the mid-2 per cent range, supported by contained wage pressures and assuming the rupiah remains below the 17,000 per US dollar level.

Samuel Sekuritas analysts wrote: “This allows Bank Indonesia to maintain a pro-growth stance, with policy decisions likely to remain data-driven and calibrated to rupiah stability, capital flows and the evolving global interest rate environment rather than short-term inflation fluctuations.”