• Indonesia’s Jan-25 trade surplus widened significantly to USD 3.45 billion for the wrong reasons, although surpassing both market expectations (USD 1.91 billion) and SSI projection (USD 1.8 billion). This marks a notable increase from Jan-24 of USD 2.0 billion, driven largely by a sharper contraction in imports, which fell 2.67% YoY—a stark contrast to market expectations of 9.95% increase.
• The reversal in import trends from December’s 11.07% growth suggests multiple headwinds, including rupiah depreciation against the US dollar, weakened domestic purchasing power, and seasonal factors related to the holiday period. The rising cost of imported goods due to currency fluctuations likely dampened demand, while subdued consumer and business sentiment further constrained import activities. Additionally, global economic uncertainties may have led businesses to adopt a more cautious approach, contributing to slowing overall trade momentum.
• ⁠On the export side, Indonesia recorded its 10th consecutive month of growth, with shipments rising 4.88% YoY. However, this was the slowest pace in seven months and fell short of market expectations of 6.99% growth, indicating potential headwinds in external demand. The slower-than-expected export growth reflects a combination of global trade uncertainties, fluctuating commodity prices, and demand shifts in key export destinations such as China, the US, and Europe.
• The unexpected decline in imports could signal softening domestic economy, as businesses and consumers exercise caution amid currency volatility and uncertain external conditions. Meanwhile, although the trade surplus remains robust, Indonesia’s full-year trade balance in 2024 narrowed to USD 31.04 billion from USD 36.89 billion in 2023, reflecting moderation in external sector performance.
• ⁠While January’s wider trade surplus is a positive development, the underlying weakness in imports raises concerns about domestic demand and economic resilience. Additionally, as a major exporter of natural resources such as coal, palm oil, and nickel, Indonesia remains highly sensitive to shifts in global commodity markets. A slowdown in China’s industrial activity, for instance, could dampen demand for Indonesian raw materials, while fluctuations in energy prices may impact the country’s trade balance.
• ⁠Looking ahead, several factors will shape Indonesia’s trade performance. IDR volatility, Bank Indonesia’s monetary policy stance and export receipts of natural resources to be deposited in domestic banks will be critical in determining import costs and export competitiveness. The latter may cause under invoicing by exporters and undermine Indonesia’s trade balance ahead, further exacerbating IDR depreciation, detrimental to Indonesia’s GDP growth, which we already expect to come in at sub 5%.