Indonesia\u2019s Trade Surplus Soars, but Import Slump Signals Risks<\/p>\n
Jakarta. Indonesia\u2019s imports of raw materials and capital goods fell\nsharply in August, raising concerns over domestic production and\ninvestment even as the trade surplus surged to $3.55 billion from just\n$121.9 million in July.<\/p>\n
Central Statistics Agency (BPS) reported that the surplus widened as\nimports declined more sharply than exports on a monthly basis. Indonesia\nrecorded a cumulative trade surplus of $7.25 billion in January-August\n2026.<\/p>\n
Exports reached $26.61 billion in August, up 6.72% year-on-year\n(YoY), while non-oil and gas exports rose 7.23% to $25.62 billion.\nImports, meanwhile, increased 19.09% YoY to $23.06 billion, with non-oil\nand gas imports growing 17.20% to $19.53 billion.<\/p>\n
However, on a monthly basis, imports fell 11.63% from July, with\ndeclines across all major categories of goods.<\/p>\n
Faisal Rachman, head of macroeconomic and financial market research\nat Bank Permata, said the wider surplus was positive for Indonesia\u2019s\nexternal balance, but the broad-based decline in imports warranted\nattention.<\/p>\n
\u201cImport weakness was broad-based, with consumer goods, raw materials\nand capital goods all contracting,\u201d Faisal said in his analysis of\nIndonesia\u2019s August trade performance on Thursday.<\/p>\n
Imports of consumer goods fell 5.95% month-on-month (MoM), while raw\nmaterials and auxiliary goods declined 11.11%. Capital goods recorded\nthe steepest drop, falling 16.04%.<\/p>\n
Faisal said the decline in raw material and capital goods imports\ncould offer clues about the outlook for economic activity, as businesses\nrely on these goods to sustain production and expand capacity.<\/p>\n
\u201cThe decline in raw material and capital goods imports is worth\nwatching because it could provide an indication of future economic\nactivity,\u201d he said, adding that the weakness could reflect slowing\ndomestic demand and investment.<\/p>\n
BPS data showed that the decline in capital goods imports was partly\ndriven by machinery. Imports of mechanical machinery and equipment and\ntheir parts (HS 84) fell 18.28% MoM, while electrical machinery and\nequipment and their parts dropped 7.20%.<\/p>\n
The figures raise questions about whether the August decline was\ntemporary or an early sign of a more sustained slowdown in domestic\neconomic activity. However, one month of lower imports alone does not\nestablish a broader economic downturn.<\/p>\n
Exports also faced headwinds, particularly in coal and other mining\nproducts, as global demand weakened amid geopolitical uncertainty and\nshifting trade policies, Faisal said.<\/p>\n
Despite these pressures, the trade surplus continues to provide a\nbuffer for Indonesia\u2019s external sector. The challenge, he added, is to\nensure that the surplus does not widen primarily because imports tied to\nproductive economic activity are falling.<\/p>\n
Government efforts to accelerate investment and economic growth are\nexpected to require imports of machinery, equipment and raw materials. A\nsustained decline in these imports could therefore complicate efforts to\nexpand domestic production.<\/p>\n
Faisal expects Indonesia\u2019s trade balance to remain under pressure,\nwith growth-oriented government policies potentially boosting import\ndemand while slowing global demand weighs on exports.<\/p>\n
He said developments in raw material and capital goods imports over\nthe coming months would be crucial in determining whether August\u2019s\ndecline was temporary or reflected a longer-lasting weakness in economic\nactivity.<\/p>\n
Kadin Sees Export Opportunities in Manufacturing<\/p>\n
The Indonesian Chamber of Commerce and Industry (Kadin) remains\noptimistic about the export outlook through the end of 2026,\nparticularly as manufacturing continues to underpin the country\u2019s\noverseas shipments.<\/p>\n
\u201cKadin sees a positive export outlook through the end of the year,\nsupported in particular by the manufacturing industry, which remains the\nbackbone of exports,\u201d said Saleh Husin, Kadin\u2019s deputy chairman for\nindustry, in a statement on Thursday.<\/p>\n
Saleh expects imports to continue growing strongly as demand for raw\nmaterials and capital goods increases. The key, he said, is ensuring\nthat these imports translate into higher production and exports,\nallowing Indonesia to maintain its trade surplus.<\/p>\n
BPS data for January-July 2026 showed exports grew 4.43%, while\nimports expanded much faster at 19.94%, Saleh said.<\/p>\n
\u201cFor now, higher imports largely reflect stronger production and\ninvestment activity, as raw materials and capital goods accounted for\n91.33% of imports in January-July. However, import growth that\nsignificantly outpaces export growth still warrants caution,\u201d he\nsaid.<\/p>\n
For Kadin, the key indicator is not simply whether imports rise, but\nwhether they generate greater production capacity, productivity and\nindustrial exports.<\/p>\n
Saleh identified processed food and agro-industry, metals and mineral\ndownstreaming, electronics and machinery, as well as automotive and\ncomponents, as sectors with significant export potential.<\/p>\n
Labor-intensive industries, including textiles, garments, footwear\nand furniture, continue to face challenges from production costs,\nproductivity constraints, technology gaps and global competition.<\/p>\n
\u201cThe focus needs to shift from commodity-based exports toward\nhigher-value-added manufactured products with greater domestic content,\u201d\nSaleh said.<\/p>\n
He urged the government to ensure that productive imports are\nfollowed by investment, expanded industrial capacity, productivity gains\nand export market expansion.<\/p>\n
\u201cPriorities include maintaining competitive energy and logistics\ncosts, ensuring the availability of raw materials, strengthening\nintermediate industries and domestic supply chains, providing regulatory\ncertainty, expanding market access and advancing downstream processing,\u201d\nhe said.<\/p>\n
\u201cThis would ensure that today\u2019s imports do not end up merely as an\noutflow of foreign exchange, but instead build Indonesia\u2019s future\nproduction and export capacity.\u201d<\/p>\n
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