Economic Alert: Triple Deficit 'Ghost' Returns to Haunt Indonesia

Jakarta, CNBC Indonesia – Indonesia is facing three simultaneous deficits arising from external and fiscal sides: the Balance of Payments (BoP), current account, and state budget.

The first deficit comes from the Balance of Payments. The Bank of Indonesia (BI) announced in its latest report, released on Friday (22 May 2026), that the Q1 2026 BoP recorded a deficit of $9.1 billion. This is the deepest deficit since BI began quarterly BoP data in 2004.

This contrasts sharply with the previous quarter, where the BoP reported a $6.1 billion surplus in Q4 2025. Thus, within a single quarter, the BoP position swung dramatically from a significant surplus to a massive deficit.

Compared to the same period last year, the pressure is even more severe. In Q1 2025, the BoP deficit was $787 million. Consequently, the Q1 2026 BoP deficit has ballooned over 11 times compared to the same quarter in 2025.

The deterioration of the BoP stems from pressures on two fronts simultaneously.

The current account has again registered a deficit, while capital and financial transactions have also turned negative. Financial transaction pressures mainly come from a large deficit in other investments amid global financial market uncertainty.

State Budget Deficit Falls, But Concerns Remain

The second deficit comes from the current account. In Q1 2026, Indonesia’s current account recorded a $4.0 billion deficit, equivalent to 1.1% of GDP. This widened from the $2.5 billion deficit (0.7% of GDP) in Q4 2025.

Compared to the same period last year, the pressure has intensified significantly.

In Q1 2025, the current account deficit was only around $200 million or 0.1% of GDP.

With this position, the Q1 2026 current account deficit is the deepest since Q4 2019, when Indonesia recorded a $8.04 billion current account deficit.

The current account is crucial as it reflects foreign exchange flows from real economic activities such as goods and services trade, interest and dividend payments, and remittances.

A current account deficit means more foreign currency is leaving for overseas payments than entering from real economic activities.

This condition often draws market attention as it can increase pressure on the rupiah. When demand for US dollars for imports, service payments, interest, dividends, and other overseas obligations exceeds foreign exchange inflows, exchange rate pressures can intensify.

Indonesia has a long history with this issue. Current account deficits have been a ‘ghost’ for the economy, making Indonesia appear fragile to global investors.

One notable period was 2013 when Indonesia was part of the Fragile Five—a group of emerging economies deemed vulnerable by investors due to heavy reliance on foreign capital and weak external balances.

The problem is that a current account deficit weakens long-term foreign exchange supply from trade in goods and services.

As a result, Indonesia relies on financial market capital flows, often termed ‘hot money’.

Hot money differs from long-term investment. It can flood into equity and bond markets quickly but also exit rapidly when global sentiment shifts.

Thus, dependence on hot money makes financial markets and the rupiah more susceptible to volatility when foreign investors pull out.

The 2013 experience is the clearest example. Global markets were gripped by concerns over US monetary tightening signals, known as the Taper Tantrum. Investors rushed to buy US dollars while abandoning emerging economies perceived as weak.

The rupiah came under severe pressure. In 2013, the Indonesian currency plummeted sharply against the dollar, ranking among the most depressed in the Fragile Five group. A primary cause was Indonesia’s current account deficit ballooning to around 4% of GDP.

For Q1 2026, current account pressures mainly stem from a shrinking goods trade surplus. The goods balance remains in surplus at $8.0 billion but is lower than the $10.2 billion in Q4 2025.

Non-oil and gas trade surplus also declined to $13.3 billion from $16.0 billion. BI explained the drop coincided with global economic slowdown and disrupted international trade supply chains.

Meanwhile, the services balance continued to register a deficit. In Q1 2026, the services deficit reached $4.6 billion, slightly better than the $5.3 billion in Q4 2025, but still indicating Indonesia pays more for services than it receives.

Pressure also comes from primary income. This category recorded a $9.2 billion deficit, marginally higher than the $9.1 billion in Q4 2025, largely due to increased coupon and interest payments to foreign investors.

The return of a significant current account deficit warrants attention.

It does not mean Indonesia will inevitably repeat the 2013 crisis, but history shows that widening current account deficits can open the door to rupiah, financial market, and investor confidence pressures.

The third deficit comes from the state budget. The government, through the Ministry of Finance’s May 2026 APBN KiTa report, announced the state budget deficit until the end of April.