Indonesia's Trade Surplus Soars, but Import Slump Signals Risks
Indonesia’s Trade Surplus Soars, but Import Slump Signals Risks
Jakarta. Indonesia’s imports of raw materials and capital goods fell sharply in August, raising concerns over domestic production and investment even as the trade surplus surged to $3.55 billion from just $121.9 million in July.
Central Statistics Agency (BPS) reported that the surplus widened as imports declined more sharply than exports on a monthly basis. Indonesia recorded a cumulative trade surplus of $7.25 billion in January-August 2026.
Exports reached $26.61 billion in August, up 6.72% year-on-year (YoY), while non-oil and gas exports rose 7.23% to $25.62 billion. Imports, meanwhile, increased 19.09% YoY to $23.06 billion, with non-oil and gas imports growing 17.20% to $19.53 billion.
However, on a monthly basis, imports fell 11.63% from July, with declines across all major categories of goods.
Faisal Rachman, head of macroeconomic and financial market research at Bank Permata, said the wider surplus was positive for Indonesia’s external balance, but the broad-based decline in imports warranted attention.
“Import weakness was broad-based, with consumer goods, raw materials and capital goods all contracting,” Faisal said in his analysis of Indonesia’s August trade performance on Thursday.
Imports of consumer goods fell 5.95% month-on-month (MoM), while raw materials and auxiliary goods declined 11.11%. Capital goods recorded the steepest drop, falling 16.04%.
Faisal said the decline in raw material and capital goods imports could offer clues about the outlook for economic activity, as businesses rely on these goods to sustain production and expand capacity.
“The decline in raw material and capital goods imports is worth watching because it could provide an indication of future economic activity,” he said, adding that the weakness could reflect slowing domestic demand and investment.
BPS data showed that the decline in capital goods imports was partly driven by machinery. Imports of mechanical machinery and equipment and their parts (HS 84) fell 18.28% MoM, while electrical machinery and equipment and their parts dropped 7.20%.
The figures raise questions about whether the August decline was temporary or an early sign of a more sustained slowdown in domestic economic activity. However, one month of lower imports alone does not establish a broader economic downturn.
Exports also faced headwinds, particularly in coal and other mining products, as global demand weakened amid geopolitical uncertainty and shifting trade policies, Faisal said.
Despite these pressures, the trade surplus continues to provide a buffer for Indonesia’s external sector. The challenge, he added, is to ensure that the surplus does not widen primarily because imports tied to productive economic activity are falling.
Government efforts to accelerate investment and economic growth are expected to require imports of machinery, equipment and raw materials. A sustained decline in these imports could therefore complicate efforts to expand domestic production.
Faisal expects Indonesia’s trade balance to remain under pressure, with growth-oriented government policies potentially boosting import demand while slowing global demand weighs on exports.
He said developments in raw material and capital goods imports over the coming months would be crucial in determining whether August’s decline was temporary or reflected a longer-lasting weakness in economic activity.
Kadin Sees Export Opportunities in Manufacturing
The Indonesian Chamber of Commerce and Industry (Kadin) remains optimistic about the export outlook through the end of 2026, particularly as manufacturing continues to underpin the country’s overseas shipments.
“Kadin sees a positive export outlook through the end of the year, supported in particular by the manufacturing industry, which remains the backbone of exports,” said Saleh Husin, Kadin’s deputy chairman for industry, in a statement on Thursday.
Saleh expects imports to continue growing strongly as demand for raw materials and capital goods increases. The key, he said, is ensuring that these imports translate into higher production and exports, allowing Indonesia to maintain its trade surplus.
BPS data for January-July 2026 showed exports grew 4.43%, while imports expanded much faster at 19.94%, Saleh said.
“For now, higher imports largely reflect stronger production and investment activity, as raw materials and capital goods accounted for 91.33% of imports in January-July. However, import growth that significantly outpaces export growth still warrants caution,” he said.
For Kadin, the key indicator is not simply whether imports rise, but whether they generate greater production capacity, productivity and industrial exports.
Saleh identified processed food and agro-industry, metals and mineral downstreaming, electronics and machinery, as well as automotive and components, as sectors with significant export potential.
Labor-intensive industries, including textiles, garments, footwear and furniture, continue to face challenges from production costs, productivity constraints, technology gaps and global competition.
“The focus needs to shift from commodity-based exports toward higher-value-added manufactured products with greater domestic content,” Saleh said.
He urged the government to ensure that productive imports are followed by investment, expanded industrial capacity, productivity gains and export market expansion.
“Priorities include maintaining competitive energy and logistics costs, ensuring the availability of raw materials, strengthening intermediate industries and domestic supply chains, providing regulatory certainty, expanding market access and advancing downstream processing,” he said.
“This would ensure that today’s imports do not end up merely as an outflow of foreign exchange, but instead build Indonesia’s future production and export capacity.”
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