Indonesia’s trade balance is projected to remain in deficit, extending the negative trend that began in May after an unprecedented 72 consecutive months of trade surpluses. Although economists expect the deficit to narrow compared with the previous month, the persistence of the shortfall underscores the growing pressure from rising imports, particularly capital goods and manufactured products from China, which continue to outpace export growth.
Chief Economist of BCA, David Sumual, estimates that Indonesia’s trade balance recorded a deficit of US$1.46 billion in June 2026, an improvement from the US$1.61 billion deficit in May. He projects exports to have grown by 3.3% year-on-year and 4.33% month-on-month, reflecting moderate improvement in overseas shipments.
However, imports are expected to have surged by 32.79% year-on-year and increased by 3.46% from the previous month, indicating that domestic demand for imported goods remained exceptionally strong. The substantial increase in imports continues to outweigh export gains, preventing the trade balance from returning to surplus despite the decline in global oil prices throughout June.
Imports from China remained elevated, particularly for machinery, electronics, and furniture, reflecting sustained investment activity as well as continued dependence on imported intermediate and capital goods.
Lead Economist at Bank Danamon Indonesia, offers a relatively more optimistic outlook, projecting a narrower trade deficit of approximately US$700 million. He attributes the improvement primarily to two factors. First, lower global oil prices are expected to reduce the value of oil and gas imports, easing pressure on the import bill. Second, imports of capital goods are anticipated to moderate after experiencing an unusually sharp increase in the previous month.
Nevertheless, Indonesia’s export performance continues to face significant external headwinds. Slowing economic growth in China and the United States during the second quarter of 2026 is expected to weaken demand for Indonesian exports.
In addition, persistent uncertainty surrounding international trade tariffs, coupled with sluggish global manufacturing activity, continues to limit the recovery of export-oriented industries. These factors suggest that while imports may gradually normalize, export growth is unlikely to accelerate significantly in the near term.
Although international crude oil prices have declined, they remain relatively elevated compared with historical averages, meaning that oil and gas imports continue to weigh on the trade balance. However, this pressure is expected to be partially offset by robust exports of Indonesia’s key commodities, including coal, crude palm oil (CPO), nickel, and gold.
The resilience of these commodity exports reflects continued global demand for energy transition minerals and agricultural commodities, although their performance remains vulnerable to fluctuations in international commodity prices.
The continuation of trade deficits is expected to place pressure on Indonesia’s current account during the second quarter of 2026. Since the trade balance represents the largest component of the current account, a sustained deficit in merchandise trade generally translates into a weaker external balance, particularly if it is not offset by improvements in services, primary income, or secondary income accounts.
However, economists believe that Indonesia’s broader external position will remain relatively stable due to strong capital inflows into domestic financial markets. Substantial portfolio investment, particularly into government bonds (Surat Berharga Negara/SBN) and Bank Indonesia Rupiah Securities (SRBI), could compensate for the deterioration in the current account by strengthening the financial account. As a result, Indonesia’s overall balance of payments is expected to remain manageable despite ongoing trade pressures.
Myrdal estimates that Indonesia’s current account deficit (CAD) will reach approximately 1.1% of GDP in the second quarter of 2026, while the overall Balance of Payments (BOP) is projected to record a deficit of around US$2.3 billion during the same period. Although these figures indicate some deterioration in the country’s external accounts, they remain within levels generally considered manageable for an emerging market economy. A current account deficit below 2% of GDP is often viewed as sustainable, particularly when financed by stable capital inflows rather than short-term speculative financing.
The persistence of Indonesia’s trade deficit also reflects broader structural dynamics within the economy. Strong import growth, especially in machinery and capital equipment, may signal expanding investment and future production capacity rather than weakening domestic fundamentals.
Imports of capital goods are generally associated with business expansion, infrastructure development, and manufacturing investment, which could enhance productive capacity over the medium term. Nevertheless, the country’s continued reliance on imported intermediate and capital goods highlights the need to strengthen domestic manufacturing capabilities and reduce import dependency.
At the same time, Indonesia’s export performance remains heavily concentrated in commodities, making external earnings highly sensitive to fluctuations in global commodity prices and economic conditions in major trading partners. Consequently, sustained improvements in the trade balance will likely depend not only on moderating import growth but also on greater export diversification, stronger downstream industrialization, and a recovery in global demand.
Overall, while the projected narrowing of the trade deficit suggests some improvement, Indonesia’s external sector is expected to remain under pressure in the near term, with the pace of import growth, global demand conditions, and commodity price movements continuing to determine the country’s path back to a sustainable trade surplus.
