Indonesia’s trade surplus beats forecasts
According to Statistics Indonesia (BPS), Indonesia’s trade surplus surged by +54.17% MoM and +72.6% YoY to USD3.45 bn in Jan-25, significantly exceeding our forecast of USD2.10 bn and the consensus estimate of USD1.77 bn. This marks the highest trade surplus since Nov-24 and extends Indonesia’s streak of 57 consecutive months of surpluses since May-20. The strong January figure was primarily driven by a USD4.88 bn surplus in the non-oil and gas (NOG) trade, which offset a –USD1.43 bn deficit in the oil and gas (OG) sector. The United States remained Indonesia’s largest source of trade surplus at USD1.57 bn, while China accounted for the biggest trade deficit at –USD1.77 bn. Looking ahead, global economic uncertainty poses challenges for Indonesia’s export performance in 2025. Heightened geopolitical tensions in the Middle East, China’s slowing economy, and the potential for stricter protectionist policies under Trump could disrupt exports and weigh on Indonesia’s trade surplus. Given these factors, we project Indonesia’s current account deficit to widen to –0.5% of GDP in 2024 and –0.7% of GDP in 2025.
Indonesia’s exports fall short of expectations amid weak china demand
Indonesia’s total exports amounted to USD21.45 bn in Jan-25 (-8.56% MoM but +4.68% YoY), hitting the lowest level since Jun-24. This performance fell short of our projected annual growth (+9.70% YoY) and the consensus estimate (+8.57% YoY). Breaking down the data, OG exports stood at USD1.06 bn (-31.35% MoM, -24.38% YoY), while NOG exports reached USD20.40 bn (-6.96% MoM, +6.81% YoY). The monthly contraction was primarily driven by weaker demand from China, where exports declined by -21.06% MoM to USD4.57 bn in Jan-25. This trend aligns with China’s Caixin Manufacturing PMI, which fell to 50.1 in Jan-25, the slowest pace since Sep-24, as foreign orders shrank for the second consecutive month amid rising global trade policy challenges. Despite the slowdown, China remained Indonesia’s largest export destination, accounting for 22.40% of total exports. Looking ahead, China’s sluggish economic recovery, driven by weak domestic consumption and continued export pressures from higher U.S. tariffs is expected to further dampen demand for Indonesia’s commodities. However, there is still limited scope for a rebound in 2025. The Chinese government’s decision to raise its budget deficit to 4% of GDP while maintaining an economic growth target of around 5% signals further policy support for recovery.
Imports contract to lowest level since Apr-24
Total imports contracted by -15.18% MoM and -2.67% YoY to USD18.00 bn in Jan-25, marking the lowest level since Apr-24 and falling below both our forecast (+10.21% YoY) and the consensus estimate (+10.15% YoY). OG imports stood at USD2.48 bn (-24.69% MoM, -7.99% YoY), NOG imports reached USD15.52 bn (-13.43% MoM, -1.76% YoY). All import categories declined on a monthly basis, with consumer goods imports dropping by -28.65% MoM to USD1.64 bn, intermediate goods imports falling by -13.11% MoM to USD13.04 bn, and capital goods imports contracting by -15.19% MoM to USD3.32 bn. The weaker import performance was largely due to seasonal effects following the year-end period. However, Indonesia’s Manufacturing PMI rose to 51.9 in Jan-25, the highest since May-24, signaling increased manufacturing activity. China remained Indonesia’s largest import source, contributing 40.86% of total imports, with imports from China recorded at USD6.34 bn (-12.99% MoM but +6.55% YoY). Looking ahead, Indonesia may experience a surge in imports from China, driven by an oversupply resulting from weak domestic consumption in China and higher US tariffs on Chinese goods.
Rupiah depreciates despite higher forex reserves and trade surplus
Indonesia’s foreign exchange (forex) reserves surged to a record high of USD156.1 bn in Jan-25, up from USD155.7 bn in Dec-24, in line with the ongoing trade surplus. This increase was primarily driven by the successful issuance of government global bonds, higher tax and service revenues, and Rupiah stabilization policies aimed at mitigating volatility in global markets. The reserves remain sufficient to cover 6.7 months of imports or 6.5 months of imports and external debt payments, well above the international adequacy standard of 3 months. This increase in reserves aligns with capital flows, as Indonesia recorded net inflows of USD1.33 bn in the government bond market and USD0.79 bn in SRBI in Jan-25. However, the equity market saw a net capital outflow of –USD0.23 bn in the same period. Despite higher reserves, the Rupiah depreciated by 1.39% MoM to Rp16,260/USD in Jan-25. We attribute this to a stronger USD, with the Dollar Index rising 2% MoM to 109, driven by uncertainty over import tariffs under Trump’s presidency and escalating geopolitical tensions. To mitigate further Rupiah depreciation, the government has revised regulations on natural resource export earnings (DHE). Exporters are now required to retain 100% of their forex earnings in the domestic financial system for one year, compared to the previous rule, which mandated only 30% for three months. Additionally, the government has implemented fiscal discipline by cutting the state budget by Rp300 tn, aiming to keep the fiscal deficit below 3% of GDP and sustain investor confidence in fiscal health. However, this policy could dampen economic growth. Considering the budget cuts, ongoing geopolitical risks, and financial uncertainties, we revise our 2025 economic growth forecast to 5.0% YoY.
