Indonesia's exports last year fell 6.9 percent to $168 billion, while imports shrank 9.5 percent to $171 billion. (Antara Photo/Sigid Kurniawan)

Indonesia's Trade Deficit Narrows by Third in 2019

BY :HERMAN

JANUARY 15, 2020

Jakarta. Indonesia's trade deficit narrowed to $3.2 billion last year as consumers and producers took a punt on a brake on imports, the Central Statistics Agency, or BPS, reported on Wednesday. 

"The deficit in 2019... was almost one-third of the shortfall in 2018, which was $8.6 billion," BPS head Suhariyanto said in a press conference, as quoted by Antara news agency. 

The country's total exports fell 6.9 percent to $168 billion, while imports shrank 9.5 percent to $171 billion, the BPS data showed. 

Imports of raw materials – which accounted for 73 percent of total inbound shipments – declined the most, falling 12 percent last year from a year earlier.

Imports of capital goods like machinery and heavy equipment only dropped by 4.5 percent.

Imports of consumer goods – from Chinese smartphones to Italian olive oil – fell by 5.1 percent.  

Despite the government's much-publicized effort to replace imported fossil fuel with locally made biofuel, oil and gas imports remained the bane of Indonesia's trade, contributing the lion's share of the deficit.

Indonesia bought $9.3 billion-worth more oil and gas than it sold abroad last year. The corresponding value in 2018 was $12 billion. 

Fortunately, non-oil and gas trade posted a healthy surplus of $4 billion in 2019.

"Agricultural exports were the only sector that grew by 5.31 percent, although its contribution to overall exports was still small at 2.16 percent," Suhariyanto said. 

"Exports in the manufacturing industry and the mining sector experienced declines of 2.7 percent and 15 percent respectively. Exports in the oil and gas sector fell 27 percent," he said.

Indonesia posted surpluses in trades with several countries, including the United States, India and the Netherlands.

Southeast Asia's largest economy saw the biggest deficits in trades with China, Thailand and Australia. 

Yusuf Rendy Manilet, an economist at thinktank Indonesia's Center of Reform on Economics (CORE), said the lower deficits raised concerns because they were driven by a decline in raw material imports that could signify slower economic activities. 

He said the deficits were in line with movements in the Manufacturing Purchasing Managers Index (PMI), a measurement for manufacturing activities in a country, which since July has been below expansion level.

The trade deficit may stay at the current level this year, Yusuf said, even though demand for Indonesia's leading export products, such as palm oil, is improving – one good news for export.

"However, imports are also likely to increase in line with potential investment inflows, which will encourage imports of capital materials and raw materials. Deficit reduction will be marginal throughout 2020," he said. 

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