Oil and gas imports drive Indonesia's narrowest trade surplus in years

Indonesia narrowly avoided a trade deficit in April as soaring oil and gas import costs sharply eroded its trade surplus, although economists expect the country to remain in surplus for the full year, The Jakarta Post reported.

The Central Statistics Agency (BPS) said on Tuesday that Indonesia recorded its 72nd consecutive monthly trade surplus, but by the slimmest margin in years.

The exports totaled US$25.3 billion while imports amounted to $25.21 billion, bringing the trade surplus to just $90 million, the narrowest reading since the country last recorded a deficit of $375 million in April 2020.

Exports were up a healthy 21.98 percent year-on-year (yoy) in April, but that increase was outpaced by imports growing 22.49 percent yoy.

Imports of non-oil and gas products grew 14.11 percent yoy, which was eclipsed by an 82.52 percent yoy jump in imports of oil and gas products worth $4.6 billion, up from $2.52 billion in April of last year.

BPS official Pudji Ismartini said crude imports surged by 67 percent, most coming from Nigeria, Brazil and Kazakhstan. Imports of oil derivatives from Malaysia, Singapore and Egypt skyrocketed by 87.76 percent.

The war in the Middle East has pushed the Brent crude price to over $90 per barrel for most of April, and often more than $100 per barrel, up from around $70 per barrel before the United States and Israel fired the first missile at Iran on Feb. 28.

The oil price surge impacted trade not only directly via imports of energy commodities but also by making other imported goods more expensive, as costlier inputs and logistics drove up production costs abroad, while the recent depreciation of the rupiah means Indonesian importers importers must spend more on products shipped into the country and paid for in foreign currencies.

The rupiah was among the worst-performing currencies since the conflict began and breached the decades-long historic low of 17,300 per dollar in April.

Imports of consumer goods and industrial inputs jumped by 43 and 25 percent, respectively.

Shipments of mechanical and electrical machinery and equipment, which account for a major chunk of total imports to Indonesia, surged in the January-to-April period in terms of both value and volumes, Pudji said, without specifying the reading for the month of April.

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Permata Bank economist Faisal Rachman wrote in an analysis on Tuesday that import growth was partly attributable to the government's pro-growth policy, which "strengthened domestic demand".

However, he noted that the increase in the import values of fuel, plastics and their derivative products was attributable to the Iran war.

Faisal does not see Indonesia's trade balance turning negative in the near future but said he expected the surplus to remain narrow for now as domestic demand was expected to increase on the back of the government's pro-growth agenda, while export growth was expected to subside.

Export growth was expected to diminish as volumes normalize following the spike seen around this time last year, when Indonesian exporters and their foreign partners front-loaded orders to expedite shipments in anticipation of rising US import tariffs threatened by US President Donald Trump.

"Escalating tensions could weaken global economic activity and external demand, thereby dampening export growth. At the same time, higher global energy prices could increase Indonesia's import bills, particularly for fuel-related imports, placing additional pressure on the trade balance," said Faisal.

The Samuel Sekuritas Indonesia research team wrote in an analysis on Tuesday that the rise in non-oil and gas imports suggested early purchases of raw materials, intermediate and capital goods amid the rupiah's slide.

The team said "the sharp rise in imports is likely to persist", particularly if the currency depreciation continued. The rupiah was trading between 17,800 and 17,900 per dollar on Tuesday.

The analysts went on to say that the trade balance would likely remain in surplus throughout the year as global trade disruption "may continue to support export volumes in the near term".

Likewise, Syafruddin Karimi, economics professor at Andalas University, said that a trade deficit was not a "baseline scenario" for this year but noted that "the possibility is still there".

He said the jump in non-oil and gas imports, unlike under normal circumstances, did not just reflect increasing demand for domestic production, given that there were other factors at play, namely global price pressures, high energy costs, supply disruption and rupiah depreciation.  

Editing by Reiner Simanjuntak