Indonesia's Current Account Balance Predicted to be in Deficit in 2023, Here's the Cause

JAKARTA - Indonesia's goods trade balance continues to show a surplus for 41 consecutive months from May 2020 to September 2023.

In the third quarter of 2023, Indonesia's goods trade balance recorded a total surplus of 7.85 billion US dollars.

Indonesia is still able to show resilience, even though global conditions also influence Indonesia's export performance.

This is proven by Indonesia's economic ability to record high growth in the second quarter of 2023 of 5.17 percent (yoy).

Bank Permata economist Josua Pardede said the trade balance posted a higher surplus compared to the previous month, because the value of imports fell more than expected.

According to Josua, annual import and export performance will continue to experience contraction in September 2023.

Cumulatively, the trade balance in January to September 2023 recorded a surplus of 27.75 billion US dollars, lower than the surplus in January to September 2022 of 39.85 billion US dollars.

"This is due to the decline in the monthly performance of imports which is deeper than the monthly performance of exports," he explained to VOI, Thursday, October 19.

The trade balance surplus in September 2023 was mainly driven by a decline in all import groups, such as imports of consumer goods, raw materials and capital goods which fell by 22.10 percent (mom), 4.86 percent (mom), and 12.27 percent (mom) respectively.

Josua said that imports of consumer goods decreased amid a decline in rice imports during the harvest season, while imports of raw materials and capital goods experienced a contraction amid a slowdown in the manufacturing sector due to concerns about the stability of the Rupiah and increasing sentiment towards the 2024 election.

"During an election year, many investors tend to take a wait-and-see action and thus halt their expansion," he explained.

However, cumulatively, imports of consumer goods and capital goods still recorded growth of 7.34 percent (yoy) and 9.11 percent (yoy) from January to September 2023, indicating a fairly strong domestic economy until the third quarter of 2023.

Meanwhile, cumulative imports of raw materials fell 13.32 percent (yoy).

Considering the cumulative trade surplus in the third quarter of 2023, Josua estimates that the current account in the third quarter of 2023 will record a deficit of around 0.5 percent to 0.7 percent of GDP.

Overall, Josua estimates that the current account in 2023 will record a slight deficit of around 0.1 percent to 0.5 percent of GDP.