Economist: Indonesia Risks Facing 'Twin Deficit' as Trade Balance Surplus Declines

JAKARTA - Economist Josua Pardede said Indonesia is at risk of facing a "twin deficit" condition in line with the decline in the trade balance surplus.

"Indonesia must also be faced with the risk of returning to the 'twin deficit' or a condition where the economy records a widening current account deficit and fiscal deficit," said Josua, quoted from Antara, Thursday, April 18.

The latest data shows that Indonesia's trade balance surplus continues to shrink, in line with the continued normalization of commodity prices and the economic condition of China, Indonesia's main trading partner, which tends to continue to weaken.

"This increases the risk of widening the deficit in the current account balance this year," said the Chief Economist of Bank Permata.

Based on data from the Central Statistics Agency (BPS), Indonesia's goods trade balance again recorded a surplus in February 2024 amounting to 0.87 billion US dollars, which was supported by non-oil and gas amounting to 2.63 billion US dollars.

However, the surplus value decreased by 1.13 billion US dollars on a monthly basis compared to January 2024 which was recorded at 2.02 billion US dollars.

On the other hand, Josua said that state revenues tend to decline in line with the normalization of commodity prices.

The latest data shows that the State Revenue and Expenditure Budget (APBN) is still recording a surplus, but when compared with the position in the same period last year, the surplus tends to decrease.

This condition raises concerns regarding future APBN financing, giving negative sentiment to the Indonesian bond market. It was noted that foreign ownership in Government Securities (SBN) continued to decline from the beginning of the year.

As of April 2, 2024, foreign investors' ownership of SBN decreased by around 1.73 billion US dollars year to date (ytd) even though foreign investors posted a net buy of around 1.48 billion US dollars (ytd) on the stock market.

Meanwhile, the current account deficit in 2024 is estimated to be minus 0.7 percent of gross domestic product (GDP) from minus 0.11 percent of GDP in 2023.

Then, the fiscal deficit in 2024 is estimated to be around minus 2.14 percent of GDP from 2023 which was recorded at minus 1.65 percent of GDP.

It is known that the APBN experienced a surplus of IDR 22.8 trillion as of March 15, 2024. The surplus value was obtained from state revenues which were higher than state expenditure.

State revenue was recorded at IDR 493.2 trillion or equivalent to 17.6 percent of the target of IDR 2,802.3 trillion.

Meanwhile, state spending was recorded at IDR 470.3 trillion. This value is equivalent to 14.1 percent of the budget ceiling of IDR 3,325.1 trillion.