Economist: Indonesia’s Trade Surplus Narrows Due to Declining Exports and Imports

Illustration. (Photo: Doc. Antara)

JAKARTA - Economist at the Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) Teuku Riefky said Indonesia's trade surplus narrowed due to a decline in exports and imports.

"In June 2024, Indonesia recorded a trade surplus of 2.39 billion US dollars, marking a trade surplus for 50 consecutive months," Riefky said in Jakarta, quoted from Antara, Wednesday, July 17.

However, that figure represents a decline of 18.30 percent month to month (mtm) compared to the surplus of 2.93 billion US dollars in May 2024.

Riefky said the decline in the trade balance was caused by a simultaneous decline in exports and imports, with exports experiencing a more significant decline than imports.

Exports were worth 20.84 billion US dollars in June 2024, down 6.65 percent (mtm) compared to the previous month and increasing 1.17 percent year on year (yoy) compared to the same period last year.

The decline in exports was caused by a decline in oil and gas and non-oil and gas exports. Oil and gas exports fell 13.24 percent (mtm) to USD 1.23 billion, while non-oil and gas exports fell 6.21 percent (mtm) to USD 19.61 billion.

The decline in oil and gas exports was caused by a decline in oil lifting which reached an average of 561 thousand barrels per day in the first semester of 2024, down 7.27 percent compared to the same period last year.

Among the ten main contributors to non-oil and gas exports in June 2024, eight of them recorded a monthly decline.

Mineral fuels fell 1.86 percent (mtm) to USD 3.24 billion, while iron and steel fell 4.32 percent (mtm) to USD 2.70 billion.

The decline in non-oil and gas exports was caused by a decline in demand from Indonesia's main trading partners.

Exports to China, ASEAN, the United States, the European Union, and Japan experienced monthly declines of 1.72 percent (mtm), 4.47 percent (mtm), 9.99 percent (mtm), 24.87 percent (mtm), and 30.14 percent (mtm), respectively.

In June 2024, imports reached US$18.45 billion, reflecting a 4.89 percent (mtm) decline from US$19.40 billion in the previous month and an increase of 7.58 percent (yoy) from the same period the previous year.

The monthly decline in imports was driven by a decline in imports of raw materials and capital goods, partly due to the depreciation of the rupiah, which made imported goods relatively more expensive. Imports of raw materials fell 3.41 percent (mtm) to USD 12.36 billion, while imports of capital goods fell 14.51 percent (mtm) to USD 3.20 billion.

On the other hand, imports of consumer goods increased by 2.48 percent (mtm) in June 2024, reaching 1.59 billion US dollars.

The decline in imports of raw materials and capital goods was reflected in the decline in Indonesia's Purchasing Managers' Index (PMI) which fell to 50.7 in June 2024 from 52.1 in May 2024. Although still in expansionary territory, it marked the lowest index in the last thirteen months.

The decline in the PMI was driven by slowing global demand, which led to reduced domestic production activity in Indonesia.

The President of the Confederation of Indonesian Trade Unions (KSPN) reported that in the first semester of 2024, six textile factories stopped operating and four other factories reduced their workforce due to efficiency issues.