Indonesia: Deficit raises external risk questions – Societe Generale

Societe Generale’s Kunal Kundu analyzes Indonesia’s May 2026 trade data, highlighting the first deficit since the pandemic and a record Oil and Gas shortfall. He notes weaker exports, strong imports and a narrowing external cushion, but also stresses that cumulative exports and downstream Nickel-related shipments remain supportive, leaving open whether this marks a temporary interruption or a more persistent deterioration.

Deficit tests external resilience narrative

"This suggests that part of the import strength may reflect ongoing industrial production, investment activity, and downstreaming efforts. The critical question is whether subsequent economic activity validates that interpretation."

"If global commodity prices weaken further, or if demand from major destinations such as China, the US, and India softens, Indonesia’s non-oil and gas surplus could come under additional strain. The concern is therefore not merely the May deficit itself, but whether it signals a narrowing margin of safety in the broader trade account."

"The key question for the coming months is whether May proves to be a temporary interruption in Indonesia’s surplus trend or the beginning of a more persistent deterioration. If energy imports stay elevated while major commodity exports fail to recover, the trade balance could become a more material macro risk."

"But if downstream exports continue to scale and capital-goods imports translate into future productive capacity, the May deficit may ultimately be seen as a manageable cost of economic transformation rather than a sign of lasting external weakness."

"Indonesia’s May 2026 trade data mark an important inflection point for the external sector. The country recorded a $1.61 bn trade deficit, reversing from a $89 mn surplus in April and ending a 72-month run of monthly trade surpluses that had been in place since May 2020."