Indonesia recorded a $1.61 billion trade deficit in May 2026, marking its first monthly trade deficit since the pandemic and ending a 72-month streak of surpluses that began in May 2020. This is a significant reversal from the $89 million surplus reported in April 2026. The deficit was driven by a record shortfall in Oil and Gas, alongside weaker exports and strong imports, which have raised questions about Indonesia's external resilience and the sustainability of its trade account. Societe Generale’s Kunal Kundu notes that the strength in imports may reflect ongoing industrial production, investment activity, and downstreaming efforts, particularly in the Nickel sector, which has continued to support cumulative exports. However, he cautions that if global commodity prices weaken further or if demand from major trading partners such as China, the US, and India softens, Indonesia’s non-oil and gas surplus could face additional pressure. The main concern is whether the May deficit is a temporary interruption in the surplus trend or the start of a more persistent deterioration in the trade balance. Kundu suggests that if energy imports remain high and major commodity exports do not recover, the trade balance could become a more significant macroeconomic risk. Conversely, if downstream exports continue to grow and capital-goods imports lead to increased productive capacity, the May deficit could be interpreted as a manageable cost of economic transformation rather than a sign of lasting external weakness. The coming months will be critical in determining whether this deficit signals a broader shift or is merely a short-term fluctuation in Indonesia’s external sector performance. [1]
CONCLUSION
Indonesia’s first trade deficit since 2020 has raised concerns about the country’s external resilience and the sustainability of its trade surplus trend. The market will closely watch upcoming trade data to determine if this marks a temporary setback or the beginning of a more persistent challenge for Indonesia’s external sector.