Indonesia’s trade balance was in a deficit for the first time in 2012. In this article we will look into three major reasons behind such historical change.
In the following weeks we will go more into details and analyze the Indonesia’s import and export statistics. We hope to provide valuable information for investors and trading companies interested in Indonesia.
Table of contents
Indonesia’s trade balance historical data
If we look at historical data between 1975-2012, Indonesia has been continuously showing a positive trade balance. The growth accelerated in the late 1990s and only started to change in the last few years.
According to the latest available statistics from Indonesian Statistics Bureau, total trade deficit of 2012 was over US$1.6 billion.
In the recent years (monthly since 2010) we see the trend is strongly towards an increasing deficit.
Reasons of trade deficit
Indonesia is often portrayed as one of the last resorts at times when world’s major economies are either in recession or slowdown. Trade deficit however indicates that even Indonesia has been affected as the economy still relies heavily on commodities.
So what happened? According to Ministry of Trade – economic slowdown of the main export markets and the rapid increase in the machinery and oil imports.
Let’s look at the data behind those claims.
1# Export to key markets declined
In 2012, Indonesia’s exports dropped 6.61%, which was beyond the expectations of most economists. Exports to almost all major trading partners declined. Exports of non-oil and gas products to China and Japan, for example, dropped by 3.39 percent and 6.4 percent to $20.86 billion and $17.23 billion respectively [Jakarta Post].
In the following table we have brought out the 10 biggest export markets and the increase or decrease of the export in the last year. It is remarkable how 8 out of 10 biggest export markets decreased in the last year.
Source of data here and until the end of article: UN COMTRADE statistics
2# Growing import
Another reason behind the trade deficit is the strong growth in imports. Looking at the top 10 countries exporting their products to Indonesia, the ratio is reversed – 8 out of 10 countries demonstrate growth.
3# Petroleum oil imports
Reviewing trade deficit per product we see that majority of it comes from one product – oil. Once a member of OPEC, Indonesia has been a net importer of petroleum for years now. With the consumption fueled by cheap subsidized gas, this deficit is only expected to widen in the near future.
Trade balance outlook
According to trade Minister Gita Wirjawan, Indonesia’s exports could remain stagnant this year as major trading partners such as the United States and Japan and European countries might keep cutting demand.
Deputy Trade Minister Bayu Krisnamurthi however expects the growth of China and Japan to grow Indonesia’s exports in 2013:
We will maintain the target for exports at a similar level to last year, which we consider realistic. However, hopefully, ongoing developments in China and Japan will improve the outlook
In the long run, the government expects Indonesia to move up in the value chain and transform itself from raw commodities exporter into a developed economy. More about it can be read from the Masterplan for Acceleration and Expansion of Indonesia’s Economic Development (MP3EI).