Indonesia's Trade Surplus Outlook Threatened by Waning Demand and Global Tensions

Indonesia faces major challenges in maintaining its trade surpluses, a phenomenon that UOB economists Enrico Tanuwidjaja and Vincentius Ming Shen attribute to exhausted demand combined with a volatile business environment. The country’s once dynamic economic situation now shows signs of slowdown that could redefine the trajectory of its foreign trade in the coming quarters.

Prematurely Exhausted Demand: The Heart of Vulnerability

Analysts highlight that last year’s unusually accelerated consumption cycle depleted demand capacity more quickly than expected. This exhausted demand is the main driver of the anticipated deceleration starting in early 2026, according to Jin10 forecasts. Economists expect this dynamic to gradually contract, hindering Indonesia’s ability to sustain its traditional trade surpluses. This situation is compounded by a broader context of slowing global economic growth.

Revealing Figures: A Gradual Compression of Surpluses

UOB projections paint a picture of tangible trade contraction. The trade surplus is expected to decrease significantly, from $41 billion in 2025 to around $35 billion in 2026. This reduction reflects a dual movement: a slowdown in exports, hampered by weakened global demand, and persistent imports of capital goods necessary to maintain the national production capacity. This scenario illustrates the fragile balance that the Indonesian economy must navigate.

Global Trade Tensions: A Catalyst for Instability

Beyond internal dynamics, escalating international trade tensions add an extra layer of uncertainty. These frictions, combined with exhausted demand in the domestic market, create an unfavorable environment for Indonesian exporters. Indonesia’s traditional trading partners are showing more cautious demand, forcing local companies to adapt their strategies and seek new markets.

Diversification and Industrialization: Strategic Levers

Faced with these challenges, UOB experts recommend strengthening trade partnerships and accelerating downstream industrialization. The comprehensive economic partnership agreement with the European Union offers an opportunity to diversify export markets, reducing dependence on traditional trading partners. However, these agreements alone are not enough: structural transformation of the Indonesian economy is necessary to sustain trade surpluses in the medium term.

Outlook: Between Adjustment and Transformation

Indonesia stands at a critical crossroads where exhausted demand and geopolitical tensions converge to challenge the viability of the current trade model. Medium-term corrective measures must go beyond simple trade agreements to embrace an inclusive and sustainable industrialization strategy. The expected reduction in trade surplus will not be temporary unless the country undertakes significant structural reforms in its value chains.