Indonesia's Trade and Current Account Balance Deficit, 2018

Indonesia's trade balance and current account experienced a deficit throughout 2018. Based on data from the Central Bureau of Statistics (BPS), the trade balance for the January-July period showed a deficit of US$3.09 billion, or approximately Rp 46 trillion. Increased demand for imports exceeding export results led to a trade deficit for five months of the year.

Similarly, Indonesia's current account experienced a deficit of US$13.75 billion, equivalent to Rp 205 trillion, during the first half of the year. The first quarter saw a deficit of US$5.71 billion, and the second quarter a deficit of US$8.03 billion. The largest contributor to the current account deficit was primary income transactions, reaching US$8.15 billion, and services transactions, at US$1.79 billion. Secondary income transactions recorded a surplus of US$1.63 billion, and goods transactions a surplus of US$286 million. For information, the current account has consistently shown a deficit since the fourth quarter of 2011.

The current account and trade balance deficits resulted in a tight supply of US dollars in the domestic market. Besides reduced export earnings, exporters were also reluctant to release their US dollar holdings. Furthermore, the increase in payments for foreign portfolio investment in the form of dividends and foreign loan interest payments increased the demand for US dollars. This is one of the factors contributing to the weakening of the Rupiah exchange rate.