Indonesia runs its first trade deficit in six years as oil bills climb

For six years Indonesia sold more to the world than it bought. That run has ended. Nikkei Asia reports that the country ran a trade deficit in May, its first since 2020. A "trade deficit" simply means the money Indonesia paid for imports was larger than the money it earned from exports. Official figures put the May gap at about US$1.61 billion.

The main reason is oil. Indonesia does not pump enough fuel for its own use, so it buys a lot from abroad. The war involving Iran has pushed global oil prices up, and a weak rupiah makes every barrel more expensive in local money. Together those two forces sent the oil and gas import bill sharply higher, while exports of commodities like coal and palm oil slipped. Outside energy, Indonesia still sold more than it bought, but the fuel bill was big enough to tip the whole balance into the red.

One month of deficit is not a crisis by itself. But it points to a problem that will not fade fast: the country is exposed to oil prices it cannot control, and to a currency that has slid for months. When imports cost more than exports earn, more rupiah is sold to buy dollars, which can push the currency down further, which then makes the next fuel bill bigger again.

Why it matters

If you buy fuel, imported food, or anything priced in dollars, a weaker trade balance is one more push behind higher prices. Watch whether June and July stay in deficit or the May gap turns out to be a one-off from the oil spike. A run of monthly deficits would add pressure on Bank Indonesia to keep interest rates high to defend the rupiah, which makes loans for homes and businesses more expensive.