Capital goods imports erode Indonesia's trade surplus, continued downward pressure into 2026

Indonesia’s trade surplus is facing a new risk environment. Slowing economic growth and increasing international trade tensions threaten to significantly compress the surplus margin. Enrico Tanuwijaja and Vincentius Min Shen from UOB point out that demand pressures, which have dried up in early 2025, may not ease throughout 2026, highlighting the challenging environment for improving the trade balance.

Rapid Contraction Scenario of Trade Surplus

According to UOB’s analysis, Indonesia’s trade surplus is expected to shrink from $41 billion in 2025 to approximately $35 billion in 2026. This $6 billion decrease is substantial, primarily driven by a slowdown in export growth and a continued increase in capital goods imports. While large-scale capital goods imports are necessary investments for Indonesia to strengthen its industrial base, in the short term, they directly pressure the trade surplus.

Importance of Diversification Strategies and Industrial Upgrading

Jin10 reports that although the comprehensive economic partnership agreement with the European Union offers limited market expansion opportunities, building broader trade partnerships and promoting downstream industrialization using capital goods are key to maintaining the surplus. For Indonesia to move beyond being a resource-exporting country and shift toward higher value-added industries, strategic investment in capital goods is essential. This approach is expected to improve export quality and balance the trade account in the medium term.