JAKARTA (AFP) – Indonesia’s trade balance unexpectedly swung back to a deficit in August, official data showed Wednesday, a setback for Southeast Asia’s top economy as it struggles to recover after a turbulent period.
However, while the statistics agency attributed the $318.1 million deficit to a surge in imports it added that most were capital goods, such as machinery for manufacturing, as opposed to consumer goods.
The government is trying to ramp up manufacturing and wean itself off imports of consumer products as it tries to get people, especially the emerging middle class, to buy Indonesian rather than foreign goods.
The market had expected the trade balance to remain in surplus for a second consecutive month.
“This will put pressure on Indonesia’s current account deficit, which had been improving on the back of better trade numbers because imports were falling,” Kenny Soejatman, an economist from Manulife Asset Management Indonesia, told AFP.
However, Standard Chartered Bank said the increase in machinery imports showed businesses were confident after July’s peaceful presidential election.
Trade is a key part of the current account, which hit a near-record deficit of $9.1 billion, or 4.27 per cent of GDP, in the second quarter this year.
The widening current account deficit was a key concern of foreign investors last year when Indonesia was hard hit by emerging market turmoil as the US Federal Reserve said it was preparing to wind down its stimulus.