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Indonesia has run its second consecutive foreign trade deficit. At least the record loss of 2018 was reduced. Demand fell in almost all product groups.

Indonesia imported 9.5 percent fewer goods in 2019 than in the previous year (excluding oil and gas: -6.3 percent). As a result, imports totaled at US$170.7 billion in 2019, down from $188.7 billion in 2018, according to figures from the Indonesian Ministry of Trade.

With exports down just 6.9 percent, the 2018 record foreign trade deficit decreased from $8.7 billion to just $3.2 billion. After adding the oil and gas figures, Indonesia tallied a positive foreign trade balance of $6.2 billion due to the deficit of $9.4 billion deficit in oil and gas. In 2018, this was $12.7 billion.

In all major product groups – with the exception of iron and steel – imports were significantly reduced. The largest import item was machinery (HS-code 84) and electronics and electrical engineering equipment (HS-code 85). Combined in both categories, demand fell by more than $ 1 billion.

Steel imports, on the other hand, rose 1.4 percent year-over-year to $10.4 billion. There were declines in the double-digit percentage range for important import categories such as motor vehicles, organic chemicals, cotton, wheat or aluminum. CKD (Completely Knocked-Down) automobiles posted a decrease of almost 25 percent to $536 million.

Germany falls behind as a supplier

Indonesia saw reduced imports from all ten major goods suppliers in 2019. At -1.4 percent, the decline was the smallest for China. As a result, the share of deliveries from the People's Republic rose from 28.5 percent in the previous year to 30 percent. In contrast, Japan, Thailand, the USA and Germany posted a double-digit percentage decrease.

According to the Indonesian Ministry of Trade, in nominal terms, German deliveries decreased by $513 million to $3.4 billion. Germany thus dropped to twelfth in the supplier ranking, trailing Vietnam and Taiwan.

In the trend of the past decades, the West has become statistically less and less important as Indonesia's supplier of goods. However, it is difficult to assess what role imports from western producers from China or other ASEAN countries play.

The reason for the declining imports in many product groups should not be lower domestic demand. Because the government uses numerous non-tariff trade barriers to ensure, at least in the medium term, that external trade balance does not become too negative. These non-trade barriers include the national product standard SNI and restrictive import licenses, as well as import quotas.

Exports to China are increasing

Indonesia's total exports fell 7 percent in 2019 to $167.5 billion in 2019. Its main exports were coal (18.7), oil and gas (17.2) and palm / palm kernel oil ($14.7 billion). Everywhere there is a decline well above the average of -4.8 percent beyond the oil and gas sector. Apparel exports, which are so important for employment, also fell by 3.7 percent to $8.2 billion.

In contrast, there was significant growth in iron and steel ($7.4 billion – an increase of 28.8 percent). Here, exports have increased almost sevenfold since 2014. Cars ($8.2 billion; +8.1 percent) and pearls, gemstones and jewelry ($6.6 billion; +18.1 percent) also increased significantly.

China is by far the most important sales market with a share of 16.7 percent in total exports. Primarily, raw materials are delivered there. Exports to the People's Republic have almost doubled since 2015. Other important customers are the USA (11.4 percent), where clothing and shoes are exported, and Japan (8.9 percent), which primarily requires ores, coal and gas from Indonesia.

GTAI is the foreign trade and inward investment agency of the Federal Republic of Germany. The organization advises foreign companies looking to expand their business activities in the German market. It provides information on foreign trade to German companies that seek to enter into foreign markets.