Indonesia recorded a trade surplus of
USD 3.12 bn in February 2025.
Exports grew by
14.05% yoy, a notable improvement from the previous month.
The manufacturing sector is on fire, surging nearly
30% yoy, while fishery exports skyrocketed by an impressive
52.01% yoy.
This means that some sectors remain solid and continue to expand.
But there’s something unusual. The
mining sector, once Indonesia’s export darling, is now struggling, plunging by
35.38% yoy.
So, while Indonesia continues to post trade surpluses, the reality is that this is largely
driven by contracting imports rather than an export boom.
This surplus might look good on the surface, but if
consumer purchasing power continues to weaken, the ripple effects could become more apparent in the coming months.
And speaking of purchasing power, this is where warning signs start to emerge. Consumer goods imports plummeted by
21.05% yoy, a much sharper drop than in the previous month.
This suggests that people might be tightening their belts, whether due to stagnant wages, rising prices, or economic uncertainty that makes them prefer saving over spending.
Distributors and retailers are also catching on to this trend.
They are reluctant to stock up if
demand is weakening. That’s why retail activity is starting to feel sluggish, with fewer imported goods entering the market.
Even Bank Indonesia has signaled caution. They project the
Retail Sales Index to decline by 0.5% yoy in February 2025.
This might seem like a small figure, but if we look at data from one of Indonesia’s major retailers,
ACES' SSSG dropped even further, to -6.6%.
This indicates that consumers are becoming more selective with their spending. They may still purchase essentials, but when it comes to discretionary goods like home appliances, electronics, or hobbies, they are holding back.
It could be due to inflation driving prices higher or economic uncertainty making people prioritize saving over buying non-essential items.
If consumption continues to decline, Indonesia’s financial markets will undoubtedly feel the pressure.
After all, consumer spending is the engine of our economy.
If people cut back on spending, business activity slows, corporate profits take a hit, and ultimately, the stock market loses momentum.
The evidence is already there.
JCI has struggled to gain traction for the past two years.
Investors remain in a
wait-and-see mode, and liquidity in the market isn’t exactly abundant.
One of the reasons? The average
M2 growth has been only 8.70%/year over the past decade.
This means that the amount of money circulating in our financial system is relatively limited, making it harder for financial markets to gain strong momentum.
However, there are two potential catalysts that could drive a market rebound.
First, Bank Indonesia could start loosening its monetary policy.
One way to do this?
Reducing the amount of outstanding SRBI
If this happens, funds that were previously locked in monetary instruments could flow back into the banking system and financial markets,
boosting liquidity.
Second, the implementation of the 100% DHE rule for natural resource exports.
If fully enforced, export earnings from non-oil and gas resources can no longer be parked abroad, they must first be deposited into the domestic financial system.
This would increase the supply of USD in the country, stabilizing the rupiah and potentially strengthening it to
IDR 15,100/USD.
More liquidity in the domestic market could also push the
10-year bond yield down to 5.50% by year-end, making investment assets like stocks and bonds more attractive.
Adding to this, The Fed FOMC recently decided to reduce its US Treasury sales from
USD 25 bn to just USD 5 bn/month. This effectively injects an additional
USD 20 bn in liquidity into the US market.
It could lead to lower US Treasury yields, making
Indonesia’s bond yields relatively more attractive.
If US yields decline, global investors may start seeking higher returns in emerging markets like Indonesia,
driving capital inflows and supporting market recovery.
So, while the current conditions remain challenging,
hope is not lost.
If Bank Indonesia starts
easing policies, DHE rule is fully implemented, and US Treasury yields decline, the financial markets could begin to see a turnaround.
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