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Reading Indonesia's January Macro Signals

Early 2026 presents two important dynamics for Indonesia's economy: narrowing trade surplus and rising headline inflation. At first glance, both developments appear to signal macroeconomic pressure. However, looking deeper, there are technical and structural factors that provide a different context for this data.

Trade Surplus Shrinks as Oil & Gas Deficit Widens
Indonesia's trade surplus in January 2026 was recorded at US$0.95 billion, declining significantly compared to US$2.5 billion in December 2025.

This narrowing was primarily caused by the widening deficit in the oil and gas (O&G) sector which reached approximately US$-2.3 billion, among the largest in the past three years.

On the other hand, the non-O&G surplus also declined to US$3.2 billion, indicating that pressure stems not only from the energy sector but also from broader trade dynamics.

Exports Stay Resilient Despite Commodity Divergence
Indonesia's export performance continues to show resilience amid commodity sector dynamics.

Total exports were recorded at US$22.2 billion, up approximately +3.41% year-on-year.

Several sectors showed divergent movements:

Palm Oil
Palm oil exports surged +59.6% YoY to US$2.3 billion, making a significant contribution to export stability.

Coal
Conversely, coal exports declined approximately -16% YoY, reflecting global price and demand dynamics.

Manufacturing
The manufacturing sector emerged as an important pillar, with growth of +8.2% YoY.

However, exports from the mining and agriculture sectors still faced pressure, declining approximately -14.6% YoY and -20.4% YoY respectively.

Imports Surge Signals Strong Domestic Demand
While exports grew at a moderate pace, imports increased far more rapidly.

Total imports rose +18.2% YoY to US$21.2 billion.

This surge was primarily driven by:
Oil & Gas Imports
O&G imports surged +27.7% YoY to US$3.2 billion, which contributed significantly to the widening energy sector deficit.

Non-O&G Imports
Non-O&G imports also grew strongly at +16.7% YoY to US$18.0 billion, which can be interpreted as a signal of solid domestic demand.

In other words, the narrowing trade surplus does not entirely reflect economic weakness, but also indicates strong domestic economic activity.

Inflation Rises, But Mainly Due to Base Effects
On the price front, Indonesia's headline inflation increased to +4.8% YoY in January 2026.

However, this increase was largely driven by statistical base effects resulting from the 50% electricity tariff discount policy in the previous year.

The discount contributed approximately 2.2 percentage points to current inflation.

If this factor is excluded, inflation is actually estimated to be at only around +2.5% YoY.

Core Inflation Gradually Edges Higher
Core inflation also experienced a moderate increase.

Core inflation was recorded at +2.63% YoY, up from +2.45% YoY in December 2025, and reached the highest level in nearly three years.

However, this increase was also influenced by specific factors, particularly the rise in gold prices.

If the gold component is excluded, core inflation is actually at only around +1.0% YoY, indicating that overall price pressures remain relatively contained.

Inflation Outlook: Still Within BI's Target Range
Going forward, inflation pressures are expected to ease.

The base effect from the electricity discount will gradually fade over the coming months, which has the potential to bring inflation back below the 3% level.

However, there are several risks to watch.

Prolonged geopolitical tensions in the Middle East could drive:
- an increase in gold prices
- an increase in unsubsidised fuel prices

which could ultimately exert additional pressure on domestic inflation.

The latest trade and inflation data present a fairly balanced economic picture.

While the trade surplus has narrowed, it is largely driven by higher energy imports and strong domestic demand.

On the other hand, the spike in headline inflation is largely influenced by technical factors, while core price pressures remain relatively controlled.

The combination of these factors suggests that Indonesia's macroeconomic fundamentals remain reasonably solid heading into 2026, although global and geopolitical dynamics remain a factor to watch.