TEMPO.CO, Jakarta – Economists at PT Bank Rakyat Indonesia (BRI) have warned that Indonesia's recent trade deficit could have significant implications for the country's banking sector, particularly by increasing demand for foreign exchange hedging services and heightening credit risks linked to trade concentration.
Indonesia posted a US$1.61 billion trade deficit in May 2026, marking the country's first monthly trade deficit since April 2020.
In its latest BRI Regular Economic Update, the bank's Office of the Chief Economist Group said the trade deficit could put additional pressure on the rupiah by reducing foreign exchange inflows generated through international trade.
"This condition increases the need for hedging among importers, creating opportunities for banks to expand their foreign exchange hedging services," the economists said in the report, cited on Saturday, July 4.
Banking Sector Risks
The BRI economists also highlighted Indonesia's growing trade dependence on China. China has strengthened its position as Indonesia's largest non-oil and gas export destination, while the shares of the United States, India, and Malaysia have declined.
On the import side, China remains Indonesia's dominant trading partner, accounting for 42 percent of total non-oil and gas imports.
According to the report, the increasing concentration of trade with China could make Indonesian borrowers more vulnerable to an economic slowdown or supply chain disruptions originating from the country. The economists said this trend should be closely monitored from a credit portfolio risk management perspective.
Investment and Working Capital Loans
The report also projected more moderate growth in investment lending, in line with slowing imports of capital goods.
Although imports of raw materials and intermediate goods continue to grow strongly, demand for working capital loans is expected to remain subdued as Indonesia's manufacturing sector weakens.
"Despite continued growth in imports of raw and intermediate materials, the outlook for working capital lending remains constrained as Indonesia's manufacturing Purchasing Managers' Index (PMI) has fallen into contraction territory," the economists said.
Trade Outlook Expected to Improve
Despite the recent setback, BRI expects Indonesia's trade balance to improve in the coming months.
The bank cited several factors that could support a recovery, including improving manufacturing activity in key export markets, slower imports of raw materials due to weakening domestic manufacturing activity, and higher global prices for coal and crude palm oil (CPO).
Earlier, Statistics Indonesia (BPS) said the May trade deficit was primarily driven by the oil and gas sector.
"The deficit reached US$3.76 billion, mainly due to petroleum products and crude oil," Ateng Hartono, Deputy for Distribution and Services Statistics at BPS, said during a press conference on Wednesday, July 1.
The non-oil and gas trade balance remained in surplus, but it was insufficient to offset the larger deficit recorded in the oil and gas sector, resulting in Indonesia's first overall monthly trade deficit in more than six years.
Read: Indonesia's JCI Slips 0.35% in Weekly Trading
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