Indonesia's current account deficit widens, set to expand in 2025

February 20, 2025 (MLN): Indonesia's current account deficit widened in 2024 as its merchandise trade surplus shrank amid weaker global demand, the central bank said on Thursday, and analysts pointed to a worsening outlook for global trade this year.

Southeast Asia's largest economy reported a current account deficit of $8.9 billion for the year, equivalent to 0.6% of GDP, within the central bank's outlook range of 0.1% to 0.9%, but widening from 2023's gap of $2bn, or 0.1% of GDP.

In 2025, the central bank, Bank Indonesia (BI), expects the current account deficit to be in a range of 0.5% to 1.3% of GDP, according to Reuters.

However, Indonesia had a $7.2bn surplus in its balance of payments (BoP) for 2024, larger than 2023's surplus of $6.3bn, due to a surplus in the capital and financial accounts on stronger portfolio inflows.

This year, Indonesia's goods exports will face headwinds from U.S. President Donald Trump's trade threats, which come amid a potential rise in imports following an Indonesian government drive to stimulate domestic economic growth, said Bank Permata economist Josua Pardede.

He predicts the current account deficit will widen to 1.18% of GDP in 2025.

He projected a small deficit in the balance of payments in 2025, Reuters further noted.

"The BoP deficit may limit room for BI-rate cuts in 2025, underscoring the importance of monetary policy in maintaining Rupiah stability and curbing imported inflation," said Josua, who projected BI would stand pat until the year-end with a terminal rate at 5.75%.

BI has cut rates twice in the current monetary easing cycle that started in September, but it kept interest rates steady on Wednesday, emphasizing its focus on rupiah stabilization.

In January, Indonesia booked a $3.45bn merchandise trade surplus, amid surprisingly weak imports, even as exports came in below forecast.

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