• Indonesia’s trade surplus widened to USD 3.55 Bn in Aug-26 from USD 0.12 Bn the month  before, recovering from a period of sluggish growth. This expansion was driven by stable export growth  (1.51% MoM) coupled with a sharp contraction in imports (-11.53% MoM). 
• Export growth was mainly supported by three key commodity groups, namely CPO (15.51% MoM),  precious metals (56.69% MoM), and especially nickel (93.87% MoM). To some extent, the acceleration in nickel exports indeed reflects a low-base effect following last month’s contraction. Nevertheless, this  was also accompanied by stronger export demand from China (12.57% MoM), consistent with their solid  Aug-26 PMI reading (51.5), which may signal a recovery in China’s manufacturing sector. Meanwhile, iron and steel exports moderated (-4.75% MoM) after several months of steady contribution. 
• On the other hand, imports reversed after a relatively consistent upward trend. Contractions  were recorded in both O&G (-6.37% MoM) and non-O&G imports (-12.52% MoM). The latter was largely  dragged by slower demand of mechanical and electrical machinery (-18.28% MoM and -7.20% MoM  respectively), plastic products (-6.74% MoM), as well as iron and steel (-18.29% MoM). 
• Keeping that in mind, imports across all product categories remained expanding on an annual basis,  albeit at a slower pace compared to the previous month. Raw materials grew by 22.48% YoY, followed  by consumer goods (11.93% YoY) and capital goods (10.63% YoY). This divergence suggests an  annual recovery but with softening near-term momentum in both household and business  purchasing power. 
• Recent Trump-Xi meetings have reduced the likelihood of renewed US-China tariff hostilities, coming as  good news for Indonesia despite persistent geopolitical tensions in the Middle East. That said, the  stakes are high for future trade prospects. With the government targeting a modest 4.1% YoY  growth in state spending next year, achieving the ambitious 6% economic growth target will heavily  rely on the performance of private investment and international trade. It will be interesting to see how  Bank Indonesia (BI) maneuvers to maintain balance within this dynamic, amidst markets that still expect  global conditions to remain ‘higher for longer’.

The full version of this report (and the previous report) can be accessed via the following link: https://s.id/BCA_REI