Falling commodity prices and China's economic slowdown will pose challenges for the new government in boosting exports, yet Indonesia also has significant export potential in the agricultural downstream sector. After the outbreak of the Russia-Ukraine war in February 2022, commodity prices surged in 2022. Prices of coal, gold, and crude palm oil (CPO) hit record highs one after another. Data shows that the average coal price in 2022 reached US$345.41 per ton, up 128.6% from the previous year. Similarly, the average annual price of crude palm oil soared to RM 4,155.1 per ton in 2022, an increase of 134%. Coal prices hit new highs repeatedly in 2022, peaking at US$463 on September 5, 2022. On March 9, 2022, crude palm oil prices hit an all-time high of RM 7,268 per ton. Nickel prices set a new record in March 2022, and in early March 2022, the London Metal Exchange (LME) even suspended trading for a week due to short selling that pushed nickel prices above US$100,000 per ton. Commodity prices began to surge at the end of 2021, coinciding with the normalization of global trade activities after the COVID-19 pandemic. The period 2022-2023 saw the world experience a "commodity boom" following the previous decade (2010-2012). Due to the surge in crude palm oil and coal prices, Indonesia's exports set multiple records in 2022, peaking in August 2022 with export value reaching US$27.86 billion. On the other hand, domestic import growth from 2020 to the present has not yet reached pre-pandemic levels. Because commodity exports surged sharply while imports did not, Indonesia recorded a prolonged trade surplus for 52 consecutive months, from May 2020 to August 2024, the longest surplus period since the Suharto era. Indonesia's exports during the Jokowi era also benefited greatly from the nickel downstream business. According to BPS data, Indonesia's exports of nickel iron rose from US$373.6 million (IDR 5.66 trillion) in 2010 to US$15.29 billion (approximately IDR 231.57 trillion) in 2023. Exports of nickel and its products also surged from US$1.44 billion (IDR 21.81 trillion) in 2010 to US$6.82 billion (IDR 103.29 trillion) in 2023.
On the other hand, imports remain sluggish, especially consumer goods, indicating weakening domestic demand. In 2023, consumer goods imports only grew by 8.6%, and even contracted in 2022. In fact, before the pandemic, consumer goods imports grew at double-digit rates. UOB economists stated that the decline in imports is largely due to a sharp drop in consumer goods imports during and after the COVID-19 pandemic, indicating that consumption levels and public confidence have not yet recovered. Indonesia's trade orientation has shifted in recent years, with China now replacing the United States and Japan as Indonesia's largest trading partner. Before the 2010s, Japan was Indonesia's main export destination or largest trading partner. Since the launch of the ASEAN-China Free Trade Agreement (ACFTA) in 2004, major changes have occurred, which eliminated tariffs on 94.6% of Indonesia's exports to China. Data from the Central Statistics Agency (BPS) shows that in 2004, Indonesia's trade with Japan reached US$18.62 billion, of which Indonesia's exports reached US$15.96 billion. Meanwhile, trade with China was only US$12.24 billion, with exports amounting to US$4.6 billion. Ten years after the ACFTA came into effect, in 2014, Indonesia's trade with China surged to US$48.23 billion, with exports reaching US$17.61 billion. Since 2011, China has been Indonesia's largest non-oil and gas export market. Since 2021, the bilateral trade volume has even surpassed US$100 billion for the first time in history. Indonesia's exports to China jumped from US$17.61 billion in 2014 to US$64.93 billion in 2023. In 2023, exports to China accounted for 25% of total exports, with major commodities shipped to China including coal, palm oil, steel, and iron ore. According to UOB data, in 2023, China dominated Indonesia's steel export market with a share of 68.7%. Meanwhile, in the coal and crude palm oil sectors, China accounted for 29.6% and 21.4% of Indonesia's total exports of these two commodities, respectively. When China's economy is sluggish as it is now, Indonesia's heavy reliance on exports to China can become a problem. In the second quarter of 2024, China's economy grew by only 4.7% (year-on-year), lower than the 5.3% growth in the first quarter of 2024. China's economic weakness has affected exports to Indonesia; from January to July 2024, Indonesia's exports to China fell by 8.7% to US$33.12 billion.
UOB economists explained in their report "Macro Notes Indonesia: Export Diversification is Key to Sustainable Growth" that product and export market diversification is key to Indonesia's sustainable export growth. Commodity diversification, especially products with added value, is important. For Indonesia, it is crucial to optimize other export commodities, especially rubber, coffee, and fish. Exports to ASEAN, India, and the United States need to be increased to offset the potential decline in exports to China. According to UOB's report, ASEAN is Indonesia's second-largest trading partner, contributing an average of 21% over the past two decades, with mineral fuels dominated by coal being Indonesia's largest export commodity to ASEAN. Indonesia is also an exporter of automobiles and auto parts to ASEAN, mainly cars, motorcycles, and auto parts. Indonesia and ASEAN have also signed the ASEAN Free Trade Area (AFTA) agreement, which makes it easier for Indonesia to export to ASEAN. India is also an attractive export market worth further exploration. As the world's fifth-largest economy, India is a strategic trading partner for Indonesia, especially in coal and crude palm oil commodities. From January to July 2024, Indonesia's exports to India grew by nearly 10% to US$12.34 billion. In addition, stable demand from the United States has also supported Indonesia's exports amid weak Chinese demand. From January to July 2024, Indonesia's exports to the US grew by 6.8% to US$14.35 billion. With the US economy strong, the demand outlook for crude palm oil, textiles, and electronic products remains optimistic.
Indonesia is the world's sixth-largest geological resource country, with almost all major commodities being coal, precious metals, and base metals. Indonesia also has huge potential in agricultural products, especially crude palm oil, rubber, coffee, and fish. Although mineral resource reserves are abundant, they will eventually be depleted with ongoing exploration and expansion. The Ministry of Energy and Mineral Resources (ESDM) stated that Indonesia's proven and potential nickel reserves will be exhausted within the next 15 years, so Indonesia needs to optimize the agricultural and fisheries sectors to maintain sustainable export growth. Indonesia aims to export about US$68 billion in agricultural products, including derivative products, by 2024. Various commodities such as crude palm oil, rubber, wood and its derivatives, fish, processed food, and essential oils supported agricultural product exports in 2023, accounting for about 30% of Indonesia's total exports. Downstream agricultural exports continue to rise; about 53% of Indonesia's total rubber exports are processed rubber in the form of rubber powder, and about 40% of Indonesia's total wood product exports are processed wood in the form of finished furniture. Indonesia will form a new government led by President Prabowo on October 20. According to the just-approved 2025 State Budget (APBN), expenditures of IDR 3,621.31 trillion will be allocated next year. Meanwhile, economic growth is set at 5.2%.
The 2025 APBN infrastructure budget allocation is IDR 433.9 trillion, while the budget for subsidy management is IDR 30.7 trillion. Parliament gave the new government the freedom to reallocate the 2025 APBN. To support the formation of the new cabinet, the Budget Agency and the government have agreed to provide flexibility in reallocating the budget to meet the budgetary needs of new ministries and agencies. It is hoped that this freedom can be used in the 2025 APBN to increase productive spending and support the economy, especially to boost consumption and exports. The public also hopes that Indonesia's eighth president will continue the sustainable structural transformation starting from mining and food downstream, improve the tax system, improve the quality of education and health, and continue the energy transition. In the context of falling commodity prices and a weak Chinese economy, developing export-oriented manufacturing is also very necessary for Indonesia.
Falling commodity prices and China's economic slowdown will pose challenges for the new government in boosting exports, yet Indonesia also has significant export potential in the agricultural downstream sector. After the outbreak of the Russia-Ukraine war in February 2022, commodity prices surged in 2022. Prices of coal, gold, and crude palm oil (CPO) hit record highs one after another. Data shows that the average coal price in 2022 reached US$345.41 per ton, up 128.6% from the previous year. Similarly, the average annual price of crude palm oil soared to RM 4,155.1 per ton in 2022, an increase of 134%. Coal prices hit new highs repeatedly in 2022, peaking at US$463 on September 5, 2022. On March 9, 2022, crude palm oil prices hit an all-time high of RM 7,268 per ton. Nickel prices set a new record in March 2022, and in early March 2022, the London Metal Exchange (LME) even suspended trading for a week due to short selling that pushed nickel prices above US$100,000 per ton. Commodity prices began to surge at the end of 2021, coinciding with the normalization of global trade activities after the COVID-19 pandemic. The period 2022-2023 saw the world experience a "commodity boom" following the previous decade (2010-2012). Due to the surge in crude palm oil and coal prices, Indonesia's exports set multiple records in 2022, peaking in August 2022 with export value reaching US$27.86 billion. On the other hand, domestic import growth from 2020 to the present has not yet reached pre-pandemic levels. Because commodity exports surged sharply while imports did not, Indonesia recorded a prolonged trade surplus for 52 consecutive months, from May 2020 to August 2024, the longest surplus period since the Suharto era. Indonesia's exports during the Jokowi era also benefited greatly from the nickel downstream business. According to BPS data, Indonesia's exports of nickel iron rose from US$373.6 million (IDR 5.66 trillion) in 2010 to US$15.29 billion (approximately IDR 231.57 trillion) in 2023. Exports of nickel and its products also surged from US$1.44 billion (IDR 21.81 trillion) in 2010 to US$6.82 billion (IDR 103.29 trillion) in 2023.
On the other hand, imports remain sluggish, especially consumer goods, indicating weakening domestic demand. In 2023, consumer goods imports only grew by 8.6%, and even contracted in 2022. In fact, before the pandemic, consumer goods imports grew at double-digit rates. UOB economists stated that the decline in imports is largely due to a sharp drop in consumer goods imports during and after the COVID-19 pandemic, indicating that consumption levels and public confidence have not yet recovered. Indonesia's trade orientation has shifted in recent years, with China now replacing the United States and Japan as Indonesia's largest trading partner. Before the 2010s, Japan was Indonesia's main export destination or largest trading partner. Since the launch of the ASEAN-China Free Trade Agreement (ACFTA) in 2004, major changes have occurred, which eliminated tariffs on 94.6% of Indonesia's exports to China. Data from the Central Statistics Agency (BPS) shows that in 2004, Indonesia's trade with Japan reached US$18.62 billion, of which Indonesia's exports reached US$15.96 billion. Meanwhile, trade with China was only US$12.24 billion, with exports amounting to US$4.6 billion. Ten years after the ACFTA came into effect, in 2014, Indonesia's trade with China surged to US$48.23 billion, with exports reaching US$17.61 billion. Since 2011, China has been Indonesia's largest non-oil and gas export market. Since 2021, the bilateral trade volume has even surpassed US$100 billion for the first time in history. Indonesia's exports to China jumped from US$17.61 billion in 2014 to US$64.93 billion in 2023. In 2023, exports to China accounted for 25% of total exports, with major commodities shipped to China including coal, palm oil, steel, and iron ore. According to UOB data, in 2023, China dominated Indonesia's steel export market with a share of 68.7%. Meanwhile, in the coal and crude palm oil sectors, China accounted for 29.6% and 21.4% of Indonesia's total exports of these two commodities, respectively. When China's economy is sluggish as it is now, Indonesia's heavy reliance on exports to China can become a problem. In the second quarter of 2024, China's economy grew by only 4.7% (year-on-year), lower than the 5.3% growth in the first quarter of 2024. China's economic weakness has affected exports to Indonesia; from January to July 2024, Indonesia's exports to China fell by 8.7% to US$33.12 billion.
UOB economists explained in their report "Macro Notes Indonesia: Export Diversification is Key to Sustainable Growth" that product and export market diversification is key to Indonesia's sustainable export growth. Commodity diversification, especially products with added value, is important. For Indonesia, it is crucial to optimize other export commodities, especially rubber, coffee, and fish. Exports to ASEAN, India, and the United States need to be increased to offset the potential decline in exports to China. According to UOB's report, ASEAN is Indonesia's second-largest trading partner, contributing an average of 21% over the past two decades, with mineral fuels dominated by coal being Indonesia's largest export commodity to ASEAN. Indonesia is also an exporter of automobiles and auto parts to ASEAN, mainly cars, motorcycles, and auto parts. Indonesia and ASEAN have also signed the ASEAN Free Trade Area (AFTA) agreement, which makes it easier for Indonesia to export to ASEAN. India is also an attractive export market worth further exploration. As the world's fifth-largest economy, India is a strategic trading partner for Indonesia, especially in coal and crude palm oil commodities. From January to July 2024, Indonesia's exports to India grew by nearly 10% to US$12.34 billion. In addition, stable demand from the United States has also supported Indonesia's exports amid weak Chinese demand. From January to July 2024, Indonesia's exports to the US grew by 6.8% to US$14.35 billion. With the US economy strong, the demand outlook for crude palm oil, textiles, and electronic products remains optimistic.
Indonesia is the world's sixth-largest geological resource country, with almost all major commodities being coal, precious metals, and base metals. Indonesia also has huge potential in agricultural products, especially crude palm oil, rubber, coffee, and fish. Although mineral resource reserves are abundant, they will eventually be depleted with ongoing exploration and expansion. The Ministry of Energy and Mineral Resources (ESDM) stated that Indonesia's proven and potential nickel reserves will be exhausted within the next 15 years, so Indonesia needs to optimize the agricultural and fisheries sectors to maintain sustainable export growth. Indonesia aims to export about US$68 billion in agricultural products, including derivative products, by 2024. Various commodities such as crude palm oil, rubber, wood and its derivatives, fish, processed food, and essential oils supported agricultural product exports in 2023, accounting for about 30% of Indonesia's total exports. Downstream agricultural exports continue to rise; about 53% of Indonesia's total rubber exports are processed rubber in the form of rubber powder, and about 40% of Indonesia's total wood product exports are processed wood in the form of finished furniture. Indonesia will form a new government led by President Prabowo on October 20. According to the just-approved 2025 State Budget (APBN), expenditures of IDR 3,621.31 trillion will be allocated next year. Meanwhile, economic growth is set at 5.2%.
The 2025 APBN infrastructure budget allocation is IDR 433.9 trillion, while the budget for subsidy management is IDR 30.7 trillion. Parliament gave the new government the freedom to reallocate the 2025 APBN. To support the formation of the new cabinet, the Budget Agency and the government have agreed to provide flexibility in reallocating the budget to meet the budgetary needs of new ministries and agencies. It is hoped that this freedom can be used in the 2025 APBN to increase productive spending and support the economy, especially to boost consumption and exports. The public also hopes that Indonesia's eighth president will continue the sustainable structural transformation starting from mining and food downstream, improve the tax system, improve the quality of education and health, and continue the energy transition. In the context of falling commodity prices and a weak Chinese economy, developing export-oriented manufacturing is also very necessary for Indonesia.