Jakarta. Economists have warned that Indonesia’s surplus can shrink further -- even to the point of being in the red -- as the world faces its worst oil supply shocks.

Indonesia’s positive trade balance fell to $89.1 million in April, the lowest reading in the country’s 72 months of surplus run, following an 82.52% year-on-year jump in oil and gas imports. The US-Iran war was on its two-month mark, and Tehran’s blockade over the Strait of Hormuz -- a major oil route  -- had sent crude prices flying beyond $100 per barrel. The rupiah keeps reaching historic lows, hitting Rp 17,300 per dollar in April, and has now topped Rp 18,000.

“Our surplus will gradually narrow amid geopolitical tensions and rising trade protectionism,” Mohammad Faisal, the executive director of CORE Indonesia, told the Jakarta Globe.

Faisal warned that Indonesia could “return to a trade deficit if the situation persists”. The country last posted a deficit in the pandemic-hit month of April 2020.

Yose Rizal Damuri of CSIS also warned that “the downward trend would continue", citing higher crude oil prices and resilient domestic demand, especially if oil rises back above $100 per barrel, although it has eased below that level for now.

“The fact that subsidies do not curb [energy] consumption can worsen [the oil deficit].  People do not feel the price pressures, so they don’t feel the need to adjust their consumption,” Yose said.

Permata Bank’s chief economist Josua Pardede urged the government to keep energy imports in check via fuel efficiency, alternative sources, and greater domestic production.

“But Jakarta must make sure its import control policies do not impact the raw materials and capital goods for the industry. Overly harsh import restrictions could depress production and exports months later,” Josua said.

Yose is skeptical about whether manufacturing exports can replace Indonesia’s commodity-driven growth. The national manufacturing sector relies on commodities. While efforts are underway to move up the value chain, local factories can only produce semi-processed goods.

“They tend to fluctuate and are susceptible to price changes and global demand. Indonesia’s plan to centralize all commodity exports will make it even worse,” Yose said.

Faisal struck a more optimistic tone, saying that manufacturing industries that embrace sustainability standards have a chance to be “new export engines” as green goods gain popularity.

“While more local firms now use renewable sources and embrace circularity, [green industry] growth in developing economies is not as fast as in advanced nations,” Faisal stated.