AmCham Update Vol. 7 #094

Prabowo in Russia and Seeking More Trade, Trade Surplus Returns, Inflation rising as Destry Sworn In, Indonesian PMI Slips Back to Contraction, Gov’t Raises 2027 Oil Production Target Despite 2026 Shortfall

Sep 04, 2026

Starting September 2026, AmCham Update will now be published twice a week, every Tuesday and Friday.

Prabowo Seeks Expanded Trade during Russia Visit

President Prabowo Subianto made his fourth trip to Russia since taking office to attend the 11th annual Eastern Economic Forum as its chief guest on Sep 3 in Vladivostok, the largest city in the Russian Far East. He also held bilateral talks with Russian President Vladimir Putin.

His message? Indonesia should expand cooperation and trade with Russia. “Indonesia, located between the Indian and Pacific Oceans, seeks to build stronger bridges to the Russian Far East and to the Eurasian Economic Union,” he said.

The geographical distance between Jakarta and Vladivostok should not be an obstacle, he said in remarks to the Economic Forum. “The Pacific Ocean does not separate us. The Pacific Ocean connects us. It is not a wall between us. It must serve as a highway between our two economies,” Subianto said.

His goal, he said, is to double trade between the two countries. “For Eurasian businesses, Indonesia is a natural gateway to ASEAN. We are the region's largest market, the center of the Regional Comprehensive Economic Partnership (RCEP), and now a free trade partner," he said.

Bilateral trade between Indonesia and Russia was approximately $5 billion in 2025, an increase of about 21.7 percent from 2024.

The approach, the president told the gathering, is part of Indonesia’s “realist, pragmatist” foreign policy and closer ties with Russia and Eurasia can help heal a fragmented world order

“Indonesia does not want to join any military alliance, but we seek to join economic alliances… Not an alliance against anyone, but a partnership for the prosperity of everyone,” he said.

“Russia has wheat, fertilizer, energy, science and advanced engineering. Indonesia has palm oil, fisheries, coffee, rubber, textiles, furniture, consumer goods, a young work force and a gateway for the 680 million people of ASEAN… This is the foundation of fair and durable trade,” Subianto said.

The annual gathering is held in Vladivostok and is focused on encouraging investment in Eurasia. It is largely centered on countries from the former Soviet Union.

Subianto and a delegation of senior officials also had a bilateral meeting with Putin.

Following that session, Putin said his personal relationship with Subianto “reflects the strategic nature of the bilateral ties between Russia and Indonesia.”

“Indonesia is one of Russia’s key partners in the Asia-Pacific region. We have maintained friendly relations for many years, and trade between our two countries continues to grow,” he added.

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Indonesia Notches Trade Surplus in July after Two Months of Deficits

Indonesia narrowly restored its trade surplus in July, recovering from two months of deficits as shipments of export commodities grew sharply.

Statistics Indonesia (BPS) said on Sep 1 exports exceeded imports by $120 million in July, just barely giving the country the positive trade surplus it had maintained for years.

BPS official Hartono Ateng attributed the surplus to Indonesia’s animal and vegetable oils, mainly crude palm oil; iron and steel; and coal.

Indonesia had an uninterrupted streak of monthly trade surpluses from early 2020 until May, when rising oil and gas prices due to conflict in the Middle East resulted in a $1.6 billion trade deficit. The deficit fell to $450 million in June.

Despite the recovery, the July surplus is small by comparison to previous surpluses. As a net oil importer, rising global oil prices have had a major impact and have also made imports more expensive. The cost of oil and gas imports in July were up almost 50 percent year-on-year (yoy).

Prices for imports of capital goods and raw materials for industry rose 17 and 32 percent, respectively. Exports grew by 6.05 percent yoy.

Ateng said outbound shipments of Indonesia’s two top export commodities rose in both price and volume. CPO prices were up 12.81 percent yoy in July and the country exported 2.23 million metric tons of the commodity, a 15.44 percent increase over July 2025. Similarly, the price of coal jumped by 16.83 percent yoy, and Indonesia shipped out 29.02 million metric tons in July, an annual increase of 4.9 percent.

The largest surplus was with the United States, at $10.5 billion, followed by India and the Philippines with $7.8 billion and $4.95 billion, respectively. Indonesia recorded a deficit with China, Singapore and Australia.

Despite the surplus, “the underlying picture remains less comfortable,” given that import growth outpaced exports, Bank Danamon lead economist Irman Faiz wrote on Sep 1.

Permata Bank economist Faisal Rachman said Indonesia’s trade balance “is expected to remain fragile” by virtue of the imports needed to support the government’s pro-growth agenda.

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Inflation Rises as Destry Sworn in as BI Governor

Indonesia’s annual inflation rate increased to 3.19 percent in August, up from 2.88 percent in July. The increase was largely a result of higher prices for food, personal care products and transportation. It is still within the government target of 2.5 percent plus or minus 1 percent.

Statistics Indonesia released the figure at a press conference in Jakarta on Sep 1. BPS official Ateng Hartono said the Consumer Price Index (CPI) rose to 111.97 in August 2026 from 108.51 in the same month last year.

Meanwhile, newly appointed Bank Indonesia (BI) Governor Destry Damayanti was sworn into office on Sep 2, saying that she will prioritize macroeconomic stability while also gearing policy toward growth.

Destry said the global economy will face a higher interest rate environment for a longer period, which will weigh on the country’s economic outlook.

“Stability is critical because a stable economy widens the room for economic growth,” Destry said after her inauguration. “If you ask what our policy stance will be moving forward, our first priority is naturally safeguarding stability, but we will calibrate which instruments lean pro-stability and which lean pro-growth.”

On the inflation front, food, beverages, and tobacco were the largest contributors to annual inflation at 3.86 percent, contributing 1.13 percentage points to the overall rate.

The second-largest contributor was personal care and other services, which recorded annual inflation of 9.25 percent and contributed 0.63 percentage points. The increase was primarily driven by higher gold jewelry prices.

Transportation was another significant contributor, recording annual inflation of 4.79 percent in August, contributing 0.58 percent to the overall inflation rate.

In her remarks, Destry called for greater “synergy” with government agencies to maintain price stability and keep inflation in check.

“Everything can be achieved through this red-and-white synergy, which continues to guide us toward a better Indonesia. Through such partnerships, particularly in addressing domestic issues such as inflation, BI will strengthen its synergy with other ministries and related agencies,” she said after the inauguration.

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Indonesia’s Factory Activity Slips Back into Contraction

Indonesia’s manufacturing sector slipped back into contraction territory in August, with the S&P Global Indonesia Purchasing Managers’ Index (PMI) falling to 49.8 from 50.2 in July, below the 50-point threshold separating expansion from contraction.

The decline reflected weaker output and employment as manufacturers faced softer demand, intense competition and elevated input costs. Companies reduced staffing in response to lower production requirements, while some also reported difficulties retaining workers due to voluntary resignations.

Despite the downturn, new orders increased for the first time in three months, while business confidence continued to improve.

“We also saw a modest increase in new orders and continued improvement in business confidence. This shows that industry players still see fairly good market prospects ahead,” Industry Ministry spokesperson Febri Hendri Antoni Arief said in a statement on Sep 1.

Manufacturers relied on finished-goods inventories to meet new orders, pushing post-production stocks down at their fastest pace in four years. Purchasing activity was broadly unchanged after five consecutive months of decline, as stronger orders at some companies were offset by weaker demand elsewhere.

Other pressures included higher input and output prices, longer supplier delivery times, and rising backlogs of unfinished work.

S&P Global Market Intelligence economist Maryam Baluch said sentiment among manufacturers continued to recover despite the subdued headline reading. ASEAN overall boasted solid manufacturing figures, and only recorded a PMI drop to 52.3 from 52.8.

“Business confidence also continued to recover from April, suggesting that, despite the sector’s muted overall performance, manufacturers remain hopeful that production will rise over the coming 12 months,” Baluch said.

Indonesia underperformed against ASEAN peers, with the Philippines recording the strongest expansion at 54.9 and Thailand 53.8, Vietnam is at 53.3, and Singapore 51.3, while Myanmar stood at 50.3 and Malaysia at 50.2.

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Indonesia Raises 2027 Oil Production Target Despite 2026 Shortfall

Indonesia has raised its 2027 crude oil lifting target to 612,500 barrels per day (bpd), even as domestic output remains below this year’s target.

Energy and Mineral Resources Minister Bahlil Lahadalia announced the target during a working meeting with House Commission XII on Aug 31. He said higher output would be supported by new wells in Madura and Sumatra, including a project developed by Malaysia’s Petronas, as well as expanded use of enhanced oil recovery technology.

Official ministry data showed average crude oil production at 578,156 bpd as of July 31, below the 2026 State Budget target of 610,000 bpd.

Bahlil attributed the shortfall to natural depletion and operational disruptions at major production hubs. Output at the Cepu Block, which straddles Central and East Java, fell from a peak of around 185,000 bpd to 140,000 bpd, while the Rokan Block in Riau was affected by gas pipeline leaks and electricity disruptions.

The government also lowered its 2027 gas lifting target to 954,000 barrels of oil equivalent per day (BOEPD), from 984,000 BOEPD in the 2026 budget.

Separately, current gas production also remains below target, with output at around 6,544 million standard cubic feet per day (MMSCFD), compared with a 2026 target of 6,837 MMSCFD.

Indonesian National Oil and Gas Companies Association (ASPERMIGAS) Investment Committee Chairman Moshe Rizal said higher production would depend heavily on government support, particularly for gas infrastructure that may offer limited commercial returns for private investors, and that improving the business climate was equally important.

“Indonesia is competing against other countries in attracting investors, however Indonesia is not the only one offering incentives, others are also giving incentives and also convenience, we need to look at what other countries are giving if we want to improve,” said Moshe.

Indonesia’s oil production stood at around 601,500 bpd in 2025, while gas production averaged 6,753 MMSCFD.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Donna Priadi and written by the AmCham Staff.

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