Official data released on Thursday showed that Indonesia recorded a much larger-than-expected trade surplus of $3.55 billion in August, widely exceeding market expectations, while some economists questioned the sustainability of this situation.
The August surplus is the largest since September 2025, according to LSEG data, and is much higher than the average forecast of about $630 million, according to a Reuters poll.
This large surplus may alleviate concerns about the deterioration of Indonesia's current account situation, after the country recorded its largest deficit since 2018 during the April-June quarter.
But Erman Faiz, an economist at Danamon Bank, said that although the surplus provides a buffer for foreign currencies in the near term, this improvement is “fragile and not structural.”
Fayez attributed this to a decline in import growth below expected levels, noting that this situation is temporary.
“Therefore, we remain cautious about external expectations, especially as the terms of trade have become less favorable,” he said.
He added that Danamon Bank still expects the central bank to further tighten monetary policy to deal with external pressures.
Import growth was below expectations
Indonesia, the largest economy in Southeast Asia, is the world's largest exporter of thermal coal, palm oil and nickel, and is also a major supplier of tin, copper, aluminum and coffee. The country benefited this year from higher prices for some of its major commodity exports, with some of the gains driven by rising global crude prices as a result of the conflict in the Middle East, but import bills also rose sharply, given the country being a net importer of oil.
Exports rose by 6.72 percent year-on-year in August to reach $26.61 billion, according to data from the Indonesian Statistics Authority, exceeding the 4.3 percent increase expected in a Reuters poll.
This increase, which exceeded expectations, was driven by increased shipments of non-ferrous metal products, nickel, aluminium, copper, and basic chemical products.
In contrast, imports rose by 19.09 percent year-on-year to reach $23.06 billion, which is less than the 31.14 percent jump expected by the survey.
Faisal Rahman, an economist at Permata Bank, said that import growth is expected to remain strong in the coming period in conjunction with the improvement in the Purchasing Managers' Index in September, while exports may face obstacles resulting from weak demand.
Rahman expected Indonesia's current account deficit to expand to reach 2.49 percent of GDP in 2026, and to stabilize at approximately this level in 2027, which is a much higher percentage than the expected deficit of 0.09 percent in 2025, suggesting that the central bank will continue to maintain a more stringent monetary approach.
It is noteworthy that the Bank of Indonesia had raised interest rates by 100 basis points during the period between May and Utah, to support the local currency, the rupiah, which was witnessing a decline.
Euro zone government bond yields were mixed on Thursday, after recording their biggest quarterly rise since 2022 as the worsening energy shock continued to boost bets that the European Central Bank would raise interest rates at least three times by late 2027.
At the same time, French bond yields reached their highest levels in 18 years, after recording the largest quarterly jump in nearly four decades, according to Reuters.
Expectations of further interest rate hikes by the European Central Bank have increased borrowing costs, raising concerns about debt sustainability in the eurozone's most indebted countries, particularly France and Italy, while political uncertainty ahead of the 2027 elections has increased concerns about the two countries' public finance trajectories.
German 10-year government bond yields, the benchmark for the euro zone, rose by one basis point, after reaching 3.6526 percent on Monday, their highest level since June 2009, and on Wednesday they had recorded a quarterly rise of 71 basis points.
The two-year German government bond yield, which is the most sensitive to interest rate expectations, rose by 1.5 basis points to 3.21 percent, after touching 3.3276 percent on Monday, its highest level since September 2023. The yield recorded a quarterly rise of 66 basis points, the largest increase since the last quarter of 2022, when it rose by 95 basis points.
Money market pricing indicates expectations that the interest rate on deposits at the European Central Bank will reach 2.81 percent by December, which means an expectation of an interest rate hike of a quarter of a percentage point, with a 24 percent probability of a second hike. Markets also expect the key interest rate to reach 3.42 percent by late 2027, compared to 2.50 percent currently.
The spread between French and German government bond yields, a market indicator of the risk premium required by investors to hold French debt, reached 127.51 basis points, after reaching 114.06 points last week, recording its highest level since June 2012.
The difference in Italian bond yields compared to German bonds, which are considered a safe haven, also widened to 104.15 basis points, recording its widest range since May 2025.
Turkey's main stock index entered a bear market and recorded its worst monthly performance since 2008 in September, after a selling wave triggered by liquidity-strapped investment funds spread to the broader market.
The index closed 2.79 percent lower on Wednesday, becoming more than 20 percent below the record closing level recorded on May 11, confirming its entry into a bear market. It ended September down 16.65 percent.
The selling wave accelerated on September 14 due to concerns about funds with high exposure to low-trading stocks. Some funds were forced to sell liquid holdings to meet redemption requests, leading to broader declines and triggering more divestment requests, analysts said.
The index fell by more than 8 percent in the week ending September 18, recording its worst weekly performance since March 2025, when the imprisonment of Istanbul Mayor Ekrem Imamoglu led to a sharp selling wave.
On September 17, the Turkish Capital Markets Authority (SPK) ordered the liquidation of 131 funds that manage more than $20 billion and serve 455,758 individual investors.
Since then, regulators have expanded their investigations into allegations of manipulation in stock and fund markets. Justice Minister Akin Gorlik said on Wednesday that the number of suspects had risen to 217 people, including 56 detainees awaiting trial.
Small stocks suffer the biggest losses
The Istanbul Index of companies outside the list of the 100 largest companies, which includes 484 companies, has outperformed the benchmark index since the beginning of 2025. However, the difference narrowed sharply after the Turkish Capital Markets Authority in late August imposed restrictions on the size of the fund’s assets that can be concentrated in individual companies.
The index fell about 35 percent in September, recording its worst monthly performance in lira terms since its launch in 2009.
In contrast, the index of the largest 30 stocks, which includes blue-chip stocks, declined at a slower pace, ending September down 9.8 percent.
As for the index, which includes the remaining 70 stocks within the 100 largest companies, it bore the brunt of the selling wave since January 2025, as 15 of its components lost between 50 and 90 percent of their value in September, according to data collected by LSEG.
