Indonesia’s Net International Investment Liability Position Increased in Q2/2017 - Bank Sentral Republik Indonesia
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November 20, 2017

Indonesia’s International Investment Position (IIP) recorded a net liability of USD350.2 billion (35.7% of GDP) at the end of Q2/2017, up USD15.6 billion on the net liability of USD334.6 billion (34.9% of GDP) at the end of Q1/2017. The increase was due to larger increase in Foreign Financial Liabilities (FFL) compared to the increase in Foreign Financial Assets (FFA). The development was congruous with the capital and financial account surplus in Indonesia’s balance of payments in Q2/2017 supported by high investor confidence in Indonesia’s economic outlook as the investment grade status achieved.

Indonesia’s FFA position increased 2.7% (qtq) or USD8.4 billion to USD317.4 billion at the end of Q2/2017. The rise was mainly driven by increased other investment asset position, mostly in the form of offshore deposits related to the banks anticipation to meet temporary liquidity needs in Lebaran long holiday. Furthermore, the increase in FFA position was also supported by bigger reserve assets as well as direct investment and portfolio investment asset positions.

Indonesia’s FFL position at the end of Q2/2017 rose 3.7% (qtq) or USD24.1 billion to USD667.6 billion. The increase was mainly influenced by influx of foreign capital inflows in the form of direct investment and portfolio investment supported by sustained domestic economic growth and positive investor confidence in Indonesia’s economic outlook in line with Indonesia’s credit rating upgrade by S&P rating agency. Moreover, the increase in FFL position was also influenced by rising value of the rupiah-denominated investment instruments in line with the Jakarta Composite Index (JCI) rally.

Bank Indonesia views that the development of Indonesia’s IIP until Q2/2017 remained healthy. Nevertheless, Bank Indonesia continues to be aware of the risk of Indonesia’s net IIP liability position to the economy. Going forward, Bank Indonesia believes Indonesia’s IIP will be healthier supported by the monetary and macro-prudential policy mix implemented by Bank Indonesia.

Further information is presented in the Q2/2017 Indonesia’s IIP Report on the Bank Indonesia website.

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