Indonesia’s Net International Investment Liability Position Decreased in Q3/2017 - Bank Sentral Republik Indonesia
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January 20, 2018

Indonesia’s International Investment Position (IIP) recorded a declining net liability, underpinned by rising Foreign Financial Assets (FFA). At the end of the third quarter of 2017, Indonesia’s IIP recorded a net liability of USD343.4 billion (34.4% of GDP), down from the net liability of USD348.1 billion (35.5% of GDP) posted at the end of the second quarter of 2017. The decrease was due to an uptick of Foreign Financial Assets (FFA) that exceeded the corresponding increase of Foreign Financial Liabilities (FFL).

Indonesia’s FFA position increased 3.2% (qtq) or USD10.3 billion to USD329.8 billion at the end of the third quarter of 2017. The rise was mainly driven by increased official reserve assets in line with a substantial Indonesia’s balance of payments surplus in the third quarter of 2017. Furthermore, higher positions of direct investment, portfolio investment, and other investment assets also raised the FFA position. The increase in FFA position in the reporting period was also affected by upward valuation of the non-US dollars FFA in line with the weakening of the US dollar against most major global currencies.

Indonesia’s FFL position at the end of the third quarter of 2017 rose 0.8% (qtq) or USD5.5 billion to USD673.2 billion. The increase was mainly influenced by a large influx of foreign capital inflows in the form of direct investment and portfolio investment in line with the optimism on domestic economic performance and of the attractiveness of domestic financial asset yields. Further increase in FFL position was stifled by negative revaluation of domestic financial assets as the US dollar strengthened against the rupiah.

Bank Indonesia views that the development of Indonesia’s IIP until Q3/2017 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 performance will improve further in line with Indonesia’s maintained economic stability and sustained economic recovery, supported by consistency and synergy in the mix of monetary policy, fiscal policy, and structural reforms.

Further information is presented in the Q3/2017 Indonesia’s IIP Report on the Bank Indonesia website.

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