Stronger Balance of Payments Surplus in Q3/2009

In Q3/2009, the overall balance of payments recorded a surplus of US$3.5 billion, up from the US$1.1 billion surplus in Q2/2009. Positive contributions to this surplus came from both the current account as well as the capital and financial account. In response, the international reserves position at end-Q3/2009 mounted to US$62.3 billion, a level equivalent to 6.1 months of imports and servicing of official external debt.

The current account posted a US$1.7 billion surplus in Q3/2009, lower than the Q2/2009 surplus of US$2.9 billion. The lower surplus is explained by reduced performance in the non-oil/gas trade balance and the oil trade balance. Non-oil/gas exports forged ahead on the upward trend under way since the preceding quarter, bolstered by strong demand in some Asian economies and rising international market prices for leading primary commodity exports. However, the accelerated pace of domestic economic activity prompted a surge in non-oil/gas import growth (16.3%, qtq) ahead of non-oil/gas exports (9.5%, qtq), resulting in a diminished non-oil/gas trade balance surplus compared to one quarter earlier. Accelerated domestic economic activity and the seasonal factor of the Eid-ul-Fitr festivities also led to increased consumption of oil-based fuels and imports of oil with a consequent deficit in the oil trade balance. Nevertheless, the current account benefited from a heftier surplus in the gas trade balance following commencement of production at the Tangguh gas field and increases in world oil prices.

Offsetting the reduced current account surplus was stronger performance in the capital and financial account. During Q3/2009, the capital and financial account posted a US$3.0 billion surplus, after a US$2.2 billion deficit in the preceding period. Key to this surplus was stronger performance in portfolio investment and other investments. The steady improvement in domestic macroeconomic conditions combined with attractive interest rates on rupiah-denominated instruments prompted higher portfolio capital inflows. In other investments, improved outlook for the economy, easing of global liquidity conditions, and comparatively low international interest rates have encouraged greater foreign borrowing by the private sector. Other investments also benefited from an additional allocation of Special Drawing Rights (SDRs). This allocation is intended to bolster the international reserves held by member countries in the International Monetary Fund (IMF), including Indonesia, as part of the efforts to resolve the global economic crisis.

Balance of payments statistics for Q3/2009 are presented in the attached table. A complete report may be accessed on the Bank Indonesia website (www.bi.go.id) from 20 November 2009.

Jakarta, 17 November 2009
Office of the Governor

Dyah N.K. Makhijani
Director