The current account recorded a US$4.0 billion surplus in Q3 2006, leading to a US$6.2 billion surplus in the first three quarters of 2006, on the back of strong export performance and weak import demand.
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The world’s economic expansionary cycle, which is expected to reach its peak in 2006, has contributed positively to Indonesia’s export performance. Export volumes and prices of major non-oil and gas commodities, such as rubber, copper, coal, crude palms oil (CPO), machineries, electronics, chemical products, and textile and textile products have increased significantly.
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On the other hand, the growth of imports has slowed down substantially due to weak domestic consumption and investment.
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The deficits in services and income increased while surplus in current transfer was relatively stable. A significant drop in tourist arrivals is one of the main factors behind the increase of deficit in services. The strong foreign demand for domestic equities and their corresponding impacts on income payments have contributed to the increase of deficit in income transactions.
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Foreign Direct Investment (FDI) inflows declined. A number of unresolved problems, including the lack of basic infrastructures (i.e. road and electricity) contributed to this sluggish performance.
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Portfolio investment inflows increased despite the continued declines in BI Rate.
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Official reserves increased significantly. These large increases were mostly coming from the rise in oil and gas export revenues.