• The current account recorded a US$2.1 billion surplus in Q4 bringing the surplus for January-December 2006 to US$9.6 billion surplus (2.6% of GDP).  Key factors in this performance were strong export performance that contrasted with relatively flat import growth due to slow recovery in domestic demand. This surplus was considerably larger than in 2005 (US$0.3 billion or 0.1% of GDP), but in line with the prediction of November 2006 (US$9.7 billion or 2.7% of GDP). The ongoing expansionary cycle in the world economy contributed positively to Indonesia’s export performance
  
  
• Oil prices declined in Q4 but the oil and gas exports in 2006 were nevertheless higher than in the previous year. Despite substantial decline in Q4, oil export prices averaged US$62.3/barrel in 2006 compared to US$52.0/barrel in 2005. The higher oil price contributed to 9.4% growth in oil and gas export revenues.
  
  
• Imports picked up in Q4, although import growth for the whole of 2006 remained low. Non-oil/gas imports climbed by a strong 22.5% (y.o.y) in Q4. Imports of raw materials and capital goods, which recorded only sluggish growth in Q1-Q3 began to accelerate in Q4 in line with stronger domestic demand.
  
  
• The services and income deficits mounted higher in 2006 alongside a relatively stable surplus in current transfers. Key factors in the increased services deficit were rising freight costs for imports and the decline in tourist arrivals from 5.0 million in 2005 to 4.9 million in 2006 caused partly by concerns over bird flu and natural disasters. The strong foreign demand for domestic equities, government bonds, and Bank Indonesia Certificates (SBI) and their corresponding impact on income payments contributed to the increased deficit in income transactions.
  
  
• Global liquidity and the stable domestic macroeconomic environment contributed to the larger surplus in capital and financial account. On the liabilities side, the financial account recorded a surplus of US$5.4 billion in Q4 and US$11.1 billion for 2006 overall. After allowance for overseas asset placements, the capital and financial account recorded a surplus of US$2.2 billion in Q4 and US$2.5 billion for the year 2006, well ahead of the US$0.3 billion surplus in 2005.
  
  
• Net FDI inflows reached US$4.9 billion in Q4 and US$7.5 billion for 2006 overall, down from US$8.3 billion in 2005. Portfolio investment inflows increased despite the series of reductions in the BI Rate. Portfolio investment recorded net inflows of around US$1.9 billion in Q4 and US$5.7 billion for the whole year, up from US$5.3 billion in 2005.
  
  
• During 2006, official reserves increased by US$15.0 billion, largely due to stronger oil and gas export revenues. This provided ample room for Bank Indonesia and the Government to accelerate repayments to the IMF. Even after these early repayments, official reserves at the end of 2006 stood at US$42.6 billion (equivalent to 4.6 months of imports and official debt repayments), up US$7.9 billion from US$34.7 billion at the end of 2005.

Please see attachment for complete story of Indonesia’s BOP Performance