Indonesia’s Net International Investment Liability Position Increased - Bank Sentral Republik Indonesia
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December 10, 2019
Indonesia's International Investment Position (IIP) recorded an increase of net liabilities at the end of Q1/2019 on a higher position of Foreign Financial Liability (FFL). At the end of Q1/2019, Indonesia’s IIP recorded a net liability of USD331.2 billion (31.5% of GDP), higher than the net liability of USD318.6 billion (30.6% of GDP) at the end of Q4/2018. The increase was attributable to a more significant increment in the FFL position compared to the increase in Foreign Financial Asset (FFA) position.
 
The higher in Indonesia’s FFL position, primarily backed by an influx of foreign capital in the form of portfolio investment and direct investment. It reflected strong investor confidence in the domestic economic outlook. In addition, a milder global financial markets uncertainty risk has also been a driving factor in supporting foreign capital inflows in the form of portfolio investment and direct investment. At the end of Q1/2019, the FFL position climbed by 3.5% (qtq) or USD23.3 billion to USD689.0 billion. The increase in FFL position was also influenced by other changes such as a positive revaluation of domestic financial instruments in line with the Jakarta Composite Index (JCI), which traded upwards, as well as US dollar depreciation against the rupiah, which raised the value of rupiah-denominated investment instruments.
 
Indonesia’s FFA position also increased due to the FFA acquisition transaction, especially in the form of other investment position and reserve asset. The FFA position rose by 3.1% (qtq) or USD10.6 billion, to reach USD357.8 billion at the end of Q1/2019. The FFA position edged up by an increase of average stock index in countries receiving FFA and the US dollar depreciation against several major currencies in countries where reserve assets were being placed.
 
Bank Indonesia views that the development of Indonesia’s IIP at the end of Q1/2019 remained healthy. This condition is indicated by the domination of long-term instruments within the structure of Indonesia's IIP net liability. Nevertheless, Bank Indonesia will remain vigilant on the risk of Indonesia’s IIP net liability to the economy. Going forward, Bank Indonesia believes that Indonesia’s IIP performance will improve further, congruent with maintained economic stability and persistence recovery of Indonesia economy, supported by consistency and synergy in the policy mix of monetary, financial market deepening, fiscal, and structural reforms.
 
Further information is presented in the Q1/2019 Indonesia’s IIP Report on the Bank Indonesia website. 
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