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12/23/2020 8:00 AM
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Net Liabilities of Indonesia’s International Investment Position Decreased in Third Quarter of 2020

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Indonesia's International Investment Position (IIP) recorded a decrease in net liability at the end of Q3/2020.  At the end of the reporting period, Indonesia's IIP recorded a net liability totalling USD265.3 billion (24.8% of GDP), lower than the net liability of USD281.7 billion (25.7% of GDP) at the end of Q2/2020. The decrease was attributable to a decrement in the Foreign Financial Liabilities (FFL) position and an increase in the Foreign Financial Assets (FFA) position.  

The lower Indonesia's FFL position was primarily due to a decrease in portfolio investment. This development was in line with high financial market uncertainty amidst an increase in direct investment transactions. At the end of Q3/2020, the FFL position down by 1,4% (qtq) from USD660,8 billion to USD651.4 billion. The decrease in FFL position was primarily due to the rebalancing of portfolio investment and the revaluation of rupiah-denominated investment instruments in line with lower Jakarta Composite Index (JCI) and stronger US dollar against the Rupiah at the end of Q3/2020 compared to the previous quarter. However, further FFL decreased were negated by an increase in FFL transactions in the form of equity inflows on direct investment and withdrawals of foreign loans.

Indonesia's FFA position increased mainly driven by direct investment and reserve assets. At the end of the third quarter of 2020, the FFA position expanded 1,9% (qtq) from USD379,1 billion to USD386,1 billion. Besides transaction factors, the rising FFA was also backed by the positive revaluation factor due to the US dollar depreciation against most global currencies.

Bank Indonesia views that Indonesia's IIP at the end of Q3/2020 remained solid. This condition is indicated by Indonesia's IIP liability structure dominated by long-term maturity instruments. Nevertheless, Bank Indonesia will remain vigilant on the risk of IIP net liability to the economy. Going forward, Bank Indonesia believes that Indonesia's IIP performance will be maintained in line with the effort to stimulate economic recovery during the Covid-19 pandemic, supported by the synergy of Bank Indonesia's policy mix and government policy, as well as other relevant authorities.

Further information is presented in Q3/2020 Indonesia's IIP Report on the Bank Indonesia website.

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Erwin Haryono

Executive Director

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