Indonesia’s Q4/2018 Balance of Payments Surplus, External Resilience Maintained - Bank Sentral Republik Indonesia
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July 19, 2019

No. 21/10/DKom

Indonesia’s Balance of Payments (BOP) in Q4/2018 experienced a surplus thus supporting the external resilience. After experiencing a deficit in the previous quarter, the BOP in the fourth quarter of 2018 registered a surplus of USD5.4 billion, supported by an increase in the capital and financial account surplus. With this development, the official reserve asset position at the end of December 2018 increased to USD120.7 billion, equivalent to 6.5 months of imports and government foreign debt, and was above the international adequacy standard of around 3 months of imports.

The capital and financial account surplus in Q4/2018 increased significantly as a reflection of strong investor confidence in the domestic economy outlook. The capital and financial account surplus was recorded at USD15.7 billion, a significant increase compared to the surplus in the previous quarter of USD3.9 billion. This increase was mainly supported by the improvement in portfolio investment performance, in line with a surge in foreign capital inflows on domestic financial assets. The increased surplus was also supported by the global bond issuances by government and corporations. In addition, optimism on Indonesia's economic prospects has encouraged domestic businesses to withdraw their deposits at offshore banks to meet business needs causing a surplus in other investments.

Meanwhile, the current account deficit in Q4/2018 increased in line with strong domestic demand. The current account deficit in the fourth quarter of 2018 was recorded at USD9.1 billion (3.57% of GDP), higher than the deficit in the previous quarter of USD8.6 billion (3.28% of GDP). The increase in the current account deficit was affected by a decline in the non-oil and gas trade performance due to a remained high imports in line with domestic demand which was still strong amid limited export performance. Nevertheless, a better improvements in the primary income balance and services trade balance can reduce the widened deficit. The improvement in the primary income balance was mainly related to lower government debt security interest payments, and increased surplus in travel services, among others, was supported by the holding of the Asian Para Games in Jakarta and the IMF Annual Meeting- World Bank in Bali.

The overall development of the BOP in 2018 shows a maintained external resilience. The current account deficit was still within safe limits, amounting to USD31.1 billion or 2.98% of GDP. This deficit was mainly influenced by high non-oil and gas imports, especially raw materials and capital goods, as a result of strong domestic economic activity, amid the limited performance of non-oil and gas exports. The increase in the deficit was also driven by an increase in oil imports in line with the increase in average world oil prices and domestic fuel consumption. On the other hand, amid uncertainty on high global financial markets, capital and financial transactions recorded a significant surplus of USD25.2 billion, mainly supported by long-term capital inflows. With these conditions, the BOP in 2018 suffered a deficit of USD7.1 billion.

Looking ahead, BOP's performance is predicted to improve and continue to sustain the external sector resilience. Bank Indonesia continues to strenghten coordination with the Government to strengthen the resilience of the external sector, including controlling the current account deficit in 2019 towards the range of 2.5% of GDP. Bank Indonesia will keep track of global developments that can affect the outlook for the balance of payments, such as uncertainty in the still high global financial markets, as well as the volume of world trade and global commodity prices which tend to decline. Bank Indonesia will continue to strengthen the policy mix to maintain economic stability, and strengthen policy coordination with the Government in encouraging the continuation of structural reforms.

Further information and data are presented in the Q4/2018 Indonesia Balance of Payments Report of Bank Indonesia website.

Jakarta, 8 February 2019
Communication Department 
Executive Director


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