Current Account Deficit Narrowed in Q4/2016 - Bank Sentral Republik Indonesia
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October 25, 2020

No. 19/13/DKom

Current account deficit narrowed in Q4/2016 in line with improvements in the global economy and the Indonesia’s economy. The current account registered a deficit of US$1.8 billion (0.8% of GDP) in Q4/2016, lower than the previous quarter’s deficit of US$4.7 billion (1.9% of GDP) as goods and primary income accounts improved. Goods trade surplus increased as trading partner economes improved and global commodity prices rebounded. Meanwhile, the primary income deficit decreased in accordance with the schedule of lower interest payments on government debt securities. The current account performance in Q4/2016 was also better than the same period last year which recorded a deficit of US$4.7 billion (2.2% of GDP) due to an increase in the goods trade surplus and a decrease in the services trade deficit.

The capital and financial account in Q4/2016 recorded a sizable surplus that surpassed the current account deficit. The capital and financial account surplus in Q4/ 2016 reached US$6.8 billion, mainly attributable to other investment surplus in line with the continued tax amnesty fund repatriation. Nevertheless, the capital and financial account surplus was lower than Q3/2016 surplus. The development stemmed from the reversal of portfolio investment to deficit as foreign capital outflows from domestic stock and rupiah denominated government debt securities post-announcement of the US presidential election, as well as lower direct investment surplus due to outflow in the mining sector.

As a result, Indonesia's balance of payments (BOP) in Q4/2016 recorded a surplus of US$4.5 billion. Balance of payments surplus in Q4/2016 in turn led to an increase in official reserve assets to US$116.4 billion at the end of Q4/2016 from US$115.7 billion at the end of Q3/2016 or US$105.9 billion at the end of 2015. The amount of reserve assets was adequate to finance 8.4 months of imports and government external debt repayment and well above the international standards of reserves adequacy.

For the whole year, the balance of payments became surplus in 2016 underpinned by a decline in the current account deficit and increase in capital and financial account surplus. The 2016 BOP recorded a surplus of US$12.1 billion, a turnaround from the US$1.1 billion deficit posted in 2015. The current account deficit fell from US$17.5 billion (2.0% of GDP) in 2015 to US$16.3 billion (1.8% of GDP) in 2016 supported by improvement in goods and services trade performances. Trade in goods surplus increased on account of a greater decrease in imports than exports. Nonetheless, the pace of a decline in imports in 2016 was not as deep as a decline import in 2015 in line with the improving domestic economy. Similarly, the decline in exports was milder than the decline in export in the previous year on the back of rising global commodity prices. Trade in services deficit also decreased following the decrease in imports of goods. On the other hand, the capital and financial account surplus in 2016 increased significantly to US$29.2 billion from US$16.8 billion in 2015. The increase was primarily driven by higher surplus of direct investment and portfolio investment along with a decrease in other investment deficit in line with positive investor perception of domestic economy and the sound implementation of tax amnesty program.

Looking forward, Bank Indonesia will continue to be aware of global developments, particularly the risks related to the US and China policy directions as well as rising oil prices, which could affect the overall balance of payments. Bank Indonesia believes the balance of payments will be better supported by monetary and macroprudential policy mix, as well as policy coordination with the Government, especially in encouraging the acceleration of structural reforms.

Further information and data are presented in the Q4/2016 Indonesia Balance of Payments Report on the Bank Indonesia website.

Jakarta, 10 February 2017
Communication Department

Tirta Segara
Executive Director

Notes:
- The next publication of Indonesia’s Balance of Payments statistics is scheduled on 12 May 2017.

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