Domestic Demand Strengthens, Current Account Deficit Increases - Bank Sentral Republik Indonesia
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November 13, 2018

No. 20/86/DKom

The current account deficit increased in Q3/2018 in line with strengthening domestic demand. The current account deficit was recorded at USD8.8 billion (3.37% of GDP), higher than the previous quarter's deficit of USD8.0 billion (3.02% of GDP). Cumulatively up to the third quarter of 2018, the current account deficit was still within a safe threshold at 2.86% of GDP.

The widen current account deficit was due to weaker trade performance and increased services account deficit. The faded trade performance was mainly attributable to rising oil and gas trade deficit, while increase of non-oil and gas trade surplus was relatively limited due to high import in response to robust domestic demand. The increasing oil and gas trade deficit was explainable by growing oil imports amid world oil price hike. The widen current account deficit was also caused by an increase in the services account deficit, especially transportation services, in line with higher imports of goods and the hajj pilgrimage activities. A further current account deficit was restrained by better export performance of manufactured products and increase in travel services surplus as the number of foreign traveler visits increased, among other during Asian Games held in Jakarta and Palembang.

The capital and financial account in Q3/2018 recorded a substantial surplus as a reflection of investors’ remained high confidence on the domestic economic outlook. The capital and financial account posted a surplus of USD4.2 billion during the reporting quarter, supported by increased direct investment inflows. In addition, the foreign capital inflows through government securities instruments was rising and corporate foreign loans also increased. However, the capital and financial account surplus was not enough to finance the current account deficit, so that the Indonesia’s Balance of Payments (BOP) recorded a deficit of USD4.4 billion in Q3/2018. Such condition makes the official reserve assets position at the end of September 2018 was registered at USD114.8 billion. The amount of reserve assets was equivalent to 6.3 months of imports and servicing government external debt, well above the international standard of adequacy at 3 months of imports.

Going forward, BOP performance is expected to improve and continue to sustain the external sector resilience. Strong coordination and concrete steps taken by the Government together with Bank Indonesia to encourage exports and reduce imports are believed to have a positive impact in managing the current account deficit to remains below 3%. At the same time, Bank Indonesia will keep a close watch on global development that may affect the BOP outlook, such as the remained high global financial markets uncertainty, the declining world trade volume, and the increasing world oil prices. Bank Indonesia continues to strengthen the policy mix to maintain economic stability, as well as strengthen policy coordination with the Government in encouraging the continuation of structural reforms.

Further information and data are presented in the Q3/2018 Indonesia Balance of Payments Report of Bank Indonesia website.

Jakarta, 9 November 2018
Communication Department

Agusman
Executive Director

Note:
- The next publication of BOP statistics is scheduled on February 8, 2019.

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