JAKARTA (TheInsiderStories) – Indonesia’s balance of payments surplus continued in first quarter (Q1) of 2017 as a result of large capital and financial surplus that outpaced current account deficit. The balance of payments surplus stood at US$4.5 billion, relatively the same as the preceding quarter surplus, or in contrast to deficit of $300 million in the same quarter of 2016.
“The balance of payments surplus in turn led to an increase in official reserve assets from $116.4 billion at the end of Q4 2016 to $121.8 billion at the end of Q1/2017,” said Director Executive Communication Department of Bank Indonesia, Tirta Segara in a press statement.
The amount of reserve assets was adequate to finance 8.6 months of imports and government external debt repayment and well above the international standards of reserves adequacy. An increase in capital and financial account surplus was in line with improving economic growth and positive perceptions of the economic outlook.
The capital and financial account surplus in Q1 2017 reached $7.9 billion, higher than the Q4 2016 surplus of $7.6 billion and the Q1 of 2016 surplus of $4.2 billion. This increase was mainly driven by mounted portfolio investment inflows in rupiah-denominated instruments (SUN, T-bills and stock) and the issuance of the government’s global Sukuk.
Further increase in capital and financial account surplus was detained by a decrease in direct investment surplus, largely due to outflows of direct investment in the oil and gas sector, and other investment deficits mainly due to the placement of private sector assets abroad.
Meanwhile, the current account deficit increased driven by growing deficits in oil and gas trade balance and primary income. The current account deficit in Q1 2017 was $2.4 billion (1.0 percent of GDP), up from $2.1 billion (0.9 percent of GDP) in Q4 2016, but much lower than the deficit in Q1 2016 of $4.7 billion (2.1 percent of GDP).
“The increase in current account deficit in Q1 2017 was primarily due to higher oil and gas trade balance and primary income deficits,” he added.
The increase in oil and gas trade deficit was affected by rising world oil prices amid declining oil lifting, while the increase in primary income deficit followed interest rate payment schedules of government bonds and increased direct investment income payments. The increase in current account deficit was halted by a surge in non-oil and gas trade surplus as commodity price hike continued and services deficit declined mainly due to a surge in travel services surplus.
The overall balance of payment development in Q1 2017 indicates a maintained external balance of the economy and paves the way for supporting a sustained macroeconomic stability. Bank Indonesia will continue to be wary of global developments, in particular risks related to US central bank policies and geopolitical factors, which may affect the overall balance of payments performance. (RF)