JAKARTA (TheInsiderStories) - Indonesia’s Balance of Payment (BOP) was surplus of $12 billion in 2016, compared to a deficit of $1 billion in previous year, driven by improved current and capital account, Bank Indonesia Governor Agus Martowardojo revealed. The surplus represents 1.8% of GDP, which is quite encouraging.
“As for this year, in general we still see this (surplus) will be maintained. What we need to watch out is the current account deficit that may enlarge to $22-23 billion from $17 billion last year,” he said. This could make Indonesia’s current account deficit to increase to 2.4% of GDP, although it may still in healthy level.
As a result of improved capital account, Indonesia’s foreign exchange reserves increased to $116.4 billion at end of January, from $105 billion in early January. “This shows that the monetary stability is well-guarded as indicated by the inflow of capital into Indonesia, coupled with the issuance of global bonds by the government,” Martowardojo said.
He said Indonesia’s forex reserves level is equal to covering imports and government debt repayment of eight months.
The challenges in current account is being offset by improvement of capital account, supported by direct investment and portfolio investment. “We see private investors are bringing in their money to invest. Up to February, there has been Rp24 trillion funds inflow into Indonesia. The opportunity for private investors to invest is quite large in the past two years,” the governor said.
“We see in 2017, the world economy is improving, as indicated by a rise of commodity prices, providing further opportunities for private sector to invest,” he said.
As for inflation, the governor expects inflation to be maintained at 4+1%. The government has agreed to cut subsidy on energy which may put pressure on inflation. “We will guard volatile food so that it will not go above inflation target. We also hope that the administered goods prices will be kept under control so that it will not put upward pressure on inflation,” Agus Martowardojo said.
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At present, the global economy is facing uncertainty in the financial system, awaiting for the fiscal and trade policies of the US. As for currency trade, Yuan may further weaken after falling by 7% in 2016. “We are paying attention on this issue,” he said.
The central bank also paying attention on the oil price volatility after OPEC decided to cut its production. Indonesia expects oil price to settle at US$47 per barrel in 2017. Indonesia’s leading commodities’ prices improved in late 2016, which may continue through to the end of this year. The world economy is projected to grow by 3.4% this year, revised upward from 3.2% in early projection.
Head of board of Mandiri Institute Chatib Basri noted that the positive news is that the commodity prices are improving. This will have direct impact on farmers which ultimately increase their income. The challenge in global trade, however, is the protection policy of the newly elected US President Donald Trump. (*)