JAKARTA (TheInsiderStories) - Indonesia’s balance of payments (BOP) recorded surplus US$5.1 billion in the fourth quarter (Q4) of 2015, after the previous quarter recorded a deficit of $4.6 billion. This surplus was supported by the capital and financial account surplus of $9.5 billion which exceeded the current account deficit amounted to US$ 5.1 billion (2.39 percent of GDP).
In last quarter of 2015 balance of payments surplus in turn push up the foreign exchange reserves of $101.7 billion at the end of the Q3 of 2015 to $105.9 billion at the end of the Q4 of 2015. The amount of foreign exchange reserves is adequate to finance the payment of imports and foreign debt government for 7.4 months and is above the international standard of adequacy.
The current account deficit increased in the repair process of the Indonesian economy. The current account deficit in the fourth quarter of 2015, higher than the previous quarter of $4.2 billion (1.94 percent of GDP). The increase in the current account deficit was due to the decline in non-oil trade balance surplus for non-oil imports grew 7.5 percent (q-o-q) along with the increase in domestic demand in the fourth quarter of 2015.
The increase occurred in the group of the largest import of capital goods, followed by consumer goods and raw materials , Meanwhile, non-oil exports contracted 4.2 percent (q-o-q) affected by continued weak global demand and a continued decline in commodity prices.
On the other hand, the oil trade deficit to shrink with the decline in the volume of oil imports and crude oil prices. Despite the increase in the deficit compared with the previous quarter, the current account improved fourth quarter 2015 compared to the same period in 2014 which recorded a deficit of $6.0 billion (2.70 percent of GDP).
The capital and financial account surplus increased significantly with decreasing uncertainty on global financial markets and the improvement in confidence in the outlook for the Indonesian economy. The capital and financial account surplus fourth quarter of 2015 is higher than the previous quarter at $280 million.
The increase in capital and financial account surplus was mainly supported by the back of rising inflows of portfolio investment in government bonds, including global bond. In addition, the increase in the financial capital account surplus is also supported by the increase in other investment and inflows of foreign direct investment (FDI).
The increase in other investments caused partly by increased withdrawals of deposits abroad and the withdrawal of foreign loans related to the increasing realization of the government’s infrastructure projects. Meanwhile, the increase in inflows of foreign direct investment (FDI), especially in the mining sector, finance, and manufacturing in line with improvements in domestic investment. The capital and financial account surplus in the fourth quarter of 2015, relatively equal to the surplus recorded in the same period the previous year.
On the whole year, the balance of payments in 2015 under pressure amid dynamic development of the global and domestic economy. NPI in 2015 had a deficit of $1.1 billion after the previous year recorded a surplus of $15.2 billion.
The pressure on the balance of payments surplus was due to the reduction in capital and financial transactions that can not be fully finance the current account deficit. However, the current account deficit amounted to $17.8 billion (2.06 percent of GDP), better than the previous year to reach $27.5 billion (3.09 percent of GDP).
Such improvement is due to a decrease in imports greater than the decrease in exports, as well as improving the performance of the balance of services and income account. The decline in imports due to weak domestic demand as a result of slower economic growth in 2015.
Meanwhile, the decline in exports was driven by weaker external demand due to the slowing world economy and the continuing decline in global commodity prices. On the other hand, the capital and financial account surplus in 2015 fell to $17.1 billion from $45.0 billion in 2014.
This was primarily driven by capital inflows of direct investment and corporate funding needs through foreign borrowing declines with slowing domestic economy. In addition, the financial capital transaction the decline was also caused by a decrease in capital inflows of foreign portfolio and other investments.
The decline in foreign portfolio capital inflows significantly due to the high uncertainty in the global financial markets, despite uncertainties in the global financial market had eased in the fourth quarter of 2015. Meanwhile, the decline in other investments due to the increase in private sector deposits in foreign banks due to the perception of the perpetrator economy to the domestic economy had weakened.
Looking ahead, Bank Indonesia will continue to be aware of global developments, particularly the risks related to the economic slowdown in China and continued decline in commodity prices, which could affect the overall balance of payments. However, 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.