Indonesia's gross domestic product (GDP) growth recorded at 5.02 percent in 2019, lower than 5.17 percent achieved in 2018 - Photo: Special

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) reported the country’ current account deficit (CAD) widened to US $8.4 billion or 3 percent of the gross domestic products (GDP) in the second quarter (2Q) of 2019. Its higher from the previous quarter which reached $7 billion or 2.6 percent of GDP

Based on an official statement released on Friday (8/9), the deficit rising was influenced by the repatriation payment, dividends and foreign debt payments. In addition, it was also caused by slowing global economic growth and the declining of world commodity prices. 

In the 2Q of 2019, non-oil and gas exports were recorded of $37.2 billion, lowered from previous quarter worth of $38.2 billion. The oil and gas trade balance deficit also rose to $3.2 billion from $2.2 billion in the previous quarter.

Inline with the rising of global oil prices and seasonal demand for oil and gas imports related to Idul Fitri and school holidays. However, Indonesia’ balance of payments (BoP) still recorded a surplus of $400 million. This was driven by a capital and financial account surplus in line with improving investor positive perceptions of the Indonesian economy.

The capital and financial account surplus in the second quarter of 2019 was recorded at $7.1 billion, supported by inflows of foreign direct investment and portfolio investment. Investment inflows were recorded at $7 billion, increased from previous quarter of $6.1 billion.

Portfolio investment was also still high at $4.5 billion. While, other investments recorded a deficit influenced by the increasing payment of government and private foreign loans that were due.

Looking ahead, the balance of payments is predicted to remain good so that it can continue to sustain the resilience of the external sector. This prospect is supported by the forecast of current account deficit 2019 which is expected to be lower than 2018, in the range of 2.5 until 3 percent of GDP.

The foreign capital inflows is also predicted to increase driven by positive investor perceptions of the maintained economic prospects of Indonesia. Bank Indonesia will strengthen policy synergies with the government and relevant authorities to improve external resilience.

Previously, Indonesia’ president Joko Widodo has criticized his ministers due to the country’s widening current account deficit. In a plenary cabinet session at Presidential Palace in Bogor, West Java on July 8, the president criticized his minister performance who were considered to be not maximal enough to overcome national economic problems, especially about imports and exports.

“We need to look at the figures obtained by the statistics agency’ data. This is careful, which is related to exports and imports,” said Widodo.

He asked the ministers to look at the figures and question why the value of imports was so high. He insinuated the relevant ministers to fix this problem. Starting from the energy and mineral resources minister Ignasius Jonan, state-owned enterprises minister Rini Soemarno, to the investment coordinating board chief Thomas Trikasih Lembong.

Regarding exports, the former governor of Jakarta said Indonesia had a great opportunity for exports, especially after the trade war between the United States (US) and China. According to Widodo, the opportunity for country’ exports to the US is enormous because of the imposition of tariffs on products from China.

“This is our chance to increase the capacity of factories, existing industries. But once again the government should provide incentives for existing opportunities. If we are just a routine, we cannot give special incentives for exporters, both those who small, large and medium, or incentives in the form of interest, for example, it is difficult for them to penetrate, both to the market, which I shared and new markets that exist,” said the Indonesian leader.

Beside the matter of exports and imports, Widodo also mentioned investment. The president reminded that he had said dozens of times that investments related to exports, investments related to import substitution, must be granted as soon as possible.

Widodo also has criticized his ministers for introducing new regulations that discourage investments and are not in line with his push for economic growth. He claimed 23 new regulations prevented easy investment. He said that the regulations were not included in the economic packages that had been issued by the government.

The president called on his ministers and other relevant officials to revise their “problematic” regulations to help the government attract more foreign investment. He said that such regulations may disrupt the economic growth target.

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