Indonesia's BoP will Surplus in 1Q 2019, says BI
Governor of Bank Indonesia Perry Warjiyo at One Seminar in Jakarta - Photo by BI

JAKARTA (TheInsiderStories) – Indonesia recorded a worsening current account deficit (CAD) situation, as it swelled to US$9.1 billion in the fourth quarter (4Q) of 2018, according to Bank Indonesia (BI) last week. The figure is equal to 3.57 percent of the Gross Domestic Product (GDP).

Previously, BI’ governor Perry Warjiyo was expected the CAD in the 4Q of 2018 surplus in the range of $8 billion, or around three percent of gross domestic products (GDP). In the 3Q, the CAD was $8.6 billion or 3.28 percent of GDP.

“The swelling CAD is affected by the degrading performance of non-oil and gas goods, due to high imports in accordance with strong domestic demands amid limited exports situationn,” said the central bank’ spokesman Agusman in a written statement.

On the opposite, he added that there were better services balance and primary revenue balance. It is mainly supported by lower payment of government securities interest rate and travel services surplus hike, due to Asian Para Games and IMF-World Bank annual meeting.

During the whole year of 2018, Indonesia continues recording current account deficit at $31.1 billion, or 2.98 percent of GDP. Agusman mentioned that the deficit was affected by several conditions such as high non-oil and gas import, oil import increase, and financial global turmoil. By this, 2018′ balance of payment (BoP) is $7.1 billion deficit.

Meanwhile, in the 4Q, Indonesia recorded $5.4 billion surplus BoP, supported by capital and financial transaction surplus. This is the first surplus, as Indonesia has three quarters deficit. In the first quarter, the deficit was US$3.9 billion. In the second quarter, it was US$4.3 billion. And in the third quarter, it was US$4.4 billion deficit.

By this, Indonesia’s foreign exchange increased to $120.7 billion or equal to 6.5 months of import and government foreign debt, also above than international adequacy standard of 3 months import.

But in the future, Warjiyo believes that this deficit will gradually decline by boosting exports, suppressing imports, B20 programs, tourism promotion programs and postponement of infrastructure projects.

“I think this year’ current account deficit will fall to the range of 2.5 percent of GDP, thanks to potential of foreign funds and portfolios,” he said.

The Bank also hopes that this year the global pressure on the national economy will not be as similar as last year. The existence of a trade war between China and the United States (US) has put pressure on the global economy.

He revealed, that this year BI estimated the Indonesian economy could grow in the range of 5.0-5.4 percent. This figure is more optimistic when compared to Indonesia’s economic growth projection in 2018 which is pegged at 5.1-5.2 percent.

“We predict that our GDP will range from 5.0 to 5.4 percent compared to last year. The midpoint is 5.1 percent,” Warjiyo said.

He added, economic growth in 2018 which is estimated to be in the range of 5.2 percent is a positive growth rate. The national economy will be supported by domestic demand and household consumption growth.

“Investment also grows 6.5-6.9 percent, we have to grow bigger if we want to increase our GDP. In total, the disaggregation of economic growth from domestic demand is seen from the 5.5 percent investment growth,” said the governor.

For that, he added, the export side must also be boosted, so that later it will encourage Indonesia’s trade balance to be able to surplus. By boosting exports, it is expected that this year’s national economy will be better than last year.

“It is a challenge from external demand that we increase exports, but we have to restrain our imports, because the negative and negative exports are smaller,” he concluded.

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