JAKARTA (TheInsiderStories) – Bank Indonesia (BI) reported the nation’ balance of payments (BoP) recorded surplus of US$4.7 billion during 2019 from previous year worth of $7.1 billion. In the fourth quarter (4Q) of 2019 the BoP surplus $4.3 billion, improved compared to the previous quarter which experienced a deficit of $46 million.
“The surplus was mainly supported by an increase in the capital and financial account surplus and the current account deficit (CAD) which remained under control,” said the central bank in an official statement released on Monday (02/10).
The CAD in 2019 was recorded at $30.4 billion or 2.72 percent of gross domestic products (GDP), improved compared to the deficit in the previous year of 2.94 percent of GDP. This development was mainly supported by the goods trade balance which recorded a surplus, different from the previous year which experienced a deficit.
The goods trade balance which recorded a surplus was affected by the rising non-oil and gas trade balance surplus and the declining oil and gas trade balance deficit. This was influenced by the decline in oil imports in line with import control policies such as the B20 program.
The improved performance of the balance of payments is also supported by a capital and financial transaction surplus that increased significantly to $36.3 billion from $25.2 billion in 2018, supported by long-term capital inflows amid continued uncertainty in global financial markets.
With this development, the position of foreign exchange reserves at the end of 2019 reached $129.2 billion, up from $124.3 billion at the end of 3Q of 2019. The position of reserves is equivalent to financing 7.6 months of imports or 7.3 months of imports and payment of government foreign debt, and are above the international adequacy standard of three months of imports.
BI also reported, the capital and financial transaction surplus in the 4Q of 2019 increased reflecting optimism for the outlook for the domestic economy. The capital and financial transaction surplus in the last quarter of 2019 was recorded at $12.4 billion, higher than the surplus in the previous quarter of $7.4 billion.
The large surplus was mainly driven by high inflows of portfolio investment originating from global government and corporate bond issuances. Other investments also recorded a surplus, in line with the withdrawal of bank deposits abroad by domestic business actors and an increase in the placement of non-resident funds in domestic banks.
The CAD in 4Q of 2019, said the central bank, remained under control, thereby contributing to the resilience of Indonesia’ external sector. The current account deficit in the 4Q of 2019 was recorded at $8.1 billion (2.84 percent of GDP), supported by an increased non-oil and gas trade balance surplus.
The increase in the non-oil and gas trade balance surplus was mainly influenced by the decline in non-oil and gas imports amid the export performance which was not yet strong. On the other hand, the oil and gas trade balance deficit increased in line with the increase in oil imports to meet the high demand at the end of the year.
Looking ahead, the performance of the BoP is predicted to remain good so that it can sustain external sector resilience. The outlook for the balance of payments is supported by the CAD in 2020 which is forecasted to remain under control in the range of 2.5 – 3.0 percent of GDP.
The prospect of foreign capital inflows is also expected to remain large driven by positive investor perceptions of the maintained economic prospects of Indonesia. BI stated will continue to strengthen the policy mix to maintain macroeconomic and financial system stability, and to continue to strengthen coordination with the Government and relevant authorities to improve external sector resilience, including encouraging increased foreign investment.
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