JAKARTA (TheInsiderStories) – Indonesia recorded a US$5.5 billion current account deficit in the first quarter of 2018 lower than the previous quarter’s deficit of US$6.0 billion, according to Bank Indonesia.
The decrease in current account deficit was mainly driven by the decrease in the service account deficit and the increase in the surplus in the balance of income. It’s expected to support the resilience of Indonesia’s external economic sector on the back of improving capital and financial accounts amid rising outflow.
The decrease in services deficit was mainly influenced by the surplus of travel services as the number of foreign tourist arrivals and the decrease in imports of freight services.
An increase in the surplus in the secondary income balance is in line with the increasing acceptance of remittances from Indonesian migrant workers.
Meanwhile, the non-oil and gas trade surplus declined mainly due to the decline of non-oil and gas exports. Non-oil and gas imports also declined even more, with imports of capital goods and raw materials still at a high level in line with increased production and investment activities.
Capital and financial transactions in first quarter remained a surplus amid heightened uncertainty in global financial markets. The capital and financial account surplus in the first quarter of 2018 was recorded at $1.9 billion, mainly supported by the high inflows of direct investment.
“This reflects the positive perception of investors’ perceptions of Indonesia’s economic prospects,” said BI Governor Agus Martowardojo, Friday (11//5).
Nevertheless, the capital and financial account surplus in first quarter was recorded lower than the surplus in the preceding quarter.
The decline in the surplus is inseparable from the impact of increasing uncertainty in global financial markets which has resulted in adjustments to the placement of foreign funds in the stock market and government bond market.
The decline in the surplus was also affected by other deficit-listed investment components, primarily influenced by the increase in private sector deposit placements in overseas banks.
Martowardojo, who has repeatedly called for calm, said the central bank will continue to intervene in the forex market to protect the rupiah and take steps to ensure ample liquidity in forex and bond markets.
Overall, Indonesia’s balance of payments in the first quarter of 2018 recorded a deficit in line with the decrease in capital and financial account surplus. The deficit of balance of payments in the first quarter of 2018 was recorded at $3.9 billion.
With the development of the balance of payments, the position of foreign exchange reserves at the end of March 2018 was recorded at $126.0 billion as BI continued to intervene in the market to stabilize the rupiah against the increasingly stronger US dollar.
This amount of foreign exchange reserves is equivalent to the 7.7 month financing of imports and government foreign debt and is above the international standard of adequacy.
Meanwhile, Finance Minister Sri Mulyani Indrawati has said the government will closely monitor inflation as rupiah exchange rate against US dollar continues to weaken.