Board governor of Bank Indonesia - Photo by BI Office

JAKARTA (TheInsiderStories) – Indonesia’s current account deficit (CAD) decreased to US$7.7 billion in the third quarter (3Q) of 2019 from $8.2 billion gaps a year earlier, equivalent to 2.7 percent of the country’s gross domestic product, Bank Indonesia (BI) has reported today (11/08).

The central bank noted the goods account surplus widened to $1.26 billion from $0.50 billion gaps a year ago, with exports falling 8.53 percent and imports decreasing 12 percent. On the other hand, the secondary income surplus was unchanged at $1.78 billion. Meantime, the services account gap rose to $2.27 billion from $1.82 billion and the primary income gap increased to $8.43 billion from $7.98 billion, the bank showed.

BI’s executive director of communication department Onny Widjanarko explained, the decrease of CAD was supported by an increase in the goods trade balance surplus, which was accompanied by a decrease in the oil and gas trade balance deficit.

The improving deficit in the oil and gas trade balance was affected by the decline in oil and gas imports in line with the positive impact of import control policies through the B20 program, he noted.

Meanwhile, the non-oil and gas trade balance surplus was stable amid a slowing world economy and falling commodity prices for Indonesian exports. The improving deficit in the current account is also supported by a decrease in the primary income account deficit due to lower repatriation of dividends and interest payments on foreign debt.

Meanwhile, capital and financial transactions in this quarter were recorded at $7.6 billion, higher than the previous quarter $6.5 billion. It’s supported by improved portfolio investment performance, in line with the increase in foreign capital inflows on domestic financial assets.

The surplus increase was also caused by a decrease in other investment deficits which was influenced by an increase in net withdrawal of private sector foreign loans and a decrease in net government foreign loan payments.

With the improvement in the current account and capital account deficit, Indonesia’s balance of payments in the 3Q recorded a deficit of $46 million, lower than the deficit in the previous quarter of $2 billion.

Going forward, Indonesia’s balance of payments in 2019 and 2020 will be in the range of 2.5 to 3.0 percent of GDP with large foreign capital inflows. The central bank will continue to strengthen policy synergies with the government and related authorities to improve external resilience, including efforts to encourage increased foreign investment.

Previously, BI noted, Indonesia’s foreign exchange reserves at the end of October amounted to $126.7 billion, increased from the position at the end of September $124.3 billion.

The increasing of foreign exchange reserves in October was influenced by the issuance of global government bonds, oil, and gas foreign exchange receipts, and other foreign exchange receipts.

The foreign exchange reserves are equivalent to financing 7.4 months of imports or 7.1 months of imports and payments of government foreign debt and are above the international adequacy standard of about 3 months of imports.

The central bank assessed that foreign exchange reserves are capable to support external sector resilience and macroeconomic and financial system stability. Going forward, BI viewed foreign exchange reserves to remain adequate, supported by stability and sound economic prospects.

Written by Staff Editor, Email: theinsiderstories@gmail.com