Board governor of Bank Indonesia - Photo by BI Office

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) reported current account deficit (CAD) in the first quarter (1Q) of 2019 was recorded at US$7 billion or 2.6 percent of GDP. Previous quarter the deficit worth of $9.2 billion or 3.6 percent of GDP.

The central bank’ spokesman Onny Widjanarko said in an official statement, that the declining of CAD was supported by a surplus of goods, non-oil and gas trade balance. It was also influenced by the declined in imports, in line with government policy to control imports of certain commodities since end of 2018.

Nevertheless, the deficit continued to rise mainly due to low foreign tourist arrivals, which declined in accordance with the seasonal pattern, in the midst of declining imports of freight services.

Furthermore, the capital and financial account surplus in the 1Q of 2019 were recorded at $10.1 billion, supported by a relatively high direct investment inflow. This reflects by investors’ positive perceptions of the Indonesian economy.

In addition, the slackening risk on global financial markets has also been a factor in foreign capital inflows. However, the capital and financial account surplus in the 1Q of 2019 lower than the surplus in the previous quarter, parallel with the government’ payment for maturing global bonds.

Overall, Indonesia’ balance of payments (BoP) recorded a surplus of $2.4 billion. With these developments, the position of foreign exchange reserves at the end of March 2019 was $124.5 billion or equivalent to 6.8 months of imports and government foreign debt and is above the international adequacy standard of around three months of imports.

In the future, BoP’ performance is predicted to improve and can continue to sustain the resilience of the external sector. BI assured will continue to strengthen coordination with the government and related authorities in order to strengthen the resilience of the external sector, including to control the current account deficit so that it decreases towards the range of 2.5 percent of GDP in 2019.

Bank Indonesia continues to look at global developments that can affect Indonesian balance of payments, such as slowing global economic growth, uncertainty in global financial markets, and the volume of world trade and global commodity prices which tend to decline.

Bank Indonesia will also continue to strengthen the policy mix to ensure continued macroeconomic and financial system stability, as well as strengthen policy coordination with the government in encouraging the continuation of structural reforms.

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