JAKARTA (TheInsiderStories) – Indonesia’s foreign investment recorded an increase in net liabilities driven by an increase in foreign financial obligations, based on investment statistics released by Bank Indonesia today (09/27). Country’s foreign investment net liability reached US$330.3 billion or 31 percent of gross domestic product (GDP) in the second quarter (2Q) of 2019.
The central bank noted the value is higher than the foreign investment net liability at the end of the previous quarter of $329.2 billion or reached 31.3 percent of GDP. The increase in net liabilities is in line with the increase in the position of foreign financial obligations which is greater than the position of foreign financial assets.
Indonesia’s increasing foreign financial obligations are driven by the flow of foreign capital in the form of portfolio investments. This is supported by a favorable outlook for the domestic economy and the attractive return on investment in domestic financial assets.
The position of foreign financial liabilities increased by 0.4 percent (qtq) to $691.2 billion at the end of 2Q of 2019. The increase in the position of foreign financial liabilities was also influenced by the weakening factor of the US dollar against the Rupiah which resulted in an increase in the value of rupiah-denominated investment instruments.
Nevertheless, the increase in the position of foreign financial obligations was still held back by the negative revaluation factor of domestic financial instruments in line with the decline in the Jakarta Composite Index (JCI) during the quarter under review.
The position of Indonesia’s foreign financial assets also increased, mainly driven by the acquisition of foreign financial assets in the form of direct investment assets and other investments.
At the end of 2Q of 2019, the position of foreign financial assets grew 0.5 percent (qtq) or $1.9 billion to $361 billion. The increasing position of foreign financial assets was also influenced by rising bond prices and the average stock indexes of countries placing foreign financial assets and the weakening factor of the US dollar against several major currencies in investment placement.
Bank Indonesia views the development of Indonesia’s foreign investment in the second quarter of 2019 to remain healthy. This is reflected in Indonesia’s foreign investment’s net liability structure which is still dominated by long-term instruments. Nevertheless, Bank Indonesia will remain alert to the risks of net international investment obligations to the Indonesian economy.
Going forward, Indonesia’s foreign investment performance is expected to improve in line with maintained economic stability, supported by strengthening coordination between Bank Indonesia and the government and related authorities.
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