(Insider Stories) – Indonesia's current account defict widened to 4.4% of GDP in the second quarter of the year compared with 2.6% in the preceding quarter, due to higher imports, falling export revenues as commodity prices remain weak, and increased overseas travel by Indonesians during school holidays.

The April-June current account deficit reached a nominal $9.8 billion compared with a revised deficit of $5.8 billion in January-March, with the oil and gas trade balance remaining in deficit albeit a narrower one.

While the wider deficit is likely to add to pressure on the rupiah, policy steps taken by Bank Indonesia that include 75bps of cumulative hikes to the benchmark rate in June and July are mitigating the impact of the weak global outlook, while seasonal trends indicate the deficit will be narrower this quarter, according to the central bank.

Exports are also expected to be supported by stronger commodity prices while the weak rupiah will curb import growth, it said.

"The policy mix [implemented] by Bank Indonesia, supported by government policies, has succeeded in reducing the negative impact of weakening global economic and financial conditions," according to BI governor Agus Martowardojo.  

The capital and financial account was in a surplus of $8.2 billion, compared with a revised $0.3 billion deficit in the previous quarter.  

The balance of payments deficit narrowed to $2.5 billion compared with a $6.6 billion while foreign exchange reserves of $98.1 billion at the end of June was equal to 5.4 months worth of imports and foreign debt payments.

The rupiah has fallen around 7.5% against the dollar so far this year amid concerns over the current account deficit, making it among the worst performing Asian currencies.a