Indonesia current account deficit narrows in Q1

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JAKARTA (TheInsiderStories) – Indonesia’s current account deficit narrows in the first quarter 2016, mainly driven by the growing trade surplus in the quarter, Bank Indonesia (BI), the country’s central bank, Bank Indonesia (BI), said.

The current account deficit fell from US$5.1 billion (2.4% of GDP) in the fourth quarter 2015 to US$4.7 billion (2.1% of GDP) in Q1 2016. The decline in the current account deficit was mainly supported by increased non-oil and gas trade surplus as a result of the greater fall of total imports (-5.2% qtq) than total exports (-2.6% qtq).

“Despite the overall decline, the export performance of some non-oil and gas commodities began to show improvement,” BI said in a statement.

On the oil and gas side, oil and gas trade balance showed improvement in line with the shrinking oil imports as global oil prices fell.

The improvement in the current account was also contributed by the reduced services deficit following the drop in imports and a lower spending of resident travellers during the their visit abroad. Meanwhile, the primary income account deficit widened reflecting the pattern of government debt security interest payments, the central bank said.

Meanwhile, the capital and financial account recorded a surplus in the first quarter in line with the improving domestic economic outlook and the continued monetary policy easing in developed countries.

The capital and financial account surplus in Q1 2016 reached US$4.2 billion, mainly supported by portfolio investment and direct investment inflows. Net inflows of portfolio investment continued to increase and amounted to US$4.4 billion in Q1 2016.

The portfolio investment inflows were sourced from the issuance of government global sukuk, rupiah-denominated government debt securities, and stocks. Direct investment also recorded a surplus of US$2.2 billion, although smaller than the surplus in Q4 2015 amounted to US$2.8 billion.

In total, the capital and financial account surplus in Q1 2016 was lower than the surplus of the previous quarter. This is mainly due to other investment deficit as a result of the remained low withdrawal of private foreign borrowing.

Balance of Payment

Overall, Indonesia’s balance of payments registered a deficit in Q1 2016 in line with the lower surplus in the capital and financial account. Balance of payments deficit stood at US$0.3 billion.

Meanwhile, the official reserve assets position at the end of March 2016 stood at US$107.5 billion. The reserve assets was sufficient to finance the payment of imports and government external debt for 7.7 months and was above the international standard of adequacy.

“Looking forward, Bank Indonesia will remain vigilant of external and domestic risks that may affect the overall balance of payments,” it said.

“Bank Indonesia believes the balance of payments will improve further, supported by monetary and macroprudential policy mix, as well as strengthen policy coordination with the Government to encourage the acceleration of structural reforms, including the implementation of various packages of government policies to improve the investment climate and economic competitiveness,” it said. (*)

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Source: The Insiderstories
Indonesia current account deficit narrows in Q1

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