The current account deficit of $7 billion, or 2.6 percent of the gross domestic product (GDP), in Q1 of 2019 was lesser than the previous quarter's deficit of $9.2 billion, or 3.6 percent of the GDP, Executive Director of the Bank Indonesia (BI) Communication Department Onny Widjanarko noted in a statement here on Tuesday.
The current account deficit shrunk chiefly due to an increasing surplus in goods trade, backed by an incline in the non-oil and gas trade surplus in addition to reductions in the oil and gas trade balance deficit.
Such patterns were affected by a deeper decline in imports in comparison with lower exports, in accordance with the government’s policy to curtail the imports of specific commodities that has been applied since the end of 2018.
In the meantime, the services trade deficit expanded chiefly owing to a lower travel services surplus, as foreign tourist arrivals dropped in line with the seasonal trends, amid decreasing imports of freight services.
The capital and financial account surplus rose in Q1 of 2019, thereby mirroring foreign investor confidence in the domestic economic outlook.
The capital and financial account surplus was recorded at $10.1 billion in Q1 of 2019, mainly supported by a major influx of direct investment.
This development indicated positive investor confidence in the Indonesian economy.
Moreover, milder global financial markets uncertainty had contributed to supporting foreign capital inflow through direct and portfolio investment.
The capital and financial account surplus in Q1 of 2019 was lower than the surplus in the previous quarter in accordance with the government’s payment on the global bonds due.
Overall, the balance of payments (BOP) registered a surplus in Q1 of 2019, aligning with the improved current account deficit and higher capital and financial account surplus. The BOP surplus was recorded at $2.4 billion during the reporting period.
As a result, the official reserve assets were recorded at $124.5 billion at March-end of 2019, corresponding to 6.8 months of imports and servicing government external debt, higher than the international standard of three months.
Looking ahead, Indonesia’s BOP outlook is forecast to show an improvement and sustain the external resilience. BI has persistently intensified coordination with the government and other relevant institutions to strengthen external resilience, including to shrink the current account deficit in 2019 to lie in the manageable range of 2.5 percent of the GDP.
BI will also detect global developments that impact the balance of payments, such as a slowdown in the global economic growth, global financial market uncertainty, and a further squeeze of world trade volume and global commodity prices.
BI will work towards consistently bolstering the policy mix to maintain macroeconomic and financial system stability and reinforce policy coordination with the government to encourage the continuation of structural reforms.