Indonesia: Current Account back to deficit – UOB

UOB Group’s Economist Enrico Tanuwidjaja and Haris Handy comment on the latest Current Account data in Indonesia.

Key Quotes

“Indonesia’s current account returned to deficit at USD1.0bn (-0.4% of GDP), after posting USD0.9bn (0.3% of GDP) surplus in the previous quarter. The development was attributable to the recovery of imports of goods, which resulted in a lower trade surplus. In line with the increase of goods imports, service deficit widened due to rising freight services payments. This indicates that the domestic economic activity is starting to improve and is driving import demand.”

“Meanwhile, the primary income account recorded a narrower deficit from the previous quarter due to declining coupons and dividend payments of portfolio investment. On the other hand, secondary income balance remained stable as the increase in transfer payment from Indonesian migrant workers was offset by the decline in grants received by the government.”

“The capital and financial account (which records trade in assets between Indonesians and foreign counterparts) posted a surplus of USD5.6bn in 1Q21 vs. USD1.0bn deficit in 4Q20, supported by higher portfolio investment.”

“Direct investment also posted a USD4.1bn surplus, continuing the previous quarter performance of USD4.2bn, mainly in the form of equity capital.”

“Overall, the higher increment of capital and financial account surplus (that offset the current account deficit – CAD) led Indonesia to register USD4.1bn of surplus in its Balance of Payment (BoP) in 1Q21 vis-à-vis USD0.2bn deficit in the previous quarter. In line with this development, the country’s foreign exchange reserves position stood at USD137.1bn at the end of March 2021, which equals to 9.7 months of imports and government's foreign debt repayments, and well above the international adequacy standard.”