Indonesia: Current Account deficit shrunk in 2019 – UOB

Economist at UOB Group Enrico Tanuwidjaja assessed the recent Current Account results in Indonesia.

Key Quotes

“Indonesia’s current account deficit (CAD) narrowed to USD30.4bn (2.72% of GDP; UOB estimate at 2.80%) for full year 2019 from USD30.6bn (2.94% of GDP) seen in 2018… Overall, goods trade balance posted a surplus of USD3.5bn, far above the 2018’s USD0.2bn deficit. In addition, the improvement of CAD was also attributable to higher secondary income balance, which came at USD7.6bn in 2019 vs. 2018’s USD6.9bn.”

“Meanwhile, services balance recorded a higher deficit in 2019 at USD USD7.8bn from USD6.5bn deficit in the previous year, attributable to higher out bound tourism expenditure to other country than in bound tourism expenditure to Indonesia, and lower business service export (i.e. communication, computer/software, and information service).”

“The capital and financial account surplus stood at USD36.4bn in 2019, which rose from USD25.2bn in the previous year, driven by surged both in direct investment (2019’s USD20.0bn vs. 2018’s USD12.5bn) and portfolio investment (2019’s USD21.5bn vs. 2018’s USD9.3bn) reflecting investor optimism on domestic economic outlook.”

“Overall, Indonesia’s balance of payment (BOP) in 2019 registered a huge surplus of USD4.7bn compared to USD7.1bn deficit in 2018; supported by manageable CAD, and soaring capital and financial surplus. In line with this development, the foreign exchange reserves position in December 2019 reached USD129.2bn, up from December 2018’s of USD120.7bn.”

“For 2020, we expect CAD to narrow and bring more stability for the Indonesian external sector; underpinned by easing global uncertainties (after US-China Phase One trade deal), improved commodity prices, and access to relatively new exports market through the Free Trade Agreement (FTA) and the Comprehensive Economic Partnership Agreement (CEPA).”