MacroInsight / Click here for full PDF version
Author(s): Luthfi Ridho, Desty Fauziah
- Current account deficit (CAD) improved to 1.4% of GDP in 1Q20 (2.6% of GDP in 4Q19), due to better goods trade balance at US$4.4bn.
- Financial account reversed to -US$2.9bn (vs +US$12.6bn in 4Q20) due to portfolio outflow, but alleviated by higher FDI at US$3.5bn.
- Rupiah may remain stable at around Rp14.5k/US$ as external financing requirement may be offset by the capital inflow.
CAD improvement was attributed to lesser oil imports
Current account deficit (CAD) narrowed to 1.4% of GDP in 1Q20, from -2.6% of GDP in 4Q19. The improvement in CAD was mostly due to better goods trade balance following the decline in oil imports by 19.1% QoQ or 2.3% YoY largely due to lower oil price during the quarter (around -20% YoY). This was offset by the persistent high primary income deficit at US$8.1bn in 1Q20 (US$8.3bn in 4Q19), due to sustained dividend repatriation at US$5.0bn (US$5.2bn in 4Q19) This suggests stable revenue at foreign companies in Indonesia during 1Q20.
Better than expected FDI
Meanwhile, the surplus in the financial account reversed to -US$2.9bn in 1Q20 from +US$12.6bn in 4Q19. This was due to outflow in both portfolio and other investments at -US$5.8bn and -US$0.5bn (+US$7.1bn & +2.4bn in the 4Q19), but alleviated by surplus in FDI at US$3.5bn (relatively flat qoq). The FDI surplus is quite a surprise as incoming fund from Emerging Asia (Hongkong & Korea) and Japan is rising at US$2.0bn and US$1.2bn in 1Q20 vs. US$1.9bn & US$0.3bn in 4Q19. The investment from Emerging Asia was coming to the manufacturing sector, while investment from Japan is in the form of additional ownership to one of Indonesian banks.
Indonesia external stability will remain robust in 2020
In overall, the balance of payment (BOP) recorded an outflow of US$8.5bn in 1Q20 from an inflow of US$4.3bn in 4Q19. We are on the view that the CAD will be around 2% of GDP and the financial account will be back to record surplus at around US$16bn in 2020. We believe the external stability will remain strong in 2020, as monetary authorities have taken many measures to counter the global turmoil following the virus outbreak. In addition, we also believe that Rupiah will continue to appreciate along with the weakening of global oil price and solid capital inflows.
Sumber : IPS