Aditya L. Djono, Jakarta – Indonesia's current account deficit narrowed in the third quarter this year thanks to an improving oil and gas trade balance and less pressure to repatriate dividends and loan payments abroad.
The current account – the broadest balance of overseas trade that includes merchandises, services as well as remittances and income transfers – came at a deficit of $7.7 billion, or 2.7 percent of the gross domestic product (GDP) in the third quarter this year, down from $8.2 billion or 2.9 percent of the GDP in the previous quarter, Bank Indonesia spokesman Onny Widjanarko said in a statement on Thursday.
"The oil and gas trade deficit narrowed as imports declined, in line with the positive impact of import control policies, including the B-20 program," Onny said, referring to the government requirement to mix diesel fuel with palm oil-based fuel.
"Meanwhile, non-oil and gas trade surplus has remained relatively stable amid a weakening global economy and declining export commodity prices. Improvement in the current account deficit was also backed by a decrease in primary income deficit due to smaller dividend repatriations and service interest payments on external debts," Onny said.
The capital and financial account – a record of cross-border changes of hand of real and financial assets – posted a $7.6 billion surplus in the third quarter, up from $6.5 billion in the previous three-month period.
"The gain in the capital and financial account surplus primarily stemmed from a maintained foreign capital inflow to domestic financial investment assets, which has boosted portfolio investment performance," Onny said, adding that private companies in Indonesia were taking fewer foreign loans.
As a result, the balance of payments, which combines both accounts, recorded a $46 million deficit, narrowing from $2 billion in the previous quarter.
"Looking forward, Indonesia's balance of payment is expected to remain solid, thus bolstering its external sector resilience. The outlook is supported by a manageable current account deficit in 2019 and 2020, within 2.5-3 percent of the GDP, and a maintained influx of foreign capital," Onny said.