Indonesia posted smaller current account deficit in Q3 | Inquirer Business

Indonesia posted smaller current account deficit in Q3

/ 04:33 PM November 21, 2023

Visitors leaving Bank of Indonesia headquarters in Jakarta

Visitors walk as they leave Bank Indonesia headquarters in Jakarta, Indonesia, Jan 17, 2019. REUTERS/Willy Kurniawan/File photo

JAKARTA  -Indonesia’s current account deficit narrowed in the third quarter as demand for exports recovered, the central bank said on Tuesday, with most economists expecting the central bank to leave interest rates unchanged this week as external balances improved.

The Southeast Asia’s largest economy posted a $0.9 billion deficit in the third quarter, equivalent to 0.2 percent of gross domestic product, showing a marked improvement from the second quarter, when Indonesia registered its first quarterly deficit in two years.


Bank Indonesia’s revised data for the second quarter deficit at $2.2 billion, equivalent to 0.6 percent of GDP, Bank Indonesia’s revised data showed.


Indonesia’s monthly trade surpluses have been declining in value this year as prices of its top commodities like coal and palm oil weakened compared to a year ago.

BI noted a recovery in demand for iron and steel exports amid weakening global commodity prices.

The deficit in services also decreased in the third quarter, helped by the tourism sector’s post-pandemic recovery, BI added.

A Reuters poll showed on Tuesday that 27 of 31 economists expected BI to keep its benchmark key interest rate unchanged at 6 percent when the central bank’s two day policy review wraps up on Thursday. The remaining four predicted a quarter-percentage-point hike to 6.25 percent.

In October, BI unexpectedly hiked the benchmark interest rate by 25 basis points to 6 percent with focus on rupiah stability, taking its total rate increases since August 2022 to 250 bps.

Enrico Tanuwidjaja, a UOB economist, was among the outliers expecting BI to raise rates to keep the rupiah stable, though he viewed the smaller current account deficit as a “good development.”


“Our view is still for BI to deliver a 25 bps rate hike this week, underpinned by a likely case of the Fed remaining hawkish, expectations of upside inflation risks, and wider yield gap,” he said adding a forecast of another 25 bps rate hike in December, taking the terminal rate to 6.5 percent.

Aside from current account, the country’s financial and capital account deficit also shrank to $0.3 billion in the third quarter from a deficit of $4.8 billion in the second quarter due to higher foreign loans for companies, offsetting the capital outflow, BI said.

The smaller deficits in both current and financial accounts reduced the balance of payments deficit to $1.5 billion in the third quarter from $7.4 billion in the second quarter.

BI has forecast this year’s current account to be between a surplus of 0.4 percent and a deficit of 0.4 percent.

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The rupiah strengthened 0.03 percent to 15,435 per U.S. dollar by 0433 GMT on Tuesday.

TAGS: current account, deficit, economy, Indonesia

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