Current Account Deficit Nearly Doubles, Worst in Four Years

The worsening performance of non-oil and gas trade, coupled with increasing import demand, has led to a further deterioration of Indonesia's current account deficit. In Indonesia's 2018 Balance of Payments, the current account deficit surged nearly twofold to US$31.1 billion or Rp 450 trillion (at an exchange rate of Rp 14,481 per US dollar) from the previous year. This current account deficit was nominally the largest ever recorded. However, as a ratio to GDP, it was the worst in the last four years.

The deteriorating current account performance throughout last year was triggered by a goods trade deficit of US$431 million, compared to a previous surplus of US$18.8 billion. Furthermore, deficits in services and primary income remained high at US$7.1 billion and US$30.4 billion, respectively. The only factor preventing a deeper current account deficit was a 53% increase in the surplus from secondary income transactions, reaching US$6.89 billion.

Indonesia's large current account deficit remains manageable, staying below 3% of GDP. The high value of imports last year was partly due to the impact of numerous infrastructure projects and high consumer demand. The government's focus should be on improving export performance to generate foreign exchange reserves to cover the widening deficit.

(REVISION: This Databoks was updated on February 12, 2019, at 5:10 PM WIB. The original title was: Soaring Nearly Twice as Much, Current Account Deficit Sets a New Record Low.)