Large Foreign Investment Income Payments Trigger Primary Income Deficit

The large flow of funds for the payment of foreign investors' investment income is a major driver of the large primary income transaction deficit. Based on Indonesia's balance of payments data, primary income payment transactions reached US$19.64 billion, while receipts were only US$3.58 billion. As a result, the primary income transaction balance for the first half of this year experienced a deficit of US$16.06 billion, or the equivalent of Rp 239 trillion at an exchange rate of Rp 14,900 per US dollar. This amount consists of a primary income balance deficit of US$7.9 billion in the first quarter and US$8.15 billion in the second quarter.

The large deficit in the primary income transaction balance was contributed by a deficit in direct investment income of US$15.33 billion and a labor compensation deficit of US$365 million. Meanwhile, the direct investment deficit was contributed by a direct investment income deficit of US$8.95 billion, portfolio investment income of US$5.29 billion, and other investment income reaching US$1.09 billion.

For information, the primary income transaction deficit reached its deepest level in the third quarter of 2017, reaching US$8.94 billion, and cumulatively, the primary income deficit in that year reached US$32.83 billion, or approximately Rp 489 trillion. The large primary income deficit resulted in Indonesia's current account recording a deficit of US$13.75 billion in the first half of this year.