This is What Causes Indonesia's Current Account Deficit

Primary income transactions were the main driver of Indonesia's high current account deficit in the first half of 2018. Based on Bank Indonesia data, the primary income deficit in the first half of the year reached US$16.06 billion, equivalent to Rp240.83 trillion at an exchange rate of Rp15,000 per US dollar. This figure comprises a primary income deficit of US$7.9 billion in the first quarter and US$8.15 billion in the second quarter. Another contributor to the current account deficit was services transactions, reaching US$3.34 billion or approximately Rp50 trillion.

The large payments of dividends from foreign investor returns and maturing Indonesian foreign debt resulted in a substantial primary income deficit. The services deficit was driven by a high volume of goods shipments using foreign shipping fleets. Furthermore, many international passenger transports utilized foreign airlines.

Meanwhile, goods transactions and secondary income transactions recorded surpluses of US$2.6 billion and US$3.04 billion, respectively. As a result, the total current account deficit in the first half of the year reached US$13.75 billion, or 2.6% of national Gross Domestic Product.