Gayatri Sroyo

JAKARTA, Reuters – Indonesia recorded a surplus in its current account in 2021 for the first decade, according to data released on Friday. However, the country’s balance of payments was under pressure due to higher imports and bond market outflows.

According to Bank Indonesia (BI), the largest Southeast Asian economy posted a $3.3 Billion current account surplus in 2012. This is equivalent to 0.3% gross domestic product. It was due to a strong trade demand and a boom in commodity prices. This was Indonesia’s first surplus in five years.

A $13.5 Billion surplus was registered in the 2021 balance payment.

The volatility in the rupee has been caused by persistent current account deficits, reliance on foreign portfolio flows and previous instability. However analysts believe that last year’s surplus will help stabilize the currency even though global liquidity tightens.

Already, there have been signs that the U.S. Federal Reserve is increasing monetary tightening. This has led to outflows in the Indonesian bond markets. Data also showed that financial accounts were squeezed in the fourth quarter.

From a surplus of $4.97 billion or 1.7% in the prior three months due to higher imports and freight cost, the current accounts surplus has narrowed down to $1.42billion or 0.4% of GDP in quarter 4.

Fourth quarter’s deficit in balance payments was $844m, which is compared to July-September’s surplus of $10.69billion.

Sin Ben Ong, a JP Morgan analyst said that fourth quarter bond outflows totalling $4.9 billion was the largest since more than ten years. However, he pointed out that Net Foreign Exchange Reserves “exhibited extraordinary resilience.”

This would decrease the need for BI to keep its policy rate at lockstep with Fed, he stated.

BI predicts that the current account will return to a deficit between 1.1%-1.9% of GDP in 2022. The reason is moderating commodity prices, rising domestic demand and economic recovery following the COVID-19 epidemic.

Faisal Rahman, Bank Mandiri analyst for the year 2018, predicted that there would be a 2.15 percent current account deficit with limited portfolio inflows and that there will likely be a lower surplus in balance of payments than 2021.