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Central bank predicts BOP surplus this year

Bank Indonesia (BI) predicts the country’s balance of payments (BOP) will swing from negative to positive this year, supported by a rebound in exports and an influx of foreign inflows

Satria Sambijantoro (The Jakarta Post)
Jakarta
Sat, March 29, 2014

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Central bank predicts BOP surplus this year

B

ank Indonesia (BI) predicts the country'€™s balance of payments (BOP) will swing from negative to positive this year, supported by a rebound in exports and an influx of foreign inflows.

Indonesia'€™s BOP regained surplus in the fourth quarter of 2013 after three consecutive quarters of deficit, with the trend expected to repeat in the first quarter this year, says BI Deputy Governor Perry Warjiyo.

Overall, Indonesia booked a US$7.3 billion deficit in BOP throughout last year.

'€œOverall, our balance of payments will record a bigger surplus this quarter, compared to a quarter earlier,'€ Perry told reporters at his office on Friday. '€œThis year'€™s BOP will also be in surplus.'€

BOP comprises current account, capital account and records all international monetary transactions between a country and the rest of the world, indicating an economy'€™s financial health.

Perry noted Indonesia'€™s improved BOP this year would be attributable to an export rebound, which would improve the current account, and to the return of foreign inflows, which would boost the capital account.

Improved economic fundamentals have prompted financial services giants, from Canada-based Manulife to US-based BlackRock, to boost their investment portfolio allocations in Indonesia.

South Korea-based Samsung Asset Management has declared that it is '€œsuper-overweight'€ on Indonesian equities, the company'€™s investment manager Alan Richardson told Bloomberg recently.

Even US-based Morgan Stanley '€” which labeled Indonesia last year an economy most fragile to outflows '€” upgraded the country to '€œequalweight'€, from '€œunderweight'€ in January.

The robust foreign inflows so far have propelled the rupiah and the Jakarta Composite Index (JCI) to become the best performers in Asia'€™s currency and equity markets this year.

According to Perry, foreign inflows entering Indonesia amounted to Rp 55 trillion ($4.84 billion) in the first three months this year. That was higher compared to the Rp 42 trillion that the country recorded throughout 2013.

'€œSentiment on Indonesian assets has continued to improve,'€ stated Ho Woei Chen, an economist with United Overseas Bank (UOB) in Singapore.

A key driver of the improvement, Ho said, was the better current account, the major worry among investors last year, which had narrowed to 2 percent of gross domestic product (GDP) in the fourth quarter last year, from a record high of 4.4 percent in the second quarter of the same year.

The current-account deficit in the first quarter this year '€œwould stand roughly at the same level'€, compared to the previous quarter of 2 percent, according to Perry, who also predicted Indonesia would record a $760 million surplus in trade balance in February.

Official data on the trade balance is slated to be announced on Tuesday.

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