Jakarta: The current account deficit in the first quarter of 2020 declined due to decreased imports in line with slowing domestic economy.
The current account deficit stood at 3.9 billion US dollars (1.4 percent of GDP), lower than 8.1 billion US dollars (2.8% percent of GDP) deficit in the previous quarter.
Improved current account deficit was influenced by improving goods trade balance surplus, accompanied by decreasing services account and primary income deficit.
The improvement of goods trade balance was induced by declining imports in line with slowing domestic demand, which reduce the impact of declining exports due to world economic growth contraction.
The services account deficit improved due to a decrease in the transportation services deficit in line with the decline of goods imports, amid a decrease in travel services surplus due to reduced inbound traveler.
In addition, the current account deficit reduction also driven by improving primary income account deficit, in line with domestic economic activity.
"Meanwhile, capital and financial account in the first quarter of 2020 subdued significantly, amid high uncertainty on global financial markets," Bank Indonesia (BI) said in a press statement on Wednesday, May 20, 2020.
Capital and financial account recorded a deficit of 2.9 billion US dollars, mainly influenced by the portfolio investment deficit, after posting a surplus of 12.6 billion US dollars in the previous quarter.
This portfolio investment deficit is triggered by a surge in capital outflows in response to the global financial market panic towards the covid-19 pandemic.
Hence, the balance of payments in the first quarter of 2020 recorded a deficit of 8.5 billion US dollars, and the position of official reserve assets at the end of March 2020 reached 121.0 billion US dollars.
The position of the official reserve assets was equivalent to 7.0 months of imports and servicing government’s external debt, and well above the international adequacy standard.
Owing to steps taken for stabilization and the strengthening of BI policy mix, coupled with close coordination with the Government and the Financial Services Authority (OJK), foreign capital inflow to the domestic financial markets has improved.
Looking forward, the central bank will keep a closer look on the dynamics of the global economy that can affect the balance of payments outlook and continue to strengthen the policy mix to maintain economic stability, as well as strengthen policy coordination with the Government and relevant authorities to strengthen the external sector resilience.