Net Liabilities of Indonesia's International Investment Position Down in Q1 2021

Jakarta: Indonesia's International Investment Position (IIP) recorded a declined net liability at the end of Q1/2021, according to Bank Indonesia (BI).
 
Indonesia's IIP at the end of Q1/2021 recorded a net liability of USD268.6  billion (25.3% of GDP), down from USD281.0 billion (26.5% of GDP) at the end of Q4/2020. 
 
The decline stemmed from a decrease in the Foreign Financial Liabilities (FFL) position coupled with an increase in Foreign Financial Assets (FFA) position.

"The lower Indonesia's FFL position was driven by the declining value of domestic financial instruments," said BI Communication Department HEad Erwin Haryono in a press release on Friday.
 
Indonesia's FFL position at the end of Q1/2021 fell 1.0% (qtq) from USD685.5 billion at the end of Q4/2020 to USD678.6 billion. 
 
The decrease was primarily attributable to the revaluation factor of Rupiah-denominated domestic financial instruments in line with the US dollar appreciation against the Rupiah. 
 
A further decline in the FFL position was offset by the FFL transaction, which in the Q1/2021 recorded a surplus coming from direct investment and portfolio investment inflows in line with the positive perception of investors concerning the promising domestic economic outlook.
 
"Indonesia's FFA position increased primarily due to rising transactions of reserve assets and other investments," he said.
 
At the end of Q1/2021, the FFA position grew 1.4% (qtq), from USD404.5 billion to USD410.0 billion. 
 
However, the revaluation factor offset further FFA increases due to broad-based US dollar appreciation against other global currencies and the declining prices of several foreign assets in the form of debt securities.
 
"Bank Indonesia views that Indonesia's IIP at the end of Q1/2021 remained solid and supported external resilience," he stated.
 
This condition is indicated by Indonesia's IIP liability structure dominated by long-term maturity instruments.  
 
"Bank Indonesia will observe the potential risk of IIP net liabilities to the economy. Going forward, Bank Indonesia believes that Indonesia's IIP performance will be maintained in line with the effort to stimulate economic recovery from the Covid-19 pandemic, supported by the synergy of Bank Indonesia's policy mix and government policies, as well as policies of other relevant authorities," he concluded.
 
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