Indonesia’s International Investment Position (IIP) Increases in Q4 2020: BI

Jakarta: Indonesia’s International Investment Position (IIP) recorded a higher net liability at the end of fouth quarter of 2020 (Q4/2020), Bank Indonesia (BI) has stated. 
 
Indonesia’s IIP at the end of Q4/2020 recorded a net liability of USD281.2 billion (26.5% of GDP), up from USD260.0 billion (24.3% of GDP) at the end of Q3/2020. 
 
The increase stemmed from a larger increment in the position of Foreign Financial Liabilities (FFL) than Foreign Financial Assets (FFA), in line with the strengthening of foreign capital inflows.

"The higher Indonesia FFL position was supported by foreign capital inflows in portfolio investment and direct investment to the domestic financial market as global financial market uncertainty eased during the reporting period," said BI Communication Department Head Erwin Haryono in a press release on Friday. 
 
Indonesia’s FFL position at the end of the fourth quarter of 2020 climbed 5.2% (qtq) from USD651.6 billion to USD685.5 billion. 
 
The rising FFL was primarily attributable to an increase in foreign holdings of government debt securities and direct investment inflows in the form of equity. 
 
Other change factors included the positive revaluation of Rupiah-denominated domestic financial assets, which edged up the FFL position, in line with the Jakarta Composite Index (JCI) improvement as well as the Rupiah appreciation against the US dollar.
 
"Indonesia’s FFA position also increased primarily due to rising transactions of other investment and direct investment," he stated. 
 
At the end of the fourth quarter of 2020, the FFA position grew 3.3% (qtq), from USD391.6 billion to USD404.3 billion. 
 
Besides transaction factors, the increasing FFA was also backed by the positive revaluation given the rising average stock indexes in asset placement countries, together with a broad-based US dollar depreciation against major global currencies.
 

"For 2020 as a whole, Indonesia's IIP recorded a lower net liability compared to the position at the end of the previous year," he said.
 
Indonesia's IIP recorded a net liability of USD281.2 billion in 2020 (26.5 of GDP), declining from USD337.9 billion in 2019 (30.2% of GDP). 
 
The decrease was driven by the FFA position expanded by USD29.0 billion (7.7% yoy), mainly of other investment assets, meanwhile the FFL position decreased by USD27.8 billion (3.9% yoy), due to the decline of portfolio investment liability position.
 
"Bank Indonesia views that Indonesia's IIP at the end of Q4/2020 and the overall 2020 remained solid. This condition is indicated by the lower of Indonesia’s IIP ratio to GDP for the overall 2020 compared to 2019. In addition, Indonesia's IIP liability structure is also dominated by long-term maturity instruments. Nevertheless, Bank Indonesia will observe potential the risk of IIP net liabilities to the economy," he explained.
 
Going forward, the central bank 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 BI’s policy mix and government policies, as well as policies of other relevant authorities.
 
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