Jakarta: Indonesia’s International Investment Position (IIP) recorded a larger net liability at the end of the fourth quarter of 2019, driven by an increase of Foreign Financial Liabilities (FFL).
Indonesia's IIP registered a net liability totaling USD338.2 billion (30.2 percent of GDP), up from USD324.1 billion (29.7% percent of GDP) at the end of the previous period.
"Increasing net liability IIP stemmed from a larger increment in the FFL than Foreign Financial Assets (FFA)," Bank Indonesia said in a press release on Friday, March 27, 2020.
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According to the central bank, the higher in Indonesia’s FFL position, primarily backed by an influx of foreign capital in the form of portfolio investment and direct investment, reflected strong investor confidence in the national economic outlook coupled with attractive yields in the domestic financial assets.
At the end of the fourth quarter of 2019, the FFL position climbed by 3.1 percent (qtq) or USD21.7 billion to USD711.6 billion. In the meantime, the FFA position rose by 2.1 percent (qtq), or USD7.6 billion, to USD373.3 billion.
For 2019 as a whole, Indonesia's IIP recorded a net liability of USD338.2 billion in 2019, which increased from USD317.3 billion in 2018. Meanwhile, the ratio of IIP’s net liability to GDP at the end of 2019 was recorded at 30.2 percent, declining from 30.4 percent at the end of 2018.
In 2019, the FFL position expanded by USD47.6 billion (7.2 percent yoy), primarily influenced by an influx of long-term foreign capital despite persistent global financial market uncertainty. Meanwhile, the FFA position also increased by USD26.6 billion (7.7 percent yoy), mainly driven by a bump up of resident’s placements in overseas bank.
"Bank Indonesia views that Indonesia’s IIP at the end of Q4/2019 and the overall 2019 remained solid. Such developments were indicated by the domination of long-term instruments within the structure of Indonesia's IIP net liability," it stated.
"Nevertheless, Bank Indonesia will remain vigilant on the risk of Indonesia’s IIP net liability to the economy. Going forward, Indonesia’s IIP performance is expected to improve in line with sustained economic stability and persistence recovery of the Indonesia’s economy, supported by consistency and synergy in the policy mix of monetary, fiscal, and structural reforms," it concluded.