C. Bank Expects CA Deficit to Widen to 2.1% of GDP in 2018

Bank Indonesia, the country’s central bank, estimates that the current account deficit will widen to 2.1 percent of gross domestic product, or GDP, from 1.7 percent last year, due to the continued deficit in international trade activity, the bank’s governor said on Friday (10/03). (Antara Photo/Muhammad Adimaja)

By : Adinda Normala | on 2:11 PM March 10, 2018
Category : Business, Economy

Jakarta. Bank Indonesia, the country’s central bank, estimates that the current account deficit will widen to 2.1 percent of gross domestic product, or GDP, from 1.7 percent last year, due to the continued deficit in international trade activity, the bank’s governor said on Friday (10/03).

"It is due to the large imports of raw materials that will be used for production in Indonesia in 2018," Bank Indonesia governor Agus Martowardojo told reporters, adding that there will be a trade balance deficit of $230 million in February.

The current account records all international trades of goods and services, as well as income transfers, debt payments and remittances. That could place Indonesia's currency, rupiah, in a more vulnerable position should the country fail to attract fresh investments or debts to plug the deficit.

The Central Statistics Agency (BPS) reported that the trade deficit in January stood at $670 million, as imports increased by 26 percent on an annual basis, much faster than the 7.9 percent increase in exports.

In January, imports of consumer goods, capital goods and raw materials showed double-digit growth on an annual basis, at 33 percent, 31 percent and 25 percent, respectively.

Last year, the current account, or the broadest record of a country’s trade in international goods and services, as well as in remittances and its investment income, recorded a deficit of $17.29 billion, equal to 1.7 percent of gross domestic product. In 2016, the current account deficit stood at $16.95 billion, equivalent to 1.8 percent of GDP.

"We will maintain the current account deficit at a healthy level," Agus said.

Bank Indonesia targets the current account deficit between 2 percent and 2.5 percent of GDP for this year.

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