Indonesia: Current Account showed a deficit in Q2 – UOB

Indonesia’s 2Q23 Current Account (CA) position recorded a deficit after seven consecutive quarters of surpluses. The CA recorded a deficit of USD1.9bn (0.5% of GDP), reversing previous quarter’s surplus of USD3bn (0.9% of GDP). Capital and financial account recorded a deficit of USD5bn (1.4% of GDP), easing from previous surplus of USD3.7bn (1.1% of GDP). Overall, Indonesia's 2Q23 Balance of Payments (BOP) recorded a deficit of USD7.4bn compared to 1Q23’s surplus of USD6.5bn. 

CA deficit was largely driven by deficit in the services and primary income in line with the pickup in the domestic economy and higher payments of returns on direct investment. The wider services deficit was on the back of larger increase in services imports than exports, aligned with the increasing number of Indonesian tourists visiting abroad. Imports of travel services increased by almost USD1bn in 2Q23, while exports of travel services only increased by less than half. 

We expect Indonesia’s CA position to turn from a surplus of 1% of GDP in 2022 into a slight deficit of around -0.3% in this year. The uncertainty of US Fed rate policy coupled with risk-off sentiment amid the global economic slowdown and more moderate financial account performance are key reasons for our forecast of a slight deficit in CA position for 2023.