Bank Indonesia forecasts current account deficit at 1.8% of GDP

Bank Indonesia (BI) had forecast that the countrys current account deficit last year would fall to 1.8 percent of the national gross domestic product (GDP) as compared to 2.06 percent a year earlier.

The decline in the current account deficit would chiefly be the result of steady trade surplus, BI Deputy Governor Perry Warjiyo stated here on Friday.

According to the Central Statistics Agency, the country had recorded a trade surplus of US$840 million in November 2016, although it fell from $1.21 billion a month earlier.

“Hence, we forecast the current account deficit in the fourth quarter of 2016 to reach 1.9 percent of the GDP,” Warjiyo remarked at the BI Head Office.

Current account is an indicator of the exports of goods and services from a country to other nations and vice versa. Current account is divided into current accounts of goods and services.

When current account is in deficit, it means that imports are larger than exports. If the current account deficit steadily falls, exports and imports are improving.

On the other hand, the declining current account deficit will improve the balance of payment (NPI), which comprises current account, capital and financial account, and foreign exchange reserves.

“Indonesias foreign exchange reserves at the end of December 2016 rose to $116 billion, suggesting that the NPI will be positive (surplus), coupled with large foreign capital inflows,” Warjiyo added.