Michelle Natalia
IDXChannel - Bank Indonesia (BI) stated today that the country's International Investment Position (IIP) recorded a slightly higher net liability in the first quarter of 2023.
At the end of the reporting period, Indonesia's IIP amassed a net liability totalling USD255.3 billion, up from the USD252.7 billion net liability posted at the end of the fourth quarter of 2022.
"The latest developments stemmed from an increase in the position of Foreign Financial Liabilities (FFL) that exceeded the increase in the position of Foreign Financial Assets (FFA)," BI Communication Department Executive Director Erwin Haryono said in a media release on Monday (19/6/2023).
Increased reserve assets contributed to Indonesia's higher FFA position in the first quarter of 2023. The FFA position climbed 3.3% (qtq) from USD449.9 billion at the end of the fourth quarter of 2022 to reach USD464.5 billion at the end of the first quarter of 2023. Most FFA components recorded higher positions, led by reserve assets, followed by direct investment, other investment and portfolio investment. In addition to the increase recorded in asset placements, the higher FFA position also stemmed from rising asset prices and broad-based US dollar depreciation against most global currencies.
Indonesia's FFL position in the first quarter of 2023 increased given portfolio investment and direct investment inflows. The FFL position grew 2.5% (qtq) from USD702.6 billion at the end of the fourth quarter of 2022 to USD719.8 billion at the end of the first quarter of 2023. The increase was primarily attributable to foreign capital inflows in the form of portfolio investment, which increased during the first quarter of 2023 in line with eased global financial market uncertainty and attractive returns on domestic financial assets.
In addition, direct investment inflows also remained solid, reflecting investors optimism in the promising national economic outlook. The higher FFA position was also influenced by the US Dollar depreciation against the Rupiah, which raised the value of domestic financial instruments.
"Bank Indonesia views Indonesia's IIP in the first quarter of 2023 remained solid, thus supporting external resilience," he stated.
This was reflected by a managable ratio of Indonesia's net liability IIP to GDP, decreasing slightly from 19.2% to 19.1% in the reporting period. In addition, the structure of Indonesia's IIP liabilities also remained dominated by long-term maturity instruments (94.0%), primarily in the form of direct investment.
"Moving forward, Bank Indonesia is confident that Indonesia's IIP performance will be maintained in line with post-Covid-19 pandemic economic recovery efforts, supported by the synergy between Bank Indonesia's policy mix, the Government, and other relevant authorities. Nevertheless, Bank Indonesia will remain vigilant of the potential risks associated with a net liability IIP on the economy," he concluded. (WHY)
