Indonesia's Q1 current account deficit narrows to 0.1 per cent of GDP
A narrower deficit may provide more space for the central bank to relax monetary policy
[JAKARTA] Indonesia’s current account deficit narrowed to around US$200 million in the first quarter, equal to 0.1 per cent of gross domestic product, from a deficit of 0.3 per cent of GDP in the previous quarter, the central bank said on Thursday (May 22).
Indonesia’s current account is closely monitored by investors and policymakers because it is a source of vulnerability, making the country susceptible to capital outflows.
A narrower deficit, which could relieve pressure on the rupiah currency, may provide more space for the central bank to relax monetary policy, some analysts say.
Bank Indonesia (BI) on Wednesday cut interest rates for a third time in an easing cycle that started in September, aimed at lifting economic growth.
The smaller January-March deficit was due to a larger merchandise trade surplus, despite weakening global economic growth, BI said in a statement.
South-east Asia’s largest economy booked a four-month high trade surplus of US$4.33 billion in March, due to strong palm oil and nickel exports and a rush to beat the implementation of US tariffs – which have since been frozen until July.
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BI maintained its outlook for the full-year current account deficit to be within 0.5 per cent to 1.3 per cent of GDP this year. Last year’s deficit was 0.6 per cent of GDP.
The first-quarter balance of payments outcome was a deficit of around US$800 million, compared with a surplus of US$7.9 billion in the previous quarter, BI added.
Josua Pardede, chief economist at Permata Bank, revised his outlook for this year’s current account deficit to 0.87 per cent of GDP, compared with a previous forecast of 1.18 per cent, following the first-quarter data and positive developments in US-China tariff negotiations.
“With the deficit manageable and foreign (exchange) reserves still relatively ample, we see that there remains room for a 25bps BI-rate cut in 2H25,” he said.
Indonesia is currently also negotiating tariffs with Washington. REUTERS
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