Indonesia’s ratio of net liability for international investment to GDP in the third quarter of 2022 was maintained at around 20.0 percent, down from the ratio in the previous quarter of 21.3 percent.

Jakarta (Indonesia Window) – Indonesia's International Investment Position (IIP) in the third quarter of 2022 recorded a decline in the net liability, the central bank, Bank Indonesia (BI), said on Monday.

At the end of the third quarter of 2022, Indonesia’s IIP recorded a net liability of 262.0 billion U.S. dollars (20.0 percent of GDP), lower than the net liability at the end of the second quarter of 2022 of 270.5 billion dollars (21.3 percent of GDP).

This development was contributed by a decrease in the position of Foreign Financial Liabilities (FFL) amid the relatively stable position of Foreign Financial Assets (FFA), according to the Head of the BI Communication Department, Erwin Haryono, in his official statement on Monday.

Indonesia's FFL position decreased in line with the decline in the value of domestic financial instruments, amidst a continuing surplus of direct investment inflows.

Indonesia's FFL position fell 1.2 percent (quarter-to-quarter/qtq) from 705.2 billion dollars at the end of the second quarter of 2022 to 696.8 billion dollars at the end of the third quarter of 2022, Erwin noted.

The decline was mainly due to the strengthening of the U.S. dollar exchange rate against the majority of global currencies, including the rupiah, Erwin said.

This affected the decline in the value of domestic financial instruments, he said, adding that FFL transactions remained positive supported by direct investment inflows which reflected investor optimism about the prospects for economic improvement and a maintained domestic investment climate.

Indonesia's FFA position is relatively stable. At the end of the third quarter of 2022, the FFA position was recorded at 434.7 billion dollars, relatively stable compared to the position at the end of the second quarter of 2022.

This was supported by the position of portfolio investment assets and other investments which increased along with the placement of private assets.

The increase in FFA's position was restrained by other changing factors related to the strengthening of the US dollar against the majority of world's major currencies and the decline in the prices of several foreign assets.

Bank Indonesia views that developments in Indonesia's IIP in the third quarter of 2022 will be maintained and will support external resilience. This is reflected in the ratio of Indonesia's IIP net liability to GDP in the third quarter of 2022 which was maintained at around 20.0 percent, down from the ratio in the previous quarter of 21.3 percent.

In addition, the liability structure of Indonesia's IIP is also dominated by long-term instruments (93.9 percent), mainly in the form of direct investment.

In the future, Bank Indonesia believes that Indonesia's IIP performance would be maintained in line with efforts to recover Indonesia's economy from the impact of the Covid-19 pandemic, which is supported by the synergy of the policy mix of the central bank and the government, as well as other relevant authorities.

Nonetheless, Bank Indonesia will continue to monitor potential risks related to IIP’s net liability to the economy.

1 U.S. dollar = 15,634 rupiahs

Reporting by Indonesia Window