NPI Surplus In The Third Quarter Of 2024, Economists Suggest The Government Strengthens Added Exports

JAKARTA - Bank Permata economist Josua Pardede assessed that the Indonesia Payment Balance (NPI) in the third quarter of 2024, which recorded a surplus of 5.87 billion US dollars, reversed from a deficit of 0.56 billion US dollars (US) in the second quarter of 2024, driven by a decrease in the current account deficit (CAD) from 0.95 percent to 0.60 percent of GDP.

"This decline mostly stems from a decrease in the deficit in the balance of services and primary income," he said in his statement, Monday, November 25.

In addition, the NPI surplus was also supported by an increase in the surplus of financial transactions that jumped from 3.19 billion US dollars in the second quarter to 9.55 billion US dollars in the third quarter, supported by a surge in portfolio and direct investments.

According to Josua, the driving factor for reducing the current account deficit is an increase in foreign tourist visits by 15 percent (qoq), which narrows down the deficit in travel services.

Meanwhile, the increase in the surplus of financial transactions was supported by global positive sentiment towards Indonesian portfolio instruments such as SRBI, which attracted significant capital flow.

Josua conveyed that the balance sheet surplus of goods is estimated to be narrowing due to faster import growth than exports.

However, Josua sees a decrease in the primary revenue deficit and services can help keep CAD under control.

Meanwhile, although the surplus of financial transactions is projected to remain positive, there is a risk of moderation of the portfolio due to the potential global risk after Trump's victory.

Josua said several risk factors that influence, among others, the normalization of global commodity prices can weaken exports. In addition, the slowdown in global economic growth and protectionism can affect international trade.

Therefore, Josua conveyed the efforts that BI needed to make, among others, by optimizing instruments such as SRBI to attract incoming capital flows and stabilize the foreign exchange market.

In addition, BI can also optimize macroprudential policies to support credit in strategic sectors such as manufacturing and tourism.

Meanwhile, from the government side, Josua said that the government needs to encourage it to reduce dependence on raw commodities by encouraging added-value exports.

In addition, in order to encourage an increase in FDI, the government can provide incentives for foreign investment directly in the priority sector.

"The influence of Trump's victory over NPI's performance can trigger global risks where there is a potential for Trade War 2.0 which can worsen international trade conditions, weakening Indonesia's export demand," he explained.

In terms of portfolio investment, Josua conveyed that risk-off sentiment could drive capital outflows from developing markets such as Indonesia and Trump's protectionism policy could hinder the easing of global interest rates, suppressing the inflow of portfolio investments.

"Although the overall surplus of NPI is projected to decline, the liquidity of foreign exchange reserves remains strong, supporting external stability," he said.

Furthermore, Josua said, in the midst of these conditions, there are still challenges that still have to be faced in the future, including dependence on portfolio inflows that are vulnerable to global sentiment.

As well as the risk of pressure from lower commodity prices and global protectionism.

"So overall, although the NPI surplus in the third quarter of 2024 shows recovery, its sustainability until the end of the year will depend on external risk mitigation and internal efforts to increase export competitiveness and domestic financial stability," he concluded.