BI: Indonesia's International Investment Net Liability Increases

Illustration (Photo: Doc. Antara)

JAKARTA – Bank Indonesia (BI) reported that Indonesia's International Investment Position (PII) in the first quarter of 2023 recorded a slight increase in net liabilities to USD 255.3 billion.

Head of the BI Communication Department Erwin Haryono said this figure had increased compared to the net liabilities at the end of the fourth quarter of 2022 of USD 252.7 billion.

"The increase in net liabilities came from an increase in the position of Foreign Financial Liabilities (KFLN) which exceeded the increase in the position of Foreign Financial Assets (AFLN)," he said in a press release today, Monday, June 19.

According to Erwin, the soaring position of the AFLN was supported by an increase in foreign exchange reserves. It was stated that the AFLN position at the end of the first quarter of 2023 was recorded at USD 464.5 billion, up 3.3 percent quarter to quarter (qtq) from USD 449.9 billion at the end of the previous quarter.

"The majority of the AFLN components experienced an increase in position, with the largest increase in foreign exchange reserve assets, followed by direct investment, other investment and portfolio investment. Besides being contributed by an increase in asset placements, the increase in AFLN's position was also caused by an increase in asset prices and the weakening of the US dollar exchange rate against the majority of global currencies," he said.

Erwin explained, Indonesia's KFLN position in the first quarter of 2023 increased along with inflows of portfolio investment and direct investment.

It was noted that Indonesia's KFLN position rose 2.5 percent qtq from USD 702.6 billion at the end of the fourth quarter of 2022 to USD 719.8 billion at the end of the first quarter of 2023.

He said, this development was caused by inflows of foreign capital in the form of portfolio investment which increased during the first quarter of 2023 in line with the easing of global financial market uncertainty and attractive returns on domestic financial assets.

In addition, direct investment inflows also remained solid, reflecting the maintained optimism of business actors regarding the prospects for the national economy.

"The increase in KFLN's position was also influenced by the weakening of the US dollar exchange rate against the rupiah, which pushed up the value of domestic financial instruments," he said.

Erwin ensured that the development of Indonesia's PII in the first quarter of 2023 was maintained so as to support external resilience.

This is reflected in Indonesia's PII to GDP ratio in the first quarter of 2023 which was maintained at around 19.1 percent, slightly lower than the previous quarter of 19.2 percent.

Meanwhile, the liability structure of Indonesia's PII is also dominated by long-term instruments (94.0 percent), especially in the form of direct investment.

"Going forward, Bank Indonesia believes that PII Indonesia's performance will be maintained in line with efforts to recover the post-pandemic national economy which is supported by the synergy of the policy mix with the government and other relevant authorities. Nonetheless, Bank Indonesia will continue to monitor potential risks related to PII's net liability to the economy," concluded Erwin.