Oppositely Comparable, Economists Estimates The Transaction Deficit Will Be Widening

Illustration (Photo: Doc. ANTARA)

JAKARTA - Bank Permata economist Josua Pardede estimates that the current account deficit in the second quarter of 2024 will widen by 1.15 percent of gross domestic product (GDP) compared to the first quarter of 2024 at 0.64 percent.

"Although it is wide, it is still relatively low when compared to the average deficit in the 2012 to 2019 period which amounted to 2.5 percent of GDP," he explained to VOI, Friday, June 21.

This, he continued, was supported by the surplus of the trade balance even though it was already in a shrinking trend.

"The widening of the deficit is mainly due to seasonal factors, where every second quarter of each year there is an increase in payment of returns from domestic financial instruments to non-residents," he said.

With the deficit expected to widen, Josua conveyed that the Indonesia Payment Balance (NPI) in the second quarter of 2024 is expected to still not improve when compared to the position in the first quarter of 2024.

According to Josua, because the current account deficit tends to widen in the second quarter of 2024, especially from April to May 2024, there will be a significant outflow in the stock market and the state securities market (SBN).

The position of foreign exchange reserves until May 2024 was also recorded at 139 billion US dollars, lower than the position at the end of the first quarter of 2024 which amounted to 140 billion US dollars.

"Meski demikian, pada Juni 2024 sudah ada perbaikan pada pasar SBN. Kebijakan securitas rupiah Bank Indonesia (SRBI) oleh BI juga masih bisa membantu pencatatan inflow sehingga dapat menjaga NPI kuartal II 2024," jelasnya.

So, with the widening of the current account balance deficit and the balance of financial transactions which is likely to still record outflows, Josua estimates that NPI will still record a deficit.

Overall in 2024, Josua estimates that the current account balance will record a deficit of 0.94 percent of GDP or widen from the deficit in 2023 which is 0.14 percent of GDP.

We also see that NPI 2024 will record a deficit. This is indicated by foreign exchange reserves that have dropped significantly from the position at the end of 2023 which amounted to USS 146 billion, and an indication of a high-higher-for-longer risk that still haunts until near the end of 2024, "he said.

This estimate is inversely proportional to the prediction of Bank Indonesia (BI) which revealed that the current account deficit in the second quarter of 2024 will be lower.

Previously, Bank Indonesia (BI) revealed that the current account deficit in the second quarter of 2024 was predicted to be low, supported by the continued trade balance surplus, which until May 2024 was recorded at USD 5.6 billion.

Gubernur Bank Indonesia (BI) Perry Warjiyo menyampaikan aliran masuk modal asing dalam bentuk portofolio pada kuartal II 2024 atau hingga 14 Juni 2024, mencatatkan net inflows sebesar 4,0 miliar dolar AS, di tengah masih ketidakpastian pasar keuangan global.

The position of Indonesia's foreign exchange reserves at the end of May 2024 increased to US$ 139.0 billion, equivalent to financing 6.3 months of imports or 6.1 months of imports and payment of government foreign debt, and was above the international adequacy standard of about 3 months of imports.

"Overall, NPI 2024 is predicted to be maintained with transactions running in the low deficit range of 0.1 percent to 0.9 percent of GDP (gross domestic product)," he said at a press conference, Thursday, June 20.

Perry said that the balance of capital and financial transactions is predicted to continue to record a surplus, supported by an increase in foreign capital inflows, both in the form of Foreign Investment (PMA) and portfolio investments in line with investor positive perceptions of the national economic prospects and attractive investment returns.