Economist Predicts Current Account Deficit Will Widen in 2024

Head of Bank Permata economist Josua Pardede. (Photo: Doc. ANTARA)

JAKARTA - Bank Permata Chief Economist Josua Pardede predicts that Indonesia's current account deficit (CAD) or trade balance deficit will widen in 2024 compared to 2023.

"We estimate that CAD will widen moderately, from -0.16 percent of GDP in 2023 to -0.79 percent of GDP in 2024," he said in his statement, Tuesday, September 17.

According to Josua, this projection takes into account several main factors, including the gradual normalization of commodity prices and the potential impact of weakening global demand.

However, Josua said that Indonesia's downstream policy is expected to reduce the dependence of the current account on commodity prices, which should help limit the current account deficit.

In addition, Josua said that the potential for a decrease in global policy interest rates this year has the potential to limit further declines in commodity prices amid expectations of a weakening US dollar influenced by the Fed's interest rate cuts.

Previously, Bank Indonesia (BI) noted that in the second quarter of 2024, Indonesia's current account deficit (CAD) recorded a deficit of USD 3 billion or 0.9 percent of GDP.

This value is slightly higher compared to the first quarter of 2024 which reached a deficit of USD 2.4 billion or 0.7 percent of GDP.

Assistant Governor of the BI Communication Department Erwin Haryono said the widening deficit was in line with the increasing surplus in the goods trade balance, contributed by a decreasing deficit in the oil and gas trade balance and a relatively stable surplus in the non-oil and gas trade balance.

"Non-oil and gas exports grew positively supported by improvements in commodity prices and demand from major trading partners, while non-oil and gas imports were relatively stable due to maintained domestic economic activity," he said in his statement, quoted on Friday, August 23.

According to Erwin, the services balance deficit increased due to the travel services deficit along with the implementation of the 2024 Hajj pilgrimage.

"The primary income balance deficit was also higher due to dividend and interest/coupon payments according to the quarterly pattern," he said.