Bank Indonesia: The Obligation Of Neto International Investment Of The Republic Of Indonesia Decreases In The Fourth Quarter Of 2022

Illustration (Photo: Doc. Antara)

JAKARTA Bank Indonesia (BI) reported that Indonesia's international investment position (PII) in the fourth quarter of 2022 again recorded a net obligation that decreased to US$252.2 billion or equivalent to 19.1 percent of gross domestic product (GDP).

Head of the BI Communication Department Erwin Haryono said the figure was sloping from net obligations at the end of the third quarter of 2022 amounting to US$262.6 billion or 20.1 percent of GDP.

"The decrease in net liabilities stems from the increase in the position of foreign financial assets (AFLN) which is greater than the increase in the position of foreign financial obligations (KFLN)," he said in a press statement, Monday, March 20.

According to Erwin, Indonesia's AFLN position at the end of last year rose to USD 449.8 billion, growing 3.2 percent quarter to quarter (qtq) from USD 435.8 billion at the end of the previous quarter.

Then, the position of KFLN Indonesia in the fourth quarter of 2022 increased in line with direct investment inflows and increased the value of domestic financial instruments. The position of KFLN Indonesia rose 0.5 percent qtq from 698.4 billion US dollars at the end of the third quarter of 2022 to 702.1 billion US dollars at the end of the fourth quarter of 2022.

"Overall in 2022, PII Indonesia recorded a decrease in net obligations compared to the position at the end of 2021," he said.

Erwin explained that Indonesia's net PII obligation fell from 277.4 billion US dollars (23.4 percent of GDP) at the end of 2021 to 252.2 billion US dollars (19.1 percent of GDP) at the end of 2022.

He said, the decline in PII's net obligation was supported by an increase in AFLN's position of 18.8 billion US dollars 4.4 percent year on year (yoy) and a decrease in KFLN's position by 6.4 billion US dollars (0.9 percent yoy).

"The increase in AFLN's position mainly comes from the placement of direct investment assets, portfolio investments, and other investments," he added.

"Meanwhile, the decline in KFLN's position was mainly due to the outflow of portfolio investments in line with the increasing uncertainty of global financial markets and the strengthening of the US dollar exchange rate against the majority of global currencies, including the rupiah, thus affecting the value of domestic financial instruments," he continued.

Erwin added, Bank Indonesia views that Indonesia's PII development in the fourth quarter of 2022 and overall 2022 is maintained and supports external resilience. This is reflected in Indonesia's PII ratio to GDP in 2022 which is maintained in the range of 19.1 percent, lower than in 2021 by 23.4 percent.

In addition, the structure of Indonesia's PII obligations is also dominated by long-term instruments (93.8 percent), especially in the form of direct investment.

"In the future, Bank Indonesia believes that Indonesia's PII performance will be maintained in line with efforts to recover the national economy after the Covid-19 pandemic, which is supported by the synergy of the policy mix of Bank Indonesia and the Government, as well as other relevant authorities. However, Bank Indonesia will continue to monitor potential risks related to PII's net obligations to the economy," Erwin concluded.