Despite the continuation of the current account deficit, Bank Indonesia notes that a large surplus in Indonesia's financial and capital accounts was more than able to cover for January-March's current account deficit, hence resulting in Indonesia's USD $4.5 billion balance of payments (BoP) surplus in the first quarter of 2017, more-or-less unchanged from the nation's BoP surplus in the preceding quarter but a major improvement from the USD $0.3 billion BoP deficit in Q1-2016.

The balance of payments surplus also led to an increase in Indonesia's official reserve assets from USD $116.4 billion at the end of 2016 to USD $121.8 billion at the end of Q1-2017. The current level of foreign exchange assets can adequately cover 8.6 months of imports and government external debt repayment, well above the international standards of reserves adequacy.

Indonesia's USD $7.9 billion financial and capital accounts surplus in Q1-2017 came on the back of the nation's accelerating economic growth in the same quarter as well as positive perceptions of growth in the next couple of quarters. The figure is an improvement compared to the USD $7.6 billion in Q4-2016 or USD $4.2 billion surplus in Q1-2016. Growth was primarily driven by rising portfolio investment inflows in rupiah-denominated instruments (SUN, SPN, and stocks) as well as the government's issuance of global sukuk (Islamic bonds).

However, a slowdown in foreign direct investment into Indonesia (and, in fact, outflows of foreign direct investment in the oil and gas sector) somewhat limited the increase in the financial and capital accounts surplus.

Indonesia's Q1-2017 current account deficit at USD $2.4 billion (1.0 percent of GDP) is a big improvement from the USD $4.7 billion (2.1 percent of GDP) deficit in Q1-2016. But compared to Q4-2016 the current account deficit slightly widened. This was caused by rising crude oil prices amid Indonesia's declining oil production rate, while "the increase in primary income deficit followed interest rate payment schedules of government bonds and increased direct investment income payments".

The current account is known as the broadest measure of a country's foreign trade. It is part of a nation's balance of payments, which summarize an economy's transactions with the rest of the world. When a country posts a current account deficit it implies that the country is a net borrower from the rest of the world and requires capital or financial flows to finance this deficit. Generally, a current account deficit below 3 percent of GDP is manageable, especially if the deficit is the result of productive investment purposes (that will generate future revenue streams).

Starting from late-2011 (when it was hit by the drop in commodity prices) Indonesia has had to cope with a structural current account deficit, even touching beyond 4 percent of GDP in 2013, hence being placed among the fragile five when monetary tightening in the USA prompted capital outflows from emerging markets.

Current Account Balance of Indonesia: