Commenting on the latest data, Bank Indonesia Governor Agus Martowardojo said the balance of payments (BoP) deficit in Q1-2016 is not a surprise because Indonesia's CAD could not be covered by capital and financial transaction surpluses. However, Martowardojo added that he expects to see the BoP turn into a surplus in the remainder of the year, supported by economic reforms. Indonesia's Q1-2016 USD $287 million BoP deficit is a sharp contrast to the USD $1.3 billion BoP surplus recorded in the first quarter of 2015, or the USD $5 billion surplus in full-year 2015.

The BoP covers foreign direct investment (FDI), portfolio investments, financial derivatives and other investments.

Juda Agung, Executive Director of Bank Indonesia's Economic and Monetary Policy Department, explained that Indonesia's lower capital and financial transaction surpluses in Q1-2016 were partly caused by foreign debt payments exceeding the withdrawal of new foreign debt (signalling that Indonesia's private sector has been more careful in taking on new foreign debt amid high economic uncertainties). Meanwhile, Head of Bank Indonesia's Statistics Department Hendy Sulistyowati said the capital and financial transaction surplus occurred on the back of foreign direct investment (FDI) growth as well as robust portfolio investments (stocks and bonds).

Indonesia's current account balance, the broadest measure of a nation's foreign trade (covering goods, services and primary and secondary incomes) and which forms part of the BoP, remained in deficit in Q1-2016 at USD $4.67 billion, or 2.14 percent of GDP. This was better than the USD $5.1 billion (2.37 percent of GDP) CAD in Q4-2015 but slightly worse than the USD $4.1 billion (1.94 percent of GDP) CAD in Q1-2015. Bank Indonesia expects the full-year 2016 CAD to reach between 2.2 and 2.5 percent of GDP.

Indonesia's trade balance has mostly been in a surplus since the end of 2014. Although this may seem positive at first sight, Governor Martowardojo said the surplus is caused by the fact that imports have been dropping at a faster rate than exports throughout 2015. Rapidly falling imports indicate that economic activity in Indonesia has been on the decline. However, the weakening export performance of Indonesia - which is primarily caused by persistently low commodity prices - remains a crucial problem as well because the country misses out on much needed foreign exchange earnings.

However, the latest data from Statistics Indonesia show that the situation has changed in Q1-2016: negative export growth has started to outpace negative import growth.

Indonesia's Export-Import Performance in the 1st Quarter:

  Quarter I

Quarter I
(in USD billion)
   39.01    33.59  -13.9
(in USD billion)
   36.73    31.94  -13.0
(in USD billion)
    2.31     1.65  -28.6

Source: BPS