The central bank of Indonesia (Bank Indonesia) announced on Friday (13/02) that Indonesia’s current account deficit - the broadest measure of trade in goods and services - improved to 2.81 percent of gross domestic product (GDP), or USD $6.2 billion, in the fourth quarter of 2014 (from a revised 2.99 percent of GDP in the preceding quarter). The full-year 2014 deficit amounted to USD $26.2 billion, equivalent to 2.95 percent of GDP from a (revised) deficit of USD $29.1 billion (3.18 percent of GDP) in 2013.
Since late 2011, Indonesia has a structural current account deficit. This deficit makes the country highly vulnerable to capital outflows in times of global shocks as it signals that the country is dependent on foreign inflows. The deficit also puts depreciating pressures on the rupiah exchange rate.
Meanwhile, Indonesia’s balance of payments recorded a surplus of USD $15.2 billion in 2014 (from a USD $7.3 billion deficit in the previous year). This improvement is caused by the country’s declining current account deficit as well as a surplus in Indonesia’s capital and financial account. This surplus rose to USD $43.59 billion, almost double from USD $22 billion in 2013.