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Country Report Indonesia March 2011
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HTMLEconomic performance: Capital inflows boost the balance of payments
The current account posted a surplus of US$1.2bn in the final quarter of 2010, down from US$1.3bn in the third quarter. The trade surplus rose to US$9.3bn, boosted by strong non-oil and gas exports. Rising commodity prices and strong global demand helped to lift the value of exports (not including oil and gas) to US$46bn. However, these gains were offset by increased payments for freight owing to higher demand for imports, as well as by the transfer of profits earned by foreign firms with investments in the local stock and bond markets. In 2010 as a whole the current-account surplus came to US$6.3bn, down from US$10.7bn in 2009, in part as a result of a weaker trade position. Imports grew by 51% to US$127.1bn in 2010, while exports rose by 32% to US$158.2bn.
The capital and financial account surplus rose to US$9.9bn in the fourth quarter, from US$6.5bn at the end of the third quarter. A strong macroeconomic outlook and bright prospects for future growth helped to lift net direct investment inflows to US$3.7bn, from US$2.5bn in the third quarter. Net portfolio investment inflows also continued to rise, reaching US$1.8bn at the end of the fourth quarter, owing to the fact that capital was attracted into the country by poor returns in developed markets and growing optimism regarding Indonesia's future growth prospects. Overall, net inward portfolio investment reached US$15.7bn in 2010, up by 52% on US$10.4bn in 2009.
| Balance of payments | ||||||||
| (US$ m unless otherwise indicated) | ||||||||
| 2009 | 2010 | |||||||
| 2009 | 2010 | 3 Qtr | 4 Qtr | 1 Qtr | 2 Qtr | 3 Qtr | 4 Qtr | |
| Exports fob | 119,480 | 158,201 | 31,273 | 35,899 | 34,993 | 37,264 | 39,228 | 45,970 |
| Imports fob | -84,347 | -127,108 | -22,784 | -24,504 | -26,222 | -28,621 | -30,108 | -36,690 |
| Trade balance | 35,133 | 31,093 | 8,488 | 11,395 | 8,770 | 8,643 | 9,120 | 9,279 |
| Services, net | -14,110 | -9,491 | -3,519 | -4,538 | -3,592 | -3,417 | -3,890 | -2,770 |
| Income, net | -15,140 | -20,258 | -4,072 | -4,551 | -4,339 | -4,628 | -5,152 | -6,619 |
| Current transfers, net | 4,861 | 4,950 | 1,248 | 1,303 | 1,168 | 1,206 | 1,230 | 1,334 |
| Current-account balance | 10,743 | 6,294 | 2,146 | 3,610 | 2,007 | 1,804 | 1,308 | 1,224 |
| Capital account balance | 96 | 32 | 34 | 14 | 18 | 0 | 0 | 14 |
| Financial account balance | 3,453 | 26,186 | 2,474 | 1,255 | 4,810 | 4,370 | 6,477 | 9,861 |
| Foreign direct investment, net | 1,928 | 12,736 | 472 | 604 | 2,300 | 1,977 | 2,492 | 3,739 |
| Portfolio investment, net | 10,336 | 15,697 | 2,972 | 3,521 | 6,159 | 1,089 | 6,060 | 1,773 |
| Other investment, net | -8,812 | 3,263 | -970 | -2,869 | -3,648 | 1,304 | -2,075 | 1,850 |
| Capital & financial account balance | 3,548 | 26,218 | 2,507 | 1,270 | 4,829 | 4,370 | 6,477 | 9,874 |
| Total | 14,291 | 32,512 | 4,654 | 4,879 | 6,836 | 6,174 | 7,785 | 11,098 |
| Errors & omissions | -1,785 | -2,227 | -1,108 | -926 | -215 | -753 | -830 | 191 |
| Balance of payments | 12,506 | 30,285 | 3,546 | 3,954 | 6,621 | 5,421 | 6,955 | 11,289 |
| Reserve assets position (end-period) | 66,105 | 96,207 | 62,287 | 66,105 | 71,823 | 76,321 | 86,551 | 96,207 |
| Reserve assets (months of import & official debt-repayment cover) | 6.5 | 7.0 | 6.1 | 6.5 | 5.4 | 5.8 | 6.6 | 7.0 |
| Source: Bank Indonesia. | ||||||||
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The net impact of the movements on the current account and the capital and financial account was a balance-of-payments surplus in the fourth quarter of US$11.3bn, up from US$7bn in the third quarter. In 2010 as a whole the surplus rose to US$30.3bn, from US$12.5bn in 2009. International reserves increased to US$96.2bn as a result of the strengthened balance-of-payments position, sufficient to cover seven months of imports and interest payments on official external debt.
