REPUBLIKA.CO.ID, JAKARTA -- Indonesia's current transaction deficit at the end of 2018 will still remain within the safe limits although it is forecast to reach US$25 billion. It would be higher than that at the end of 2017, central bank said.

"The current transaction deficit is still within the secure limits," BI Governor Perry Warjiyo stated in Jakarta on Thursday.

The central bank governor did not harbor worries over the relatively high current transaction deficit since on the percentage basis, it is still lower than three percent of the gross domestic product (GDP).

He explained that one of the reasons behind the current account deficit is an increase in the imports of raw materials and capital goods needed to boost investment performance.

"An increase in imported items is mainly of raw materials as our production and economic activities are increasing," he noted, adding that the imports of capital goods are also due to the acceleration in infrastructure development and not all materials can be produced domestically, such as steel plates.

Also read: Indonesia's trade balance records surplus in June: BI

To this end, Warjiyo has welcomed the government's efforts to improve the current account balance by streamlining the licensing process to ensure that export-based investment and the import sub-sector could enter Indonesia.

In addition to increasing exports to earn foreign exchange, another step to be taken to attract foreign exchange is by improving the quality of the tourism sector to boost the number of foreign tourist arrivals.

"The government already has a strong commitment to control the current account deficit and create growth and employment, so tourism, investment for exports, and import substitution continues to be encouraged," Warjiyo stated.

For the central bank, the improvement in the current account balance holds significance, since it can indirectly become one of the tools to maintain the stability of the rupiah against the US dollar.

Earlier, the current account deficit in 2017 was recorded at Rp17.3 billion, or 1.7 percent of the GDP. This achievement is lower than the current account deficit of 1.8 percent of the GDP in 2016.

The improvement in the current account deficit stems from an increase in non-oil/gas trade balance surplus amid rising oil and gas imports, deficit in services accounting for deficits in transportation services, and the balance of income for repatriation payment of foreign investment returns.

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