Wednesday, 16 Rabiul Awwal 1441 / 13 November 2019

Wednesday, 16 Rabiul Awwal 1441 / 13 November 2019

Widening CAD results from rising oil imports

Sabtu 10 Nov 2018 09:10 WIB

Red: Reiny Dwinanda

Bank Indonesia

Bank Indonesia

Until the third quarter of 2018, CAD reached 2.86 percent of the GDP.

REPUBLIKA.CO.ID, JAKARTA -- Indonesia's third quarter current account deficit rose to US$8.8 billion due to rising oil imports that weakened the performance of oil and gas trade balance, among others. The figure was equal to 3.37 percent of the national gross domestic product

"The rising deficit in oil and gas trade balance resulted from increasing oil imports amidst global crude price hike," Bank Indonesia said in its official statement on the performance of current account in the third quarter of 2018 released on Friday.

Current account which consists of trade and service balance serves as a parameter recording payment transactions between Indonesian population and non-Indonesian population. Hence, the current account reflects the inflow and outflow of foreign exchange earnings in a country and that this parameter also serves as a reference for investors to invest in the country and determine the movement of the currency's exchange rate

Cumulatively, the current account deficit until the third quarter of 2018 reached 2.86 percent of the GDP which according to the central bank is still safe.

Also read: Current account deficit ideally solved by increasing export

According to Bank Indonesia, the rising current account deficit in the third quarter of 2018 resulted from the weakening performance of goods trade balance and the rising deficit of service balance. In the second quarter of 2018 the current account deficit reached US$8.0 billion or 3.02 percent of the GDP.

The goods trade balance covers the oil and gas sector and the non-oil/non-gas sector. The deficit of oil and gas trade balance increased, while the increase in non-oil/non-gas trade balance is relatively limited due to high imports.

High demand for imported goods in the non-oil/non-gas sector was also the result of rising domestic consumption,

According to the central bank, the rising deficit of oil and gas trade balance resulted from rising oil imports due to the increasing global crude prices. The other contributor to the current account deficit is the widening deficit of service balance, expeciallhy transportation service.

The current account deficit could be prevented from widening by increasing the export of manufactured goods and the surplus of travel service in the tourism sector.

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