Indonesia’s net liability IIP sustains slump Q3’23

It fell 0.5% quarter-on-quarter to $252.6.

Indonesia's International Investment Position (IIP) for the third quarter of 2023 revealed a decreased net liability, amounting to $252.6b, down 0.47% from $253.8b in the second quarter of 2023, data from the Bank Indonesia showed.

This decline was attributed to a reduction in Foreign Financial Liabilities (FFL) combined with an increase in Foreign Financial Assets (FFA).

The decrease in the FFL position was influenced by portfolio investment outflows in response to rising global financial market uncertainty. The FFL position dropped 0.1% quarter-on-quarter (QoQ) to $716.8b at the end of the third quarter of 2023 from $717.6b in the second quarter. 

This was mainly driven by a lower position of portfolio investment liabilities in the form of government securities (SBN) and private debt securities. Meanwhile, direct investment and other investment liabilities continued to rise due to sustained investor optimism in the promising domestic economic outlook. 

The FFL developments were also influenced by broad-based US dollar appreciation against most global currencies, including the Rupiah.

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The FFA position increased with direct investment and other investment placements in financial instruments abroad. The FFA position at the end of the third quarter of 2023 stood at $464.2b, up 0.1% quarter-on-quarter from $463.8b. 

This was primarily due to increases in the respective asset positions of direct investment, portfolio investment, and other investments in the form of debt securities and loans. 

However, the position of reserve assets decreased due to various factors, including servicing government external debt and Rupiah stabilisation measures to counter the spillover effects of global financial market uncertainty. 

The increase in the FFA position was offset by other change factors related to US dollar appreciation against currencies in asset placement countries.

Bank Indonesia views the improvements in Indonesia's IIP for the third quarter of 2023 as supporting external resilience, as reflected in a lower ratio of Indonesia's net liability IIP to GDP, decreasing from 18.8% to 18.6% in the reporting period. 

The structure of Indonesia's IIP liabilities remains dominated by long-term maturity instruments (93.9%), primarily in the form of direct investment. 

Bank Indonesia is confident that Indonesia's IIP performance will be maintained in line with national economic recovery efforts, supported by synergy between Bank Indonesia's policy mix, the government, and other relevant authorities. 

However, the central bank remains vigilant about potential risks posed by a net liability IIP on the economy.