Indonesia: Current Account surprised to the upside in Q3 – UOB

Indonesia’s 3Q23 Current Account (CA) position recorded an improvement despite being still in deficit. The CA recorded a deficit of USD0.9bn (-0.2% of GDP), improved from previous deficit of USD2.2bn (-0.6% of GDP). The improvement in CA deficit can be attributed to the higher trade surplus, lower services balance deficit, and improving primary income balance.

The trade balance in 3Q23 recorded a surplus of USD10.3bn, marginally higher than 2Q23’s surplus of USD10.1bn. The higher surplus can be attributed to the improvement in the non-oil and gas (non-OG) surplus in 3Q23 at USD15.4bn, higher than 2Q23 of USD14.7bn, underpinned by improving exports of iron and steel commodities in line with the ongoing recovery in China's manufacturing industry. While the services balance in 3Q23 recorded a deficit of USD4.1bn, narrower than 2Q23 of USD4.7bn due to an improvement in travel services, financial services, and services related to the use of intellectual property.

We keep our forecast for CA position this year to turn from a surplus of 1% of GDP in 2022 into a slight deficit of around 0.3% for the full year 2023. The anticipated global economic slowdown and a more moderate financial account performance are key reasons for our forecast of a slight deficit in CA position for 2023. Nevertheless, we may see a potential improvement for Indonesia's trade balance in 4Q23 due to recovery in demand from China, especially coal and CPO commodities which is expected to put some upside for Indonesia’s CA in 2023.