Indonesia’s International Investment Position (IIP) continued to record a lower net liability in the fourth quarter of 2022. At the end of the reporting period, Indonesia’s IIP amassed a net liability totalling USD252.2 billion (19.1% of GDP), lower than the USD262.6 billion (20.1% of GDP) net liability posted at the end of the third quarter of 2022. The latest developments stemmed from an increase in the position of Foreign Financial Assets (FFA) that exceeded the increase in the position of Foreign Financial Liabilities (FFL).
All FFA components contributed to Indonesia’s higher FFA position in the fourth quarter of 2022. Indonesia’s FFA position climbed 3.2% (qtq) from USD435.8 billion at the end of the third quarter of 2022 to reach USD449.8 billion at the end of the fourth quarter of 2022. All components experienced higher positions, led by reserve assets, direct investment, and other investments. Increases in asset placements and asset prices abroad contributed to the FFA increase.
Indonesia’s FFL position in the fourth quarter of 2022 increased in response to direct investment inflows and a bump in the value of domestic financial instruments. The FFL position rose 0.5% (qtq) from USD698.4 billion at the end of the third quarter of 2022 to USD702.1 billion at the end of the fourth quarter of 2022.
The increase was primarily attributable to persistently solid direct investment inflows, given investor optimism in the national economic outlook and conducive domestic investment climate. In addition, the FFL position was also influenced by broad-based US dollar depreciation against most global currencies in the reporting period, which raised the value of domestic financial instruments.
For the whole year of 2022, Indonesia’s IIP recorded a lower net liability compared to the end of 2021. Indonesia’s net liability IIP retreated from USD277.4 billion (23.4% of GDP) at the end of 2021 to USD252.2 billion (19.1% of GDP) at the end of 2022. Such developments were driven by increasing FFA position by USD18.8 billion (4.4%, yoy) and declining FFL position by USD6.4 billion (0.9%, yoy).
The increase recorded in the FFA position was primarily driven by direct investment, portfolio investment, and other investments. Meanwhile, the decrease recorded in the FFL position was mainly caused by portfolio investment outflows in line with elevated global financial market uncertainty and broad-based US dollar appreciation against most global currencies, including the Rupiah, which affected the value of domestic financial instruments.
Bank Indonesia views Indonesia’s IIP in the fourth quarter of 2022 and overall in 2022 as solid, thus supporting external resilience. This was reflected by a maintained ratio of Indonesia’s net liability IIP to GDP, decreasing from 23.4% in 2021 to 19.1% in 2022. In addition, the structure of Indonesia’s IIP liabilities also remained dominated by long-term maturity instruments (93.8%), primarily in the form of direct investment.
Moving forward, Bank Indonesia is confident that Indonesia’s IIP performance will be maintained in line with post-Covid-19 pandemic economic recovery efforts, supported by the synergy between Bank Indonesia’s policy mix, the Government, and other relevant authorities. Nevertheless, Bank Indonesia will remain vigilant of the potential risks associated with a net liability IIP on the economy.
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