Indonesia: Mind the (current account) gap

Indonesia's current account gap widened in 4Q 2017 and the country recorded a deficit equal to 1.7% of GDP last year. But we expect this to narrow slightly in 2018

-1.6%

Forecast for 2018 current account deficit to GDP

Slightly narrower than 2017

Current account deficit in 2018 is likely to narrow to -1.6% of GDP

The current account deficit jumped to -$5.8bn in 4Q (2.23% of GDP) from -$4.6bn in 3Q and -$1.8bn in 4Q 2016, due to high primary income payments (for investments in equity) and a moderate trade surplus.

Exports in 4Q moderated to a 13% year-on-year increase from 25% in 3Q and 14% in 4Q 2016.
Import growth remained above 20% in 4Q and 3Q and accelerated from 7% growth in 4Q 2016.
Export growth in 2017 averaged at 16.4% while imports posted a 15.7% average increase.
We expect export and import growth to moderate in 2018 with export growth still slightly outpacing imports. Primary income payments are likely to remain high and increase by 13% this year.
The result is a current account deficit of -$18.2bn or -1.6% of GDP (on real GDP growth of 5.4%) in 2018 from 2017's -1.7%.