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Indonesia’s FX reserves stood at USD 144.2 Bn by the end of April 2023, slightly decreased from previous month’s figures of USD 145.2 Bn. This may seem rather unexpected given the massive surge of reserves in March, but – if anything – it was the earlier figure that was anomalous, as it coincided with the influx of revenue to the government’s account at BI.
April’s figure was brought down largely by the payment of government’s foreign debt, specifically the maturing global bonds that amounted to USD 1.26 Bn, whereas no new global bonds were issued during the same month. The decline in FX liquidity may also be a sign of rising imports in April amid the Ramadan and Lebaran festivities. On the other hand, exports are expected to continue declining in line with commodity prices, resulting in a significant reduction in trade surplus.
Nonetheless, the Rupiah still managed to strengthen during April 2023 thanks to the inflows of foreign capital, with USD 828 Bn in equities and USD 252 Bn in bonds. The increase in capital inflows reflects both concerns over slowing growth following the US banking crisis and also Indonesia’s growing stature as one of the few havens of growth amid the expected slowdown. Meanwhile, BI’s special term deposit facility for export receipts (DHE) has also continued to help at the margins (net gain of USD 225.75 Mn by the end of April) despite the limited number of working days.
The overall FX liquidity situation, then, is still very much secure, especially given the continued increase in the amount of FX instruments held by banks. This should give Indonesia sufficient breathing room to weather the potential pressures that could come in Q2. Not only do we expect the trade surplus to narrow from before, but the service deficit could also widen as people take vacations abroad and amid the Haj pilgrimage. Furthermore, foreign funds could potentially flow out again after dividend payments, as in the common expression “sell in May
Executive Summary
Indonesia’s FX reserves slightly decreased to USD 144.2 Bn at the end of April 2023, driven by the payment of government’s foreign debt and the FX liquidity decline due to rising imports.
Foreign capital inflows supported Rupiah in April 2023, but could potentially flow out again after dividend payments in Q2. Combined with the expected narrowing trade surplus, this could result in a possible CA balance deficit.
Still good liquidity buffer may encourage BI to provide more support to the economy. However fiscal stimulus may be preferred given the still uncertain global monetary policy outlook.
FX Reserves:
A limit to Rupiah’s strength?
08 May 2023
Barra Kukuh Mamia Senior Economist Thierris Nora Kusuma
Economist / Analyst
2
and go away”. All in all, we expect the CA balance this year to flip into a narrow-ish deficit of 0.8 – 1.0% of the GDP.
All these factors suggest a limit to the appreciation of the Rupiah, after what has been a sterling start to the year. Still, this is not necessarily a negative situation for Indonesia. An excessively high exchange rate can be detrimental to the manufacturing sector, which often relies on lower costs to stay competitive. But nevertheless, the Rupiah strength does give us a more sanguine outlook with regards to domestic consumption, as well as investment that relies on imported capital goods.
Despite the recent Fed rate hike, BI still has a good buffer and flexibility to maintain its current policy mix of 5.75% policy rate and accommodative macroprudential policies. The possibility of BI cutting rates this year is still limited unless the Fed gives a clear sign of pivot first. Given that inflation may persist even in the event of a US recession (due to geopolitics and supply- side factors) the cost-benefit calculus likely favor Indonesian policymakers to focus on fiscal measures instead. Note that fiscal stimulus would also “free” large amounts of government liquidity currently sitting at BI – fiscal stimulus thus doubles as monetary stimulus too.
3 Panel 1. Rupiah continue to strengthen in April 2023, interestingly moving more like a hard
currency
Panel 2. More than just DHE facility, banks’ FX liquidity has greatly improved
% YoY
Source: BI Source: Bloomberg
144.2
14.7 12,000
13,000
14,000
15,000
16,000
17,000 60
80 100 120 140 160
Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Dec-21 Apr-22 Aug-22 Dec-22 Apr-23
BI FX Reserves (Cadev BI)
USD Bn
95.494.3
83.1
70 80 90 100 110 120 130
IDR
Hard currencies (inverse of DXY) Emerging currencies
Index (Jan-2020 = 100)
19.0
0 10 20 30
Jan-20 Apr-20 Aug-20 Dec-20 Mar-21 Jul-21 Nov-21 Feb-22 Jun-22 Oct-22 Jan-23 May-23
Banks’ placement at BI:
▬ FX term deposit ▬ FX Swap
▬ FX certificate (SBBI)
USD Bn
4
`
Panel 4. Increased foreign inflow improve domestic FX liquidity
Source: BI, Bloomberg
Panel 3.
Capital inflows rose reflecting Indonesia as a growth haven amid global slowdown after US banking crisisSource: Bloomberg
-18 -12 -6 0 6
-18 -12 -6 0 6
Mar-20 Sep-20 Mar-21 Oct-21 Apr-22 Oct-22 May-23
Net Bonds Inflows Net Equities Inflows Cumulative foreign flows from 3
Feb 2020 (USD Bn)
IDR/USD (changes since 3 Feb 2020)
-USD 11.0 Bn (8 May 2023)
+USD 5.32 Bn (8 May 2023)
12.8 9.89
-40 -20 0 20 40 60
Jan-03 Oct-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jul-13 Apr-14 Dec-14 Sep-15 Jun-16 Mar-17 Dec-17 Sep-18 Jun-19 Mar-20 Dec-20 Sep-21 Jun-22 Mar-23
▬Net foreign assets (NFA)
▬Domestic FX loans
% YoY
-1.2 -5.8
-40 -20 0 20 40 60
Jan-03 Sep-03 May-04 Jan-05 Sep-05 May-06 Dec-06 Aug-07 Apr-08 Dec-08 Aug-09 Apr-10 Nov-10 Jul-11 Mar-12 Nov-12 Jul-13 Feb-14 Oct-14 Jun-15 Feb-16 Oct-16 Jun-17 Jan-18 Sep-18 May-19 Jan-20 Sep-20 Apr-21 Dec-21 Aug-22 Apr-23
▬FX Liquidity index (NFA – FX loan growth)
▬IDR/USD (YoY)
%
5 Panel 5. FX reserves should be able to cover potential outflows
139.4
Source: BI, Bloomberg
144.2
0 50 100 150 200 250 300
350 ― BI FX reserves
Foreign ownership in gov’t bonds Foreign ownership in equities
Short-term gov’t external debt* Short-term private external debt*
USD Bn
* jatuh tempo dalam setahun ke depan
15.6
56.9 190.1
52.5
49.5%
-30 -20 -10 0 10 20 30 40
35%
45%
55%
65%
75%
85% ― Reserve adequacy ratio vs. potential outflows (inc. ST ext. debt)
― IDR/USD (12M after)
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Selected Macroeconomic IndicatorSource: Bloomberg, BI, BPS Notes:
^Data for January 2022
*Data from earlier period
**For changes in currency: Black indicates appreciation against USD, Red otherwise
***For PMI, >50 indicates economic expansion, <50 otherwise Key Policy Rates Rate (%) Last
Change
Real Rate (%)
Trade &
Commodities 5-May -1 mth Chg (%)
US 5.25 May-23 0.25 Baltic Dry Index 1,558.0 1,473.0 5.8
UK 4.25 May-23 -5.85 S&P GSCI Index 545.6 588.3 -7.3
EU 3.75 May-23 -3.25 Oil (Brent, $/brl) 75.3 84.9 -11.3
Japan -0.10 Jan-16 -3.30 Coal ($/MT) 168.5 223.5 -24.6
China (lending) 4.35 May-23 3.65 Gas ($/MMBtu) 1.85 2.13 -13.1
Korea 3.50 Apr-23 -0.20 Gold ($/oz.) 2,016.8 2,020.4 -0.2
India 6.50 Apr-23 0.84 Copper ($/MT) 8,560.3 8,740.3 -2.1
Indonesia 5.75 Apr-23 1.42 Nickel ($/MT) 24,447.3 22,910.0 6.7
CPO ($/MT) 914.9 964.6 -5.1
Rubber ($/kg) 1.34 1.32 1.5
SPN (1M) 3.70 3.33 37.2
SUN (10Y) 6.42 6.71 -28.4
INDONIA (O/N, Rp) 5.51 5.56 -5.5 Export ($ bn) 23.50 21.38 9.89
JIBOR 1M (Rp) 6.40 6.40 0.0 Import ($ bn) 20.59 15.92 29.33
Trade bal. ($ bn) 2.91 5.46 -46.78
Lending (WC) 8.89 8.75 13.80
Deposit 1M 4.18 4.00 17.94
Savings 0.67 0.67 0.25
Currency/USD 5-May -1 mth Chg (%) Consumer confidence
index (CCI) 123.3 122.4 119.9
UK Pound 0.791 0.800 1.08
Euro 0.908 0.913 0.60
Japanese Yen 134.8 131.7 -2.29
Chinese RMB 6.909 6.879 -0.44
Indonesia Rupiah 14,675 14,900 1.53 Capital Mkt 5-May -1 mth Chg (%)
JCI 6,787.6 6,833.2 -0.67 USA 47.1 46.3 80
DJIA 33,674.4 33,402.4 0.81 Eurozone 45.8 47.3 -150
FTSE 7,778.4 7,634.5 1.88 Japan 49.5 49.2 30
Nikkei 225 29,158.0 28,287.4 3.08 China 49.5 50.0 -50
Hang Seng 20,049.3 20,274.6 -1.11 Korea 48.1 47.6 50
Indonesia 52.7 51.9 80
Stock 2,789.1 2,726.8 62.33
Govt. Bond 822.9 818.5 4.38
Corp. Bond 11.8 12.0 -0.20
2.6 7.4 9.0
Chg (%)
Feb Dec
Mar
145.2 140.3 3.48
Foreign portfolio
ownership (Rp Tn) Apr Mar Chg (Rp Tn)
External Sector
Prompt Indicators
Car sales (%YoY)
Manufacturing PMI Motorcycle sales (%YoY)
Central bank reserves ($ bn)*
Chg (bps) Mar
Apr Money Mkt Rates 5-May -1 mth Chg
(bps)
Bank Rates (Rp) Feb Jan Chg
(bps)
40.5 56.3 24.6
Mar Feb
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Indonesia – Economic Indicators Projection*Estimated number
** Estimation of Rupiah’s fundamental exchange rate
Economic, Banking & Industry Research Team David E.Sumual
Chief Economist
[email protected] +6221 2358 8000 Ext:1051352
Agus Salim Hardjodinoto Head of Industry and Regional Research
+6221 2358 8000 Ext: 1005314
Barra Kukuh Mamia Senior Economist [email protected] +6221 2358 8000 Ext: 1053819 Victor George Petrus Matindas
Senior Economist
[email protected] +6221 2358 8000 Ext: 1058408
Gabriella Yolivia Industry Analyst
[email protected] +6221 2358 8000 Ext: 1063933
Lazuardin Thariq Hamzah Economist / Analyst
[email protected] +6221 2358 8000 Ext: 1071724 Keely Julia Hasim
Economist / Analyst [email protected] +6221 2358 8000 Ext: 1071535
Elbert Timothy Lasiman Economist / Analyst [email protected] +6221 2358 8000 Ext: 1074310
Thierris Nora Kusuma Economist / Analyst [email protected] +6221 2358 8000 Ext: 1071930 Arief Darmawan
Research Assistant
[email protected] +6221 2358 8000 Ext: 20364
Firman Yosep Tember Research Assistant [email protected] +6221 2358 8000 Ext: 20378
2018 2019 2020 2021 2022 2023E
Gross Domestic Product (% YoY) GDP per Capita (US$)
Consumer Price Index Inflation (% YoY) BI 7 day Repo Rate (%)
USD/IDR Exchange Rate (end of year)**
Trade Balance (US$ billion) Current Account Balance (% GDP)
5.2 3927
3.1 6.00 14,390
-8.5 -3.0
5.0 4175
2.7 5.00 13,866
-3.2 -2.7
-2.1 3912
1.7 3.75 14,050
21.7 -0.4
3.7 4350
1.9 3.50 14,262
35.3 0.3
5.3 4784
5.5 5.50 15,568
54.5 1.0
5.0 5011
3.4 5.75 15,173
28.4 -1.02
PT Bank Central Asia Tbk
Economic, Banking & Industry Research of BCA Group 20th Grand Indonesia, Menara BCA
Jl. M.H Thamrin No. 1, Jakarta 10310, Indonesia Ph : (62-21) 2358-8000 Fax : (62-21) 2358-8343
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