In the final quarter of 2023, Indonesia witnessed a noteworthy increase in its international investment position (IIP), with net liabilities expanding to $260.3 billion USD. This rise underscores the country’s ongoing engagement and growing stature within the global financial landscape, according to Bank Indonesia (BI).
The Assistant Governor of BI’s Communication Department, Erwin Haryono, highlighted the growth in Indonesia’s net liabilities from $251.9 billion USD at the end of the third quarter to $260.3 billion USD by the close of the fourth quarter in 2023. This increment is attributed to an increase in external financial liabilities (EFL), outpacing the growth of external financial assets (EFA).
The uptick in Indonesia’s EFL by 3.8% quarter-over-quarter to $744.9 billion USD from $717.3 billion USD reflects reduced global market uncertainties and sustained investor optimism towards the domestic economic outlook.
The rise in EFL was primarily fueled by foreign capital inflows in direct and portfolio investments, reflecting the positive investor perception and a conducive investment climate. A weaker US dollar against global currencies, including the Indonesian Rupiah, and the rise in Indonesian stock prices also contributed to this growth.
Indonesia’s EFA saw a 4.1% quarterly increase to $484.6 billion USD, mainly bolstered by a surge in foreign exchange reserves. Nearly all components of EFA experienced growth, with the largest increases seen in reserve assets followed by direct investment, portfolio investment, and other investments in the form of loans.
Overall, Indonesia’s IIP for the entirety of 2023 marked an elevation in net liabilities from $250.1 billion USD (19.0% of GDP) at the end of 2022 to $260.3 billion USD (19.0% of GDP) by the end of 2023. This was due to a larger increase in EFL compared to EFA, driven by rising foreign capital flows in various forms of investment.
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Bank Indonesia views the 2023 IIP developments positively, reinforcing the country’s external sector resilience. The IIP ratio to GDP remained stable at around 19.0%, comparable to 2022 levels, with long-term instruments, primarily in the form of direct investments, dominating Indonesia’s liability structure.
The increase in Indonesia’s international investment liabilities in Q4 2023 and throughout the year reflects the nation’s robust engagement with the global financial ecosystem. Bank Indonesia remains optimistic about maintaining a stable IIP performance, supported by national economic recovery efforts and policy synergy with the government and related authorities. This strategic approach aims to strengthen the external sector’s resilience while closely monitoring potential economic risks associated with net IIP liabilities.
Bank Indonesia’s latest report indicates a significant rise in Indonesia’s international investment liabilities in the fourth quarter of 2023, reaching $260.3 billion USD. This increase is attributed to the growth of external financial liabilities, spurred by improving global market conditions and strong investor confidence in Indonesia’s economic prospects. With the IIP ratio to GDP maintaining stability and a focus on long-term investment forms, Bank Indonesia underscores its commitment to bolstering the nation’s external sector resilience. This development marks a positive stride in Indonesia’s ongoing integration into the global economy.
Source: Republika, Bank Indonesia (2024)
