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Stock Index
Bahana Securities

23 Oct 2019 | 18:03 WIB
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Bahana Securities

23 Oct 2019 | 18:03 WIB
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2Q15 Balance of Payment: In deficit

Better than our (USD5.6bn) and consensus estimates (USD5.4bn), the current account deficit (CAD) improved to USD4.5bn (2.1% of GDP). Services balance improved 6.6% y-y supported by transportation which jumped 20.1% y-y while primary-income balance improved 6.9% y-y, helped by lower income repatriation from equity investments which dropped 12.6% y-y.

In our view, this is a reflection of the current slowdown in business environment. The 2Q15 trade balance of USD4.1bn also cushioned the CAD, which we expect to keep improving through year end on the back of continued lower imports.


In 2Q15, the private sector liabilities position reached -USD1.1bn, dropping USD3.1bn y-y and USD2.2bn q-q due to an increase in offshore deposits. Meanwhile, direct and portfolio investments decreased 2.3% y-y and 28.2% y-y respectively.


As such, this led to a financial account (FA) surplus of USD2.5bn (-82% y-y, -61% q-q) (exhibit 3), attributable in our view mainly by recent economic divergences between emerging markets and the US as well as IDR depreciation.


In sum, the improved CAD along with lower financial and capital account (CA) balances led to a BoP deficit of USD2.9bn in 2Q15, far below our estimate of USD2.2bn surplus.


Looking ahead, we cut our 2015 CAD target to 2.0% of GDP (previous: 2.5%), as falling oil prices (Brent: USD48.5/barrel) increase the likelihood of a lower CAD. In 3Q15 we expect the CAD ratio to improve to 1.8% of GDP, supported by continued low import levels.


Sustainability of financial accounts should be the next issue as a tightening financial market environment is likely to limit GDP growth and falling growth expectations could lead to deterioration in capital inflows. Pressure on a BI rate cut should rise now, but we expect one to come at the earliest in 2016, once inflation eases.

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