Minister: 3 Percent Account Deficit is a Yellow Signal

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  • Coordinating Economic Minister Darmin Nasution. TEMPO/Richard Andika

    Coordinating Economic Minister Darmin Nasution. TEMPO/Richard Andika

    TEMPO.CO, Jakarta - Coordinating Minister for Economic Affairs Darmin Nasution said that he cannot predict the current account deficit (CAD) for the end of 2018. Darmin asserted that the CAD will continue to change in accordance with the ongoing growth and development of the export and import.

    "What's [the CAD] for the end of this year, we're still trying to find out, because it continues to change. But if it has reached 3 percent or more, we need to consider it as a yellow signal," Darmin said on Wednesday, August 22, 2018.

    Previously, Bank Indonesia recorded that Indonesia's Balance of Payments (B.O.P) in the second quarter of 2018 had experienced a USD 4.3 billion deficit. The deficit was mostly caused by the increase of CAD, which was recorded at USD 8 billion, or equals to 3 percent of the country’s Gross Domestic Product (GDP). The number was higher compared to the previous quarter of USD 5.7 billion or equals to 2.2 percent of the GDP.

    Although the current B.O.P is recorded at a level of 3 percent, Darmin said that the number is relatively better compared to other developing countries such as India, Russia, Turkey, Brazil, and South Africa.

    Darmin asserted that the fluctuation of currency exchange rates will be harder because the CAD is larger. "Well, it is a dynamic world. As people say 'every beginning of a century will bring many events'. For the past century it was the world war, for this century, we don't know yet," Darmin said.

    Darmin explained that Indonesia CAD has been around since the New Order era.  However, the number were not as big as today. The CAD continues to increase as trade war occurs, which is marked with the occurrences of tariff wars and import duties between the United States and China.

    Darmin said that the government has taken important steps to mitigate the fluctuation. One of the steps is to attempt to prevent the CAD from expanding by issuing a policy on the use of palm oil mixture in diesel fuel, managing the petrochemical industry by restructuring PT Trans Pacific Petrochemical Indotama (TPPI), and to prevent import components.

    "With the policy, combined with general policies on tourism or industry and agriculture, I think within the next few months the CAD will not be too hard," Darmin said.