reassurance of rupiah exchange rate support after
Bank Indonesia’s rate cut last week, specifically from
high and rising FDI inflows. However, offsetting
outflows on the capital account along with a deficit
on the current account in 4Q11 reinforce our view,
and that of many investors, that BI should be treading
a more cautious monetary path.
Surging FDI inflows were the bright spot hitting a
record USD18.2bn in 2011, from USD13.8bn in
2010. The current account though, went from a
USD0.9bn surplus in 4Q10 to a USD0.9bn deficit in
4Q1l. The full year current account was still in
surplus, but only just, at 0.2% of GDP. The continuing
investment upswing will shift the current account into
deficit this year by maintaining strong demand for
imports. This will mean increased reliance on net FDI
to support the balance of payments (first chart).
Net FDI in 2011 at USD10.4bn actually fell short of
our USD12.2bn estimate and was less than the upward
revised USD11.1bn in 2010 (second chart). This is
because of rising FDI outflows, USD7.7bn in 2011
which was almost three times more than in 2010. We
have not seen much anecdotal evidence which would
substantiate the official estimate of USD7.7bn FDI
outflows. On the other hand, there have been ample
anecdotal reports of past and continuing FDI inflows.
Sumitomo plans to invest USD10.1bn in various
energy projects (no specific time frame given),
having invested up to USD5bn already in Indonesia.
The auto producers are all keen to expand
operations. Toyota plans to spend USD0.5bn on a
second plant, due to open in early 2013 while
Suzuki plans to invest USD0.8bn to expand its auto
manufacturing capacity over the next two years.
Aside from the questionable FDI outflows, there
were other leakages on the capital account, slotted
under errors & omissions. These were estimated at
USD4.2bn in 2001, which entirely offset the net
portfolio investment inflows.
As for the current account, Indonesia’s vulnerability
is underlined by structural deficits, first on services,
notably transportation services, and second on net
income, from profits and dividend repatriation.
There was an USD8.7bn transportation deficit
(around 1% of GDP) in 2011, primarily freight. This
is a reflection of Indonesia’s dependence on its
neighbours, primarily Singapore, for port services
because of its own deficient infrastructure.
Tourism inflows were estimated at 0.9% of GDP in
2011 but were entirely offset by tourism outflows
for an overall neutral contribution. Remittances
were the other source of revenues on the current
account (third chart), but at only 0.5% of GDP, pale
in comparison with the remittances contribution in
the Philippines (around 10% of GDP).
Leakages on the capital account and structural
deficits on the current account explain the negative
overall balance on the balance of payments in 3Q11
and 4Q11 despite the large net FDI inflows. Early
indications for 1Q12 point to a surplus on the overall
balance with foreign reserves rising by USD1.9bn in
January, the first monthly increase in five months. No
doubt, that and the rising FDI inflows, would have
reassured Bank Indonesia before its rate cut decision
last week. We would have preferred though, if the
current account deficit and capital account leakages
had influenced the BI into holding rates steady.
tony.nafte@clsa.com
Tidak ada komentar:
Posting Komentar