Indonesia’s Current Account Deficit (CAD) has narrowed significantly, marking a positive shift for the country’s economic prospects in 2025. Bank Indonesia reported that the CAD dropped from US$2 billion in Q3 2024 to US$1.1 billion in Q4 2024, reflecting a stronger trade balance and sustained investor confidence. This improvement highlights Indonesia’s ability to maintain economic stability despite global uncertainties.
Indonesia’s CAD Decrease and Its Economic Impact
Indonesia’s CAD decrease reflects a healthier trade balance and growing investor trust. According to Ramdan Denny Prakoso, Head of the Communications Department at Bank Indonesia, the improvement stems from a higher goods trade surplus and strong non-oil and gas exports.
“The improvement in the current account performance mainly stems from the increased surplus in the goods trade balance, supported by growth in non-oil and gas exports following the rise in the prices of Indonesia’s key export commodities,” he stated as reported by Bisnis.com.
Additionally, the decline in CAD indicates that domestic economic activity remains stable, despite fluctuations in global demand. This trend enhances Indonesia’s financial credibility, making it more attractive to investors.
Trade Balance and Export Growth Drive Stability
A major factor behind the shrinking CAD is Indonesia’s strong export growth, particularly in non-oil and gas sectors. Rising commodity prices have boosted export revenues, strengthening the nation’s trade balance. Key export commodities, such as palm oil, coal, and nickel, have seen increased global demand, supporting the economy.
At the same time, domestic consumption remains robust, reflected in steady import levels. The high demand during National Religious Holidays, such as Christmas and New Year, contributed to increased imports, balancing economic activity. Despite rising imports, the overall trade surplus has provided a cushion for the economy.
Foreign Investment and Market Confidence
Strong foreign investment inflows have further contributed to Indonesia’s economic resilience. Direct investment remains a crucial driver of growth, demonstrating investor optimism about the country’s stability and long-term potential. Bank Indonesia noted that capital inflows continued despite global market volatility.
However, portfolio investments saw some capital outflows due to global financial uncertainties. Despite this, foreign investment remains a key pillar of financial stability, ensuring continued economic momentum.
Bank Indonesia’s Strategy for Sustainable Growth
To maintain external sector stability, Bank Indonesia has implemented strategic policies to manage capital flows and sustain growth. These measures include monetary policy adjustments,foreign reserves management, and inflation control.
“Bank Indonesia will closely monitor global economic dynamics that could affect the balance of payments outlook,” Prakoso emphasized. “We will continue to strengthen policy responses in coordination with the government and relevant authorities to enhance external sector resilience.”
Maintaining a manageable CAD between 0.5% and 1.3% of GDP remains a priority to support sustainable economic expansion.
Future Outlook: Can Indonesia Maintain Its Momentum?
Looking ahead, Indonesia’s economic outlook for 2025 remains optimistic. According to the Asian Development Bank, Indonesia’s economy continues to show resilience with steady growth projections. Analysts predict that sustained export growth, foreign investment, and effective policy measures will keep the economy on track. However, external risks such as global financial market fluctuations and geopolitical uncertainties could pose challenges.
Despite these concerns, Indonesia is well-positioned to navigate economic shifts. The combination of a shrinking CAD, steady capital inflows, and a strong trade surplus suggests that the country is on a path to financial stability and growth in 2025. Additionally, maintaining control over Indonesia’s Current Account Deficit will be key in ensuring long-term economic resilience.
Source: finansial.bisnis.com
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