Indonesia Q3 Current Account Shortfall Narrows To 3.8% Of GDP

(RTTNews) - Indonesia's current account deficit narrowed sharply in the third quarter, helped by the economic stabilization policies launched by the central bank and the government.

A report released by Bank Indonesia on Wednesday showed that the current account deficit eased to 3.8 percent of GDP in the September quarter from the second quarter's record high of 4.4 percent. The outcome was in line with the bank's most recent forecast.

Driving the improvement, the surplus of non-oil and gas trade increased notably during the period. Overall merchandise trade was nearly balanced, marking an improvement from the deficit seen in the second quarter.

The deficits in the services account and the income account narrowed in the September quarter. Meanwhile, the current transfers account showed a surplus that was lower than in the June quarter.

The central bank said that the recovery in Indonesia's external balances will continue in the fourth quarter, in line with the improvement in global economic and financial conditions.

In an attempt to contain the current account deficit and stabilize the Rupiah, the central bank on Tuesday unexpectedly raised its key rate by 25 basis points to 7.5 percent. The bank has so far reduced the main rate by a cumulative 175 basis points since June.

The rupiah suffered a sharp depreciation in the third quarter after fears of an imminent tapering of Federal Reserve's stimulus program set off a wave of capital outflows across the emerging markets. Indonesia's high inflation and large current account gap exacerbated the crisis.