Indonesia: FX reserves at 2-year highs in December – UOB

Economist at UOB Group Enrico Tanuwidjaja assessed the latest FX reserves figures in the country.

Key Quotes

“Indonesia’s foreign exchange reserves surged by USD2.6bn to USD129.2bn in December 2019, the highest level since January 2018’s record-high of USD132bn. The latest reserve level was equivalent to 7.6 months of import financing or 7.3 months of imports, and payments of government external debt; which is well above the international adequacy standard of around 3 months of imports. The increase in December’s reserves was driven by the oil & gas foreign exchange receipts, withdrawal of government foreign debt, and other foreign exchange receipts. Bank Indonesia (BI) assessed that foreign exchange reserves will remain adequate, supported by the stability and solid domestic economy prospect.”

“Going forward, we might see a further moderate build-up in FX reserves in light of Phase 1 USChina trade deal and the upcoming Omnibus Law, which may result in higher investor confidence and more capital inflow. Indonesia’s stable and low inflation is also another key factor as it helps the central bank in maintaining the exchange rate stability. Risks surrounding this view could materialize from capital outflows, retreating to save-haven assets such as sovereign bonds in developed markets, as well as gold (e.g. trade deals fail to take place and lasting US-Iran conflict).”