Indonesia fleeing "Fragile Five" as CAD narrows

Indonesia is forcing itself out of the infamous grouping of the “Fragile Five” economies most vulnerable to outflows, after its current-account deficit (CAD), the major worry among foreign investors last year, surprisingly improved to a sustainable level faster than expected.

Bank Indonesia (BI) announced on Thursday that the CAD — the shortfall in the broadest measurement of international trade, an indicator of an economy’s health — narrowed to US$4 billion, equivalent to 1.98% of the gross domestic product (GDP), in the fourth quarter.

The improvement in the CAD was better than estimates of many economists, including those from US-based Goldman Sachs, which earlier estimated that the deficit might narrow to only 3.3% of the GDP in the fourth quarter.

The fourth quarter figure took full-year 2013 CAD at $28.4 billion throughout 2013, according to BI.

The central bank attributed the better-than-expected CAD data to the latest strings of trade surplus, which Indonesia already posted for three consecutive months. In December, the surplus grew to a two-year high level of $1.5 billion.

“Stronger exports significantly helped reduce the current-account deficit and bolster efforts to improve the balance of payments in the fourth quarter,” BI Governor Agus Martowardojo said, adding that his monetary stance would stay “tight-bias” to pursue further improvement in the CAD.