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INSIGHTS

Indonesia fleeing "Fragile Five" as CAD narrows

Indonesia fleeing
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 Thursd
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.
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