ECONOMIC UPDATE – BoP review - BoP strengthens, but external pressures persist

BoP shifts to strong surplus in 4Q25 on capital inflows surge

Indonesia’s balance of payments (BoP) returned to a surplus of USD6.1 bn in 4Q25, a sharp turnaround from a USD6.4 bn deficit in 3Q25 and the highest quarterly surplus in 2025. The turnaround was primarily supported by a stronger capital and financial account (CFA), which more than offset the current account (CA) deficit. In line with the surplus, foreign exchange reserves increased during the quarter, supported by government global sukuk issuance, foreign loan withdrawals, and seasonal fiscal inflows. That said, forex reserves edged slightly lower in January amid external debt repayments and Bank Indonesia’s rupiah stabilization efforts, reflecting still-elevated global market volatility. On a full-year basis, Indonesia’s BoP recorded a deficit of USD7.8 bn in FY25, reversing from a USD7.2 bn surplus in FY24. The shift was primarily attributable to a swing in portfolio investment, which posted a USD9.4 bn deficit in FY25 compared with a USD8.2 bn surplus in the previous year.

 

CA swings back to deficit in 4Q25 amid softer external outlook

Indonesia’s CA recorded a deficit of USD2.5 bn (0.7% of GDP) in 4Q25, reversing from a surplus of USD4.0 bn (1.1% of GDP) in 3Q25. The deterioration was mainly driven by a narrower goods trade surplus, which declined to USD10.2 bn in 4Q25 from USD16.1 bn in 3Q25, alongside a wider services trade deficit of USD4.9 bn in 4Q25 (vs. USD4.4 bn in 3Q25) and a slightly larger primary income deficit of USD9.6 bn in 4Q25 (vs. USD9.4 bn in 3Q25). Meanwhile, the secondary income surplus improved marginally to USD1.8 bn in 4Q25 from USD1.7 bn in 3Q25. On a full-year basis, the CA deficit narrowed significantly to USD1.5 bn (0.1% of GDP) in FY25 from USD8.6 bn (0.6% of GDP) in FY24, supported by a front-loading export strategy amid uncertainty surrounding US reciprocal tariff policies.

Looking ahead, we expect the CA to remain in deficit in 1Q26 as the trade surplus continues to narrow. Imports are likely to increase due to seasonal demand during Ramadan and Eid al-Fitr. In contrast, exports are projected to weaken amid volatile commodity prices, subdued global demand, and fewer working days. Reflecting these factors and the latest CA outcome, we revise our 2026F CA deficit forecast to –0.4% of GDP.

 

CFA rebounds sharply in 4Q25 but faces renewed pressure ahead

The capital and financial account (CFA) recorded a surplus of USD8.3 bn (2.3% of GDP) in 4Q25, a sharp reversal from a deficit of USD8.0 bn (2.1% of GDP) in 3Q25. The improvement was primarily driven by a turnaround in portfolio investment, which shifted from a deficit of USD7.1 bn in 3Q25 to a surplus of USD4.6 bn in 4Q25, as well as a recovery in other investment from a deficit of USD5.4 bn to a surplus of USD0.8 bn. In contrast, the direct investment surplus narrowed to USD2.8 bn in 4Q25 from USD4.6 bn in the previous quarter. Despite the quarterly rebound, FY25 saw a net CFA deficit, reflecting weaker capital flows compared with FY24 amid heightened global uncertainty, escalating geopolitical tensions, and weaker investor confidence on fiscal deficit concerns. Looking ahead, we expect the CFA to moderate in 1Q26, weighed down by potential portfolio outflows following MSCI’s decision to freeze its stock index and Moody’s’s revision of Indonesia’s sovereign credit outlook.