Indonesia: FX reserves keep the uptrend unchanged – UOB

Enrico Tanuwidjaja, Economist at UOB Group, gives his views on the latest FX reserves figures in Indonesia.

Key Quotes

“Indonesia foreign exchange reserves increased by USD2.6bn to USD130.5bn in May 2020, continuing the upswing from the previous month at USD127.9bn. The latest reserve level was equivalent to 8.3 months of import financing or 8.0 months of imports and payments of government external debt. This is well above the international adequacy standard of around 3 months of imports. Bank Indonesia (BI) considers that the official reserve assets position is able to support the external sector resilience and maintain macroeconomic and financial system stability.”

“The increase in May’s foreign exchange reserves was driven by government’s external debt withdrawal and banks’ foreign currency placement in BI. Going forward, we might see a further moderate build-up in FX reserves on the back of capital inflow as foreign investors’ confidence in Indonesia's economy seems getting better… In addition, relatively better market conditions from three months ago also reduced the need for BI to conduct a market intervention. Nevertheless, the downside risks remain as Indonesia continued to record new COVID-19 cases coupled with the possibility of 2nd wave of COVID-19 outbreak in which may result in capital outflows.”