Here's What's Crushing Indonesia

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		Home Tech Finance Markets Politics Strategy Entertainment Advertising Retail Sports Life Tuesday, Aug 20, 2013 Here's What's Crushing Indonesia The big story in global markets this week is the crash in Indonesia, which is already down about 10% for the week. Indonesia's troubles are part of bigger gyrations in emerging markets, which are getting clobbered for all sorts of reasons (Chinese weakness, the rise in US interest rates, etc.). In a note to clients, Morgan Stanley explains the fundamental economic problem facing the country: A deteriorating current account situation. Current account deficit worst than expected – back at levels seen in 1996: The monthly trade numbers already point to a current account deficit (CAD) which is likely to be materially worse compared to 1Q13 on the back of trade balance. We expected the 2Q13 CAD to come in the range of 3.5-4.0% of GDP. However, the numbers surprised to the downside at -4.4% of GDP (quarterly annualised) versus a downwardly revised -2.6% in 1Q13, and now stand at levels last seen in 1996 (see Exhibit 5). Most of the deterioration was in the goods trade balance, which has moved into deficit (-0.3% of GDP versus +0.7% in 1Q13; see Exhibit 6). Indeed, monthly trade data suggest that the non-oil & gas trade balance had softened further even though the oil & gas trade balance improved. Meanwhile, balances in services, income and current transfers also all weakened. In particular, income balance sank deeper in deficit (-3.2% versus -2.7% in 1Q13) as repatriation of portfolio investment income picked up. This deterioration of both trade and investment flows in at the root of why everyone's dumping Indonesian assets. Read » Also On Markets Today: TECH STOCKS FALL: Here's What You Need To Know Michigan Judge Says Detroit Bankruptcy Is Unconstitutional, Demands Filing Be Withdrawn Advertisement CHART OF THE DAY: China's GDP Numbers Look Almost Too 'Smooth' To Be True CHART OF THE DAY: The Chinese Premier's 2 Favorite Economic Indicators Look Super Depressing CHART OF THE DAY: Here's What It Looks Like When The Bond Market Goes Into A Coma Share this: Facebook Twitter Digg Reddit StumbleUpon LinkedIn The email address for your subscription is: ipat39@gmail.com Change Your Email Address | Unsubscribe | Subscribe | Subscribe to the Markets RSS Feed Business Insider. 257 Park Avenue South, New York, NY 10010 Terms of Service | Privacy Policy

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