Institute for International Finance (IIF) reported net portfolio debt inflows to all emerging markets totaled US$39.6 billion between January and April this year, about half the inflows of the year-earlier period. In Indonesia, net debt inflows year to date through April have slowed to less than $1 billion from $6.0 billion a year earlier, the result of rising U.S bond yields and a stronger dollar.

Indonesia-specific structural credit constraints include economic growth performance that while stronger than the 3.3% median for Baa-rated sovereigns has been slow to pick up from year-on-year average growth of 5.1% over the past five years, despite acommodative monetary policy and the government’s focus on infrastructure investment.

As a net oil importer, Indonesia is also vulnerable to oil-price volatility, which has been exacerbated by the US withdrawal from the Iran nuclear deal. As parliamentary elections, scheduled for 2019, draw closer, announcements freezing electricity and diesel prices point to a temporary reversal of some reform measures, which would increase the burden on the state-owned oil companies.