Indonesia’s Rupiah Hits The Lowest Point in 20 Years


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Bank of Indonesia records the rupiah reference rate that has reached Rp. 15,182 on Thursday, October 5, 2018.

“The weakest since the 1998 crisis,” said Institute for Development of Economics and Finance (INDEF) economist Bhima Yudhistira, when contacted by BBC News Indonesia.

According to him, global and domestic pressure both play a role in weakening the rupiah.

He estimates that this condition will continue, and will cause Indonesia’s economic growth in the future to stagnate. “In general until 2020 Indonesia’s economy will be hit by a major storm. Growth is predicted to be only 5-5.1% this year,” he said.

To overcome this, according to Bhima, among others, the government must reduce the current account deficit through controlling the 10 largest imports of goods.

The trick is to increase import duties and tighten anti-dumping policies. The government was also asked to provide greater incentives and guarantee preferential exchange rates for entrepreneurs to immediately exchange their export proceeds with the rupiah.

 

From global sentiment to US vs Chinese trade war

Bank of Indonesia Governor (BI) Perry Warjiyo said the rupiah exchange rate against the US dollar is currently influenced by global sentiment.

Bank of Indonesia Governor (BI) Perry Warjiyo. (Photo: Kompas.com/Mutia Fauzia)

“The development of the rupiah exchange rate is of course influenced by global sentiment. Today there is a high increase in the US Treasury Bill to 3.23 percent for the 10-year tenor,” Perry said in Jakarta on Friday (05/10) as cited by Indonesia media Kompas.com.

In addition, Perry saw that US economic conditions were improving with the employment growth in the US bigger than expected. “This condition makes global investors prefer to invest there,” he said.

Meanwhile the ongoing sentiment of the trade war between the US and China also led to a strengthening of the US dollar. In addition, geopolitical factors in Europe cannot be avoided.

Former Coordinating Minister for Economic Affairs Rizal Ramli assessed that the weakening of the rupiah exchange rate had reached IDR15,000 per US dollar just beginning. The rupiah exchange rate is predicted to continue to weaken driven by a number of things that have been predicted by analysts and economists before.

Rizal also noted on the US vs China trade war. He said that other countries affected by the trade war began to implement the South Bond Policy or divert their investment to other developing countries that are more potential than large countries such as China and the United States.

On the same note, Minister of Finance Sri Mulyani expressed that the weakening of rupiah caused majorly by external problems.

 

Inflation is still in maintainable

Perry explained, in terms of inflation so far is still maintained. From the latest data, the Central Statistics Agency (BPS) said that the September 2018 Consumer Price Index (CPI) was a deflation of 0.18 percent.

Perry’s statement was also strengthened by the recent results of a central bank survey of the business world. From the survey, it was found that the business world was responding to the weakening of the rupiah exchange rate and its influence on its business by not raising prices.

Indonesia Minister of Finance Sri Mulyani. (Photo: Kompas.com/Andri Donnal Putera)

Sri Mulyani ensured, as reported by Indonesia news portals on October 4, the government continued to work so that these external factors did not make the rupiah fall further. According to Sri, Bank Indonesia (BI) as the monetary authority has taken steps in the policy mix.

On the fiscal side, the government will also continue to implement various measures previously decided jointly as a step to anticipate the weakening of the rupiah. One of them is by monitoring the import of goods.

“The main import is consumer goods and is produced domestically, 1,147 we will see the report every week and the last position has shown a decline,” said the former managing director of the World Bank.

 

Source: BBC, Kompas.com, Liputan6.com


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Ellen Kusuma

A cultural studies student for life. Travel junkie. Solo traveling is super fun. Living digitally under @timejumble.

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