TEMPO.CO, Jakarta - The Institute for Development of Economics and Finance (INDEF) is projecting the rupiah exchange rate in 2016 will be higher than Rp14,000 per US dollar. INDEF executive director Enny Sri Hartati said that the development of the balance of payment will be one of the most crucial factors influencing the rupiah movement against the greenback.
"The balance of payments will tend to be at a surplus, but it would mostly be so due to the decline in imports that is faster than that of exports. Meanwhile, we can be sure that the service and income balance will be negative," she said during a seminar in Jakarta held today, November 26.
She said that external factors affecting the rupiah exchange rate would be the Federal Reserve's decision about its interest rate hike. Projections of an improving economy in the United States will eventually prompt the Fed to raise interests by 2016.
"This decision will create pressure on the rupiah—particularly coming from portfolio investments," she said.
Furthermore, China's economy that still hasn’t recover will cause global trading activities—especially the demand—to stagnate. China's weakening demand will deeply affect the growth of Indonesia's exports growth.
"There is also Indonesia's high credit rates that will trigger an increase in foreign loans with cheaper interests. As a result, it would be difficult to reduce pressure on the rupiah."
Based on these conditions, INDEF projects the rupiah will be traded for more than Rp14,000 per US dollar by 2016. This is a more pessimistic level compared to the government's estimate of Rp13,900 per US dollar.
"However if the government and Bank Indonesia can give maximum efforts to fix the current account deficit and boost economic growth, there is a chance that the rupiah can trade for less than Rp14,000 per US dollar," she said.
ANTARA | RR
