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Rupiah Weakens; Apindo Says Indonesia's Currency Depreciation Worst Among ASEAN-5

Translator

Ririe Ranggasari

Editor

Laila Afifa

25 June 2024 20:01 WIB

TEMPO.CO, Jakarta - The rupiah exchange rate against the U.S. dollar continues to weaken. Shinta Kamdani, chairwoman of the Indonesian Employers' Association (Apindo), said that in the past month, Indonesia has found it difficult to stop the rupiah from depreciating.

The dollar's strength has put pressure on the exchange rates of several nations. "But Indonesia is one of the most affected countries compared to the ASEAN-5 countries," Shinta said in a discussion with the Institute for Development of Economics and Finance (Indef) in Jakarta on Tuesday, June 6.

ASEAN-5 is the five founding member nations of ASEAN namely Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

According to Shinta, the weakening of the rupiah has resulted in high production costs, especially for imports of raw materials and supplies. As a result, Indonesia's manufactured export products become uncompetitive.

Most entrepreneurs, says Shinta, hope that the exchange rate will be in the range of 14,000 per US dollar. This is based on Apindo's survey last year. "This is obviously very ambitious, far from what we have now."

The rupiah is currently trading at around 16,400 per US dollar.

Shinta explained that apart from external factors such as the strengthening of the dollar, the ever-widening balance of payments deficit could also trigger the rupiah's weakening.

In the first quarter of 2024, the current account deficit widened to 0.6 percent of gross domestic product. This was due to weak growth in foreign direct investment (FDI) and export performance. In the second quarter, Indonesia experienced weakening FDI growth and export performance due to a correction in commodity prices.

Shinta expects the deficit to persist, so there needs to be a breakthrough from the government to accelerate FDI growth and increase exports. "If left unchecked, this deficit condition will have an impact on the continued weakening of the exchange rate and inflation of imported goods," he said.

Ilona Estherina

Editor's Choice: Economist Calls Rupiah Depreciation against Dollar an Anomaly amid Trade Surplus

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