Soaring Indonesian Rupiah... Jokowi Warns "Beware of Acceleration"

[Asia Economy Jakarta Correspondent Choi Su-jin] The Indonesian rupiah continues to strengthen, prompting authorities to keep a close watch.

According to local media on the 3rd, the rupiah rose from 14,000 rupiah per dollar last year to 13,500 rupiah in January this year. The appreciation of the rupiah signifies a positive economic environment in Indonesia. Perry Warjiyo, Governor of Bank Indonesia, described the rupiah's strength as "a natural market response to the positive sentiment surrounding Indonesia's economic environment." He added, "Inflation levels are the lowest, and economic growth is showing a stable upward trend," and "the current account surplus and foreign capital inflows continue steadily."

Indonesia's Gross Domestic Product (GDP) grew by 5.02% in the third quarter of last year. Inflation was maintained at 2.72% last year through government price control policies, marking the lowest level in 20 years. Above all, Bank Indonesia's recent intervention in foreign exchange transactions through the domestic non-deliverable forward market (DNDF) is analyzed to have had a decisive impact on the rupiah's strength. Additionally, the Indonesian government's issuance of global bonds for the first time this month, securing $2 billion in surplus funds, also influenced the exchange rate.

However, concerns about the negative effects of the rupiah's strength are gradually increasing. Economic expert Kasita Kristalin warned that the rupiah's appreciation could lead to increased imports rather than exports, cautioning that it "could disrupt the trade balance."

Indonesian President Joko Widodo also urged caution, stating, "Although the rupiah's value is rising, we need to be careful about the speed at which it is increasing."

Locally in Indonesia, there is a view that the rupiah's strength will not be sustained, as most of the current foreign investments are short-term bond investments. Therefore, it is emphasized that the government should devise continuous measures to attract foreign exchange inflows while simultaneously focusing on attracting foreign direct investment.

This content was produced with the assistance of AI translation services.