News / Economy

Indonesia Under Pressure to Prevent Plummeting Rupiah

An employee shows stacks of rupiah banknotes at a money changer in Jakarta, Indonesia, Aug. 23, 2013.
An employee shows stacks of rupiah banknotes at a money changer in Jakarta, Indonesia, Aug. 23, 2013.
Kate Lamb
Indonesia’s government has announced new policies to mitigate the rapidly depreciating rupiah, which has faced its worst week since 2008. Analysts say the measures are unlikely to be effective in the short term, because of broader trends affecting currencies across Asia.

A darling of investors at a time when advanced economies were flailing, Indonesia’s economic boom is being rapidly undermined by its plummeting rupiah.

Following reports of a record high current account deficit, the country has faced sell-offs in the rupiah, stocks and bonds. This week more than $500 million in global funds have been pulled from the local stock exchange.

Already among Asia’s worst performing currencies this year, the rupiah has now suffered its worst week in four years, sliding 4.2 percent. On Friday the government announced plans designed to boost investment and reduce imports.

The measures include increasing import taxes on luxury cars, reducing oil imports and providing tax incentives for investments in agriculture and the metal industries.

HSBC senior economist Fauzi Ichsan said the plan would not prevent the rupiah from depreciating further in the short term.

“Certainly the policy package will help boost exports, boost foreign direct investment but that’s for the long run. The impact of the policy once it is in implemented will only be felt in three to six months, earliest, so it does not really address the immediate problem of the lack of dollar liquidity in the foreign exchange market,” said Ichsan.

The Indonesian government has also revised its GDP growth estimate from 6.3 to 5.9 percent this year.

Ichsan said the rupiah was likely to remain ‘fragile’ and would not rebound until after the general election in the second half of 2014.

Speculation that the U.S. Federal Reserve will begin winding down its stimulus program, along with slowdowns in China and India have also hit Indonesia, which relies heavily on commodity exports.

Currencies across South and Southeast Asia have fallen hard this week, with Indonesia and India suffering the steepest losses. The currencies of Thailand, Malaysia and the Philippines also fell, but by less than one percent.

But analyst Andrew Colquhoun, from Fitch Rating in Hong Kong said concerns the region could be headed for a repeat of the Asian Financial Crisis of 1997 are unwarranted.

“We think Indonesia is in a rather stronger position today from a sovereign credit perspective certainly than it was in 1996 or 1997 and that is true across a range of areas. But one factor is the self insurance that Indonesia and a number of other Asian sovereigns have built up in the form of foreign currency reserves,” he said.

Colquhoun also suggested there was a ‘global reorientation’ of economic growth drivers away from investment and construction within China and toward growing demand in the advanced economies. He said that was also contributing to currency declines in the region.

Fitch Ratings said policy management would be an important factor in whether economic and financial stability was maintained in India and Indonesia.

You May Like

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs

World Currencies

EUR
USD
0.9009
JPY
USD
123.09
GBP
USD
0.6387
CAD
USD
1.2524
INR
USD
63.605

Rates may not be current.