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

Analyst: Joint-Arab Military Force Poses Perilous Challenge

Although international forces are desperately needed to counter the threat of the Islamic State group, analysts say conflicting alliances could escalate fighting More

Asia’s Middle Class Changes Demand for Wheat Grain Exporters

Changes in tastes and diets are boon for wheat exporters such as Australia and the United States More

S. African Comedian Taking Over Popular TV Show

Mixed-race comedian Trevor Noah, who is loved for his edgy jibes about race and language, is taking the helm from Jon Stewart at The Daily Show in US More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Film Tells Story of Musicians in Mali Threatened by Jihadistsi
X
Greg Flakus
March 30, 2015 6:48 PM
At this year's annual South by Southwest film and music festival in Austin, Texas, some musicians from Mali were on hand to promote a film about how their lives were upturned by jihadists who destroyed ancient treasures in the city of Timbuktu and prohibited anyone from playing music under threat of death. As VOA’s Greg Flakus reports from Austin, some are afraid to return to their hometowns even though the jihadists are no longer in control there.
Video

Video Film Tells Story of Musicians in Mali Threatened by Jihadists

At this year's annual South by Southwest film and music festival in Austin, Texas, some musicians from Mali were on hand to promote a film about how their lives were upturned by jihadists who destroyed ancient treasures in the city of Timbuktu and prohibited anyone from playing music under threat of death. As VOA’s Greg Flakus reports from Austin, some are afraid to return to their hometowns even though the jihadists are no longer in control there.
Video

Video With Coalition Airstrikes, Iraq Entering 'Last Page' of IS Battle

American warplanes joined Iraq's battle against the so-called 'Islamic State' in northern Iraq late Wednesday, as Iraqi ground troops launched a massive assault on Tikrit. Analysts say the offensive could take the coalition a step further towards Mosul, the largest city held by Islamic State forces. Others say it could also deepen already-dangerous sectarian tensions in the region. VOA's Heather Murdock has more from Cairo.
Video

Video Philippines Wants Tourists Spending Money at New Casinos

Tourism is a multi-billion dollar industry in the Philippines. Close to five million foreign visitors traveled there last year, perhaps lured by the country’s tropical beaches. But Jason Strother reports from Manila that the country hopes to entice more travelers to stay indoors and spend money inside new casinos.
Video

Video Civilian Casualties Push Men to Join Rebels in Ukraine

The continued fighting in eastern Ukraine and the shelling of civilian neighborhoods seem to be pushing more men to join the separatist fighters. Many of the new recruits are residents of Ukraine made bitter by new grievances, as well as old. VOA's Patrick Wells reports.
Video

Video Islamic State Prisoners Talk of Curiosity, God, Regret

Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Germanwings Findings Raise Issue of Psychological Testing for Pilots

More is being discovered about the co-pilot in the crash of Germanwings Flight 9525 in the French Alps. Investigators say he was hiding a medical condition, raising questions about the mental qualifications of pilots. VOA's Carolyn Presutti reports.
Video

Video Hi-tech Motorbike Helmet's Goal: Improve Road Safety

In cities with heavily congested traffic, people can get around much faster on a motorcycle than in a car. But a rider who is not sure of his route may have to stop to look at the map or consult a GPS. A Russian start-up company is working to make navigation easier for motorcyclists. Designers at Moscow-based LiveMap are developing a smart helmet with a built-in navigation system, head-mounted display and voice recognition. Zlatica Hoke has more.
Video

Video DOJ: Illinois National Guard Soldier Tried to Join ISIS

U.S. federal law enforcement agents arrested two suburban Chicago men accused of trying to join ISIS overseas, while also plotting attacks in the United States. As VOA’s Kane Farabaugh reports from the Midwest state of Illinois, one of those arrested is a soldier of the Illinois National Guard.
Video

Video New Wheelchair Is Easier to Use, Increases Mobility

Traditional push-rim wheelchairs create a lot of stress for arm, shoulder and neck muscles and joints. A redesigned chair, based on readily available bicycle technology, radically increases mobility while reducing the physical effort. VOA’s George Putic reports.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.

VOA Blogs

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.9220
JPY
USD
119.88
GBP
USD
0.6757
CAD
USD
1.2640
INR
USD
62.626

Rates may not be current.