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

For Lebanon-based Refugees, Desperation Fuels Perilous Passage

In a war that has caused an estimated three million people to flee Syria, efforts to make perilous sea journey in search of asylum expected to increase More

South African Brewer Tackles Climate Change

Mega-brewer SAB Miller sent delegates to climate summit in Peru, says it is one of many private companies taking their own steps to fight climate change More

Indonesia Reports Increase in Citizens Joining Islamic State

Officials say more than 350 of its citizens are now in Syria or Iraq to fight with Islamic State - 50 more than last month More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Will Pakistan School Shooting Galvanize Pakistan Against Extremism?i
X
Ayesha Tanzeem
December 17, 2014 11:54 AM
The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video Will Pakistan School Shooting Galvanize Pakistan Against Extremism?

The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video Turkey's Authoritarianism Dismays Western Allies

The Turkish government has been defiant in the face of criticism at home and abroad for its raids targeting opposition media. The European Union on Monday expressed dismay after President Recep Tayyip Erdogan lashed out at Brussels for criticizing his government's action. Turkey's bid to be considered for EU membership has been on hold while critics accuse the NATO ally of increasingly authoritarian rule. Zlatica Hoke reports.
Video

Video US-China Year in Review: Hong Kong to Climate Change

The United States is pushing for a code of conduct to resolve territorial disputes in the South China Sea as it works to improve commercial ties with Beijing. VOA State Department correspondent Scott Stearns reports on a year of U.S. policy toward China from Hong Kong to climate change.
Video

Video Japanese Leader’s Election Win Raises Potential for Conflict with Neighbors

Japan’s Prime Minister Shinzo Abe and his allies easily won a two-thirds majority in parliament Sunday, even though the country has slipped into recession under his conservative policies. VOA’s Brian Padden reports from Seoul, that the prime minister’s victory will empower him to continue economic reforms but also pursue a nationalist agenda that will likely increase tensions with Japan’s neighbors.
Video

Video Nuba Mountain Families Hide in Caves to Escape Aerial Bombings

Despite ongoing peace talks between Sudan's government and the rebel Sudan People’s Liberation Movement-North, or SPLM-N, daily aerial attacks continue in South Kordofan province’s Nuba Mountains. Adam Bailes was there and reports for VOA that government forces are targeting civilian areas, rather than military positions, with their daily bombardments.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8033
JPY
USD
117.19
GBP
USD
0.6372
CAD
USD
1.1634
INR
USD
63.622

Rates may not be current.