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

Americans Celebrate Thanksgiving

Feasts centering on turkeys with an array of traditional sides and desserts are part of the holiday's traditions, which falls on the fourth Thursday in November More

Video For Obama, Ferguson Violence is a Personal Issue

With two years left in term, analysts say, president has less to lose by taking conversation on race further More

Video Italian Espresso Expands Into Space

When Italian astronaut Samantha Cristoforetti headed for the ISS, her countrymen worried how she would survive six months drinking only instant coffee More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Changei
X
November 24, 2014 10:09 PM
Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Aung San Suu Kyi: Myanmar Opposition to Keep Pushing for Constitutional Change

Myanmar opposition leader Aung San Suu Kyi says she and her supporters will continue pushing to amend a constitutional clause that bars her from running for president next year. VOA's Than Lwin Htun reports from the capital Naypyitaw in this report narrated by Colin Lovett.
Video

Video Mali Attempts to Shut Down Ebola Transmission Chain

Senegal and Nigeria were able to stop small Ebola outbreaks by closely monitoring those who had contact with the sick person and quickly isolating anyone with symptoms. Mali is now scrambling to do the same. VOA’s Anne Look reports from Mali on what the country is doing to shut down the chain of transmission.
Video

Video Ukraine Marks Anniversary of Deadly 1930s Famine

During a commemoration for millions who died of starvation in Ukraine in the early 1930s, President Petro Poroshenko lashed out at Soviet-era totalitarianism for causing the deaths and accused today’s Russian-backed rebels in the east of using similar tactics. VOA’s Daniel Shearf reports from Kyiv.
Video

Video Hong Kong Protests at a Crossroads

New public opinion polls in Hong Kong indicate declining support for pro-democracy demonstrations after weeks of street protests. VOA’s Bill Ide in Guangzhou and Pros Laput in Hong Kong spoke with protesters and observers about whether demonstrators have been too aggressive in pushing for change.
Video

Video US Immigration Relief Imminent for Mixed-Status Families

Tens of thousands of undocumented immigrants in the Washington, D.C., area may benefit from a controversial presidential order announced this week. It's not a path to citizenship, as some activists hoped. But it will allow more immigrants who arrived as children or who have citizen children, to avoid deportation and work legally. VOA's Victoria Macchi talks with one young man who benefited from an earlier presidential order, and whose parents may now benefit after years of living in fear.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8016
JPY
USD
117.76
GBP
USD
0.6340
CAD
USD
1.1268
INR
USD
61.850

Rates may not be current.