Indonesian economy faces tough challenges: Danamon

Indonesian economy faces tough challenges: Danamon


Jakarta — The Indonesian economy faces tough global challenges with the rupiah exchange rate weakening, says an economist team from the publicly listed private lender Bank Danamon. The team noted three threats against the economy – the outflow of the United States dollars from Indonesian market; trade war and the increase in global energy prices. It projects the ongoing outflow of capital from the Indonesian market owing to the sale of shares of bonds by foreign investors sparked by U.S. economic improvement. As a result the Jakarta Composite Index (JCI) declined 2 percent earlier this week and the rupiah exchange rate weakened to above Rp 13,800 against the dollar. “High composition of foreign investment in both shares and bonds make Indonesia fragile to any global fluctuation,” said Danamon economist Dian Ayu Yustina on Friday (09/03). Another tough challenge for the economy was a trade war initiated by President Donald Trump’s decision to impose a tariff of 25 percent on steel imports and 10 percent tariff on aluminum imports. The third threat was the increasing price of global energy, of which coal prices had reached more than US$100 per ton, while global crude oil had reached US$70 per barrel. The rupiah will continue to face pressure, said Dian, adding that Bank Indonesia might be open to the possibility of increasing its reference rate.