Economists criticise the rupiah\u2019s ongoing depreciation despite\ncontinuous central bank interventions. The trend of rupiah weakness is\nseen as a deep pressure signal for Indonesia and reminiscent of the 1997\nThai Baht crisis.<\/p>\n
Yanuar Rizky, an economist, highlighted the struggling Indonesian\nbond market amid the weakening rupiah. He noted that these pressures are\nnot visible on the surface, leading the government to often claim the\nrupiah remains stable.<\/p>\n
\u2018Foreign currency savings at banks are in a \u2018rate war\u2019 as banks\nprevent client crowding out. Since February, foreign currency interest\nrates have risen, especially for priority clients\u2019 large deposits,\u2019\nYanuar said on 29 May 2026.<\/p>\n
He added that Bank Indonesia (BI) introduced a dollar purchase\nthreshold of $100,000 per person per month in April 2026, reduced to\n$50,000, and further to $25,000 from June 2026.<\/p>\n
\u2018Banks are also heavily offering foreign currency government bonds\n(SBNs). This pressure on the rupiah isn\u2019t apparent on the surface. While\nSBN yields and BI\u2019s policy rate appear stable, the rupiah is under\nperceived domestic pressure since January,\u2019 he explained.<\/p>\n
Furthermore, Yanuar pointed to rising resident capital outflows in\nthe balance of payments. According to Bright Institute data, foreign\ncapital inflows to Indonesia in Q1 2026 reached $4.2 million, while\noutflows by Indonesian residents amounted to $9.14 million, resulting in\na net outflow of approximately $4.93 million.<\/p>\n
\u2018This signals a situation similar to the 1997 baht crisis, where\nexport proceeds (DHE) were being withdrawn as confidence in the baht\ncollapsed. It\u2019s worth monitoring whether this will act as a shock\ntherapy or become a crisis in itself,\u2019 he said.<\/p>\n
As a brief background, the 1997 Baht crisis was Thailand\u2019s currency\ndevaluation that triggered the 1997 Asian Financial Crisis. Prior to the\ncrisis, Thailand\u2019s economy appeared robust. In the early 1990s, it\nexperienced high growth, attracting significant foreign investment.<\/p>\n
Thailand\u2019s government maintained a fixed exchange rate against the US\ndollar, giving investors confidence to borrow in dollars. Thai banks and\ncompanies accumulated large dollar-denominated debts, while property and\nstock markets boomed, and current account deficits widened due to high\nimports and investment. On the surface, everything seemed fine.<\/p>\n
Problems emerged in mid-1996-1997. Thai exports slowed, the property\nsector weakened, private foreign debt ballooned, and many projects\nfailed to yield adequate returns. Investors began questioning Thailand\u2019s\nability to sustain the baht\u2019s value.<\/p>\n
As confidence in the baht eroded, speculators sold the currency and\nbought dollars. The Bank of Thailand tried to defend the exchange rate\nby selling foreign reserves and buying baht, but the market was too\nlarge, depleting reserves. By June 1997, Thailand capitulated, allowing\nthe baht to plummet.<\/p>\n
Before the crisis, 1 baht was worth around 25 to the dollar.\nAfterward, it reached 50 baht per dollar\u2014a nearly 50% depreciation. The\ncollapse was dangerous as many Thai firms held dollar-denominated\ndebts.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/rupiahs-depreciation-trend-mirrors-early-stages-of-1997-thai-baht-crisis-1780071823", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }