Beware! Rupiah Weakening Could Trigger Wave of Layoffs

The rupiah’s depreciation against the US dollar is adding to production costs for industries from several angles, according to Mohammad Faisal, Executive Director of the Centre for Reform on Economics (CORE) Indonesia. He said the rise in production costs is triggered by higher prices of raw materials in supplier countries due to disruptions in global supply chains. ‘If the impact on industrial players and also the labour market, of course it adds to the high production costs. So production costs increase because there is also an increase in prices from the country of origin,’ Faisal said when contacted by Republika in Jakarta on Monday, 18 May 2026. Faisal noted the currency weakness increasingly burdens production in line with disruptions in the global supply chain, logistics, and more expensive insurance. He said this has a big impact on industries that are heavily dependent on imports, such as chemicals, pharmaceuticals, food, and beverages. ‘With rising production costs, the industry will respond by becoming more efficient, and one possibility is to reduce the number of workers,’ Faisal said. Faisal said the impact could be deeper if followed by a drop in demand due to weaker purchasing power. He assessed the industry would regard layoffs (PHK) as one option to sustain business continuity. ‘So if sales fall, it automatically reduces the number of workers. So there is indeed potential for layoffs,’ he continued. Faisal advised industry players to mitigate the impact by sourcing supply alternatives domestically if possible. Meanwhile the government, Faisal added, must be able to maintain macroeconomic stability, fiscal discipline, and improve governance in the implementation of priority programmes. ‘This is to improve or sustain confidence in the Indonesian economy and the credibility of government policy,’ he said.