BI Confident Rupiah Can Strengthen, Supported by Indonesia's Economic Fundamentals
Bank Indonesia (BI) is confident that the rupiah exchange rate will move stably and tend to strengthen, supported by Indonesia’s economic fundamentals, high economic growth, low inflation, and attractive yields on domestic financial assets.
“We emphasise that the current rupiah exchange rate is undervalued compared to the fundamentals,” said BI Governor Perry Warjiyo during the online press conference following the BI Board of Governors’ meeting in Jakarta on Wednesday.
Perry stated that the central bank continues to strive to maintain rupiah exchange rate stability by increasing the intensity of interventions, both Non-Deliverable Forward (NDF) transactions in overseas markets and spot and Domestic Non-Deliverable Forward (DNDF) transactions in the domestic market.
“We continue to stabilise the rupiah exchange rate. Our foreign exchange reserves are $148.2 billion, still more than sufficient to ensure rupiah exchange rate stabilisation,” he said.
The stabilisation policy is also supported by strengthening the interest rate structure of market-oriented monetary instruments to remain attractive for foreign portfolio investment inflows into domestic financial assets.
Furthermore, BI is maintaining primary money growth above 10% in line with monetary expansion to ensure adequate liquidity in the money and banking markets, including through measured transactions in Government Securities (SBN) in the secondary market.
“Going forward, we will keep it above 10% (primary money growth), even reaching 12% to ensure adequate liquidity in the money and banking markets for the economy. This aligns with the monetary policy stance of liquidity expansion,” he said.
Furthermore, BI views Indonesia’s economic fundamentals as strong in facing the impacts of geopolitics, including the Middle East war. In addition, external resilience is also assessed to remain strong.
“What are our economic fundamentals like? Low inflation. High economic growth above 5%. Similarly, rupiah exchange rate stability. And of course, credit growth and other factors. Including our balance of payments position with a low current account deficit. So overall, our fundamental conditions are good and strong in facing these geopolitical conditions,” Perry explained.
He added that the central bank also supports various government policies in responding to global uncertainties along with rising global energy prices, including work-from-anywhere policies, energy saving measures, and biofuel programmes such as B50.
“These steps are very appropriate and will strengthen our economic stability and also the fiscal deficit which remains kept low below 3% of GDP,” said Perry.
In responding to global uncertainties, the central bank is also strengthening the policy mix not only through monetary policy, but also macroprudential and payment system policies.
“Macroprudential and payment system policies remain directed to support economic growth, while monetary policy is more directed to maintain stability and Indonesia’s economic resilience against global impacts,” said Perry.
Overall, BI projects economic growth for 2026 to remain in the range of 4.9 to 5.7%.
Inflation is also expected to remain within the target of 2.5% plus or minus 1%, the current account deficit in the range of 1.3 to 0.5% of GDP, and credit growth in the range of 8-12%.