BI Governor reveals 5 factors for rupiah to range 16,800-17,500 per dollar in 2027

Bank Indonesia (BI) Governor Perry Warjiyo has revealed five factors driving the rupiah exchange rate to strengthen in 2027, moving within a range of Rp16,800 to Rp17,500 per US dollar. This range is set out in the Macroeconomic Framework and Fiscal Policy Principles (KEM-PPKF) for the 2027 Fiscal Year. “There are five main factors underlying why the rupiah in 2027 will range from Rp16,800 to Rp17,500, strengthening towards that level,” said Perry during a working meeting with the House of Representatives’ Budget Committee in Jakarta on Tuesday. The first factor is that global economic conditions will improve and will not be as bad as they are now, with growth projected to increase to 3.1 per cent. “We hope the current geopolitical situation will improve and it is hoped this will encourage inflows to emerging market countries, including Indonesia,” said Perry. The second factor is that Indonesia’s solid economic fundamentals will support the strengthening of the rupiah exchange rate. “High economic growth, low inflation, a good current account deficit, and attractive yields, plus more than adequate foreign exchange reserves. So our fundamentals will support the strengthening of the exchange rate,” said Perry. Third, the policy of strengthening governance on natural resource commodity exports, particularly through the existence of PT Danantara Sumber Daya Indonesia (DSI), is believed to increase exports and export proceeds, as well as boost state revenues. Perry stated this will support not only financing for economic growth but also an increase in foreign exchange, foreign exchange reserves, and the strengthening of the rupiah. Fourth, BI’s strong commitment to continue maintaining the rupiah exchange rate, both through intervention and various other policies. Fifth, close coordination between fiscal and monetary policy focused on maintaining rupiah exchange rate stability by increasing attractiveness or yields for foreign portfolio investment inflows, particularly in SRBI and SBN, as well as maintaining sufficient liquidity in money markets and banking. “So with those five factors, God willing the rupiah will strengthen next year in the range of Rp16,800 to Rp17,500 per US dollar,” said Perry. In his presentation, Perry also conveyed that the central bank shares the view that Indonesia’s economic growth next year will be better than this year. “Our range is 5.1 per cent to 5.9 per cent for the 2027 economic growth projection, but we are confident it will lean towards the upper bound,” said Perry. Meanwhile, inflation in 2027 is firmly believed to remain within the target of 2.5 per cent plus or minus 1 per cent, or a range of 1.5 to 3.5 per cent, supported by strong synergy between central and regional governments together with BI through the Central/Regional Inflation Control Teams.