BI Governor Reveals Reasons for Rupiah Weakness Amid 5.61 Percent Economic Growth
JAKARTA - Bank Indonesia Governor Perry Warjiyo has explained the reasons behind the rupiah’s depreciation amid Indonesia’s economic growth of 5.61 percent in the first quarter of 2026.
Perry stated that the rupiah’s weakening is primarily influenced by external factors, a trend also observed in many other countries’ currencies.
The rupiah is under pressure from global sentiments, including rising world oil prices, US interest rate increases, and the strengthening US dollar, which is prompting capital outflows from emerging markets, including Indonesia.
“In terms of indicators, our economic fundamentals are strong. So the question is, why is there rupiah weakening? All world currencies are weakening,” he said during the Financial System Stability Committee press conference at the Radius Prawiro Tower, Jakarta, on Thursday (7/5/2026).
Perry mentioned that domestic demand for US dollars increased in April to May 2026, driven by corporate dividend repatriation, foreign debt payments, and needs for Hajj and Umrah pilgrims.
This situation has caused the rupiah to weaken despite high domestic economic growth and persistently low inflation.
Indonesia’s economy grew by 5.61 percent in the first quarter of 2026, with inflation at 2.42 percent.
Indonesia’s trade balance also recorded a surplus of $3.32 billion in March 2026, while foreign exchange reserves remain high at $148.2 billion.
Perry assessed that the current rupiah exchange rate is below its fundamental value, or undervalued. According to him, the rupiah has the potential to strengthen again once external pressures and seasonal factors subside.
“Fundamentally, the rupiah is undervalued,” he said.
Perry stated that BI is optimising various foreign exchange market operation instruments, including Non-Deliverable Forward (NDF) transactions in the offshore market, spot and Domestic Non-Deliverable Forward (DNDF) transactions in the domestic market, and purchases of government securities (SBN) in the secondary market.
“Bank Indonesia is going all out to protect the rupiah, with close coordination with the government and full support from the President,” he added.