Current Account Deficit Hits US$12.5 Billion, Posing Major Threat to Rupiah
The widening current account deficit (CAD) currently being experienced by Indonesia risks further burdening the movement of the rupiah exchange rate against the United States (US) dollar.
Indonesia’s current account in the second quarter of 2026 recorded a deficit of US$12.5 billion, equivalent to 3.3% of GDP. This is wider than the first quarter of 2026 figure of US$3.6 billion, or 1% of GDP.
Head of Macroeconomic and Market Research at Permata Bank, Faisal Rachman, estimates that overall pressure on external factors will affect Indonesia’s foreign exchange reserves.
“Overall, we project foreign exchange reserves will decline to around US$143–147 billion by the end of 2026, from US$156.47 billion at the end of 2025,” Faisal said, quoted from his analysis on Friday (21/8/2026).
Under these conditions, Faisal also maintained his projection that the rupiah exchange rate until the end of the year will be in the range of Rp17,800 to Rp18,000 per US dollar, even though today the rupiah was able to move to around Rp17,685 per US dollar, based on Refinitiv data.
“We also maintain our projection for the rupiah exchange rate at the end of 2026 to be in the range of Rp17,800–Rp18,000 per US dollar,” he said.
According to Faisal, pressure on the current account deficit until the end of the year still has the potential to occur, mainly driven by the government’s policy agenda oriented towards economic growth. This policy is expected to maintain domestic demand and encourage higher import growth.
At the same time, weakening global demand—particularly from China—as well as ongoing geopolitical tensions in the Middle East and the global trade war could suppress export performance. These developments also have the potential to disrupt global supply chains and further limit export growth.
“We will continue to monitor these dynamics and assess their impact on Indonesia’s external position. Therefore, we project the CAD will swell to 2.5–3.0% of GDP in 2026, from 0.11% of GDP in 2025,” he said.
From the financial transactions side, he considers portfolio capital flows to remain vulnerable to global and domestic uncertainty, although there has been a slight improvement in investor sentiment following MSCI’s decision to maintain Indonesia’s classification as an emerging market and S&P’s decision to maintain a stable outlook.
Financial transactions and capital flows were indeed able to record a surplus in the second quarter of 2026 of US$12 billion, from a deficit of US$4.8 billion in the previous quarter, compensating for pressure on trade transactions and primary income.
However, globally, Faisal warned that uncertainty surrounding geopolitical developments in the Middle East continues to overshadow the direction of the Fed’s policy, given that high energy prices could keep US inflation above the 2% target for a longer period. This could strengthen risk-off sentiment and limit capital inflows to developing countries, including Indonesia.
“Therefore, portfolio investment inflows are projected to remain limited, while the rupiah exchange rate has the potential to remain volatile and Bank Indonesia is expected to continue using foreign exchange reserves to maintain currency stability in the short to medium term,” he said.
Nevertheless, BCA Chief Economist David Sumual said that although the current account deficit has widened, the risk of pressure on the exchange rate will not materialise immediately, because of the positive side of the financial and capital account surplus.
“A reflection of still-positive foreign investor confidence,” he said.
However, he warned that the risk of significant pressure on the exchange rate still exists, especially if tensions such as the conflict in the Middle East and various other parts of the world increase, alongside investor rotation away from technology assets that are relatively overvalued.
Therefore, in the medium to long term, he estimates that the rupiah exchange rate against the US dollar still has the potential to move in the range of Rp17,600 to Rp18,100 per US dollar.
“In the medium term until the end of the year, Rp17,600–Rp18,100 per US dollar,” David said.