Economist predicts rupiah to stabilise at Rp16,800 per US dollar by year-end
Jakarta (ANTARA) - Permata Bank Chief Economist Josua Pardede has predicted that the rupiah exchange rate will stabilise at between Rp16,700 and Rp16,800 per US dollar by the end of 2026.
"In the short term, due to the assessment effects from MSCI and Moody's, we expect the rupiah exchange rate to remain relatively stable by the end of the year, in the range of Rp16,700 to Rp16,800," Josua said during the Economic Outlook 2026 online event in Jakarta on Friday.
However, Josua argued that the rupiah currently remains at an undervalued level compared with economic fundamentals. He therefore believes that should market sentiment begin to ease, the rupiah has the potential to move back towards its fundamental value.
"It is very possible for the rupiah to return to its fundamental level. Because once these external sentiment factors begin to subside, the equilibrium point will return to its fundamental level," he said.
On the domestic front, the transmission of interest rate cuts to the banking sector is considered still limited. One contributing factor is tight funding costs resulting from competition for deposits, including large depositors who continue to demand high deposit rates. This situation is seen as restraining the reduction of lending rates.
Nevertheless, Josua assessed that banking liquidity remains well maintained, supported by the placement of Excess Budget Balances (SAL), meaning the transmission of interest rate cuts is expected to continue gradually. However, he emphasised that the speed of transmission may differ between banks due to varying liquidity conditions and risk appetites.
Regarding rupiah movements, Josua advised that members of the public without direct exposure to exchange rates need not panic. He noted that whilst the rupiah level around Rp17,000 per US dollar is similar to the 1997-1998 crisis period, the context is entirely different.
"What we need to bear in mind is that the conditions surrounding the rupiah's weakening at that time were vastly different from today's conditions. Our economic fundamentals are also far different," he said.
"In the short term, due to the assessment effects from MSCI and Moody's, we expect the rupiah exchange rate to remain relatively stable by the end of the year, in the range of Rp16,700 to Rp16,800," Josua said during the Economic Outlook 2026 online event in Jakarta on Friday.
However, Josua argued that the rupiah currently remains at an undervalued level compared with economic fundamentals. He therefore believes that should market sentiment begin to ease, the rupiah has the potential to move back towards its fundamental value.
"It is very possible for the rupiah to return to its fundamental level. Because once these external sentiment factors begin to subside, the equilibrium point will return to its fundamental level," he said.
On the domestic front, the transmission of interest rate cuts to the banking sector is considered still limited. One contributing factor is tight funding costs resulting from competition for deposits, including large depositors who continue to demand high deposit rates. This situation is seen as restraining the reduction of lending rates.
Nevertheless, Josua assessed that banking liquidity remains well maintained, supported by the placement of Excess Budget Balances (SAL), meaning the transmission of interest rate cuts is expected to continue gradually. However, he emphasised that the speed of transmission may differ between banks due to varying liquidity conditions and risk appetites.
Regarding rupiah movements, Josua advised that members of the public without direct exposure to exchange rates need not panic. He noted that whilst the rupiah level around Rp17,000 per US dollar is similar to the 1997-1998 crisis period, the context is entirely different.
"What we need to bear in mind is that the conditions surrounding the rupiah's weakening at that time were vastly different from today's conditions. Our economic fundamentals are also far different," he said.