Economist: Rupiah Weakening Threatens Industrial Expansion and Layoffs
The Executive Director of the Centre of Economic and Law Studies (CELIOS), Bhima Yudhistira, estimates that the rupiah exchange rate has the potential to breach the level of Rp 20,000 per US dollar if the weakening continues without effective intervention.
Quoting Bloomberg, at the close of spot market trading on Monday (18/05/2026), the rupiah remained weak at the level of Rp 17,667 per US dollar.
“If the exchange rate today is around Rp 17,600 and the average depreciation is 0.5 per cent per day, then by 9 June 2006, the rupiah could exceed Rp 20,000 per US dollar,” Bhima told Kompas.com on Monday (18/05/2026).
However, he noted that domestic economic fundamentals and government communication also influence investor perception. “Who would want to invest in economic conditions that are considered shaky or highly volatile as they are now?” said Bhima.
Bhima assessed that the weakening of the rupiah against the US dollar is also raising serious concerns among business players and investors. “The weakening of the rupiah sends a signal that macroeconomic conditions are fraught with challenges,” Bhima stated.
“As the exchange rate weakens further, business actors are also becoming concerned about the rising costs of importing raw materials, industrial machinery, and logistics costs,” he continued.
According to him, these conditions are making investors increasingly cautious about committing capital to Indonesia, particularly for long-term investments such as factory construction and industrial expansion.
“Investors are reconsidering entering Indonesia because investment costs are becoming more expensive. Exchange rate risks are increasing, bond yields are higher, and bank loan costs also have the potential to rise,” he said.
Bhima believes that the continuous fluctuations in the exchange rate are causing investors to lose the certainty required to formulate long-term business plans. He noted that investors who previously had investment horizons of five to 10 years now tend to opt for short-term strategies due to fears regarding economic instability.