Economist says macro stability must be accompanied by market confidence

Jakarta (ANTARA) - Senior economist at the Institute for Development of Economics and Finance (Indef), Aviliani, said Indonesia’s macroeconomic stability must be accompanied by stronger market confidence to safeguard capital flows, the rupiah exchange rate, and investments. “The key issue is aligning stability with market confidence. The government is maintaining strong macroeconomic data, but the challenge lies in confidence,” Aviliani said in Jakarta on Tuesday. She noted Indonesia’s macro indicators remain resilient, but market perceptions must be managed as they influence capital outflows, the rupiah exchange rate, and business investment decisions. She said pressure on the rupiah is partly due to significant foreign capital outflows from domestic financial markets. “When looking at why the depreciation occurred, one factor is substantial capital outflows,” she added. In her presentation, Aviliani noted the rupiah has depreciated 6.18% year-to-date against the US dollar, more than several other major ASEAN currencies. Meanwhile, the rupiah closed Tuesday at Rp17,796 per US dollar, down 52 points or 0.29% from the previous day’s Rp17,744. She acknowledged Bank Indonesia (BI) has implemented various stabilisation measures, including the use of Bank Indonesia Securities (SRBI), market interventions, and monetary operations to stabilise financial markets. However, Aviliani stressed that monetary policy must be supported by consistent fiscal and financial sector policies to build positive investor perceptions. “All three must work in tandem to foster positive forward-looking perceptions,” she said. She noted Indonesia still has strong economic potential due to steady household consumption and ongoing investment. Statistics Indonesia (BPS) reported the economy grew 5.61% year-on-year in Q1 2026, driven by 5.52% household consumption growth, 5.96% higher investment, and accelerated government spending. The government’s 2027 Macroeconomic Framework and Fiscal Policy Outline (KEM-PPKF) targets economic growth of 5.8% to 6.5%, inflation of 1.5% to 3.5%, and an open unemployment rate of 4.30% to 4.87%. Aviliani said these targets require a conducive business climate, as investment decisions are long-term and heavily influenced by policy certainty. She urged the government to engage more with economic actors, including the private sector, state-owned enterprises (SOEs), and micro, small, and medium enterprises (MSMEs), to ensure policies do not create market uncertainty. “There must be more communication with economic actors, who include the private sector, SOEs, and MSMEs. I see a gap here,” Aviliani added. Aviliani cited Kadin’s Business Pulse survey for Q1 2026, showing 40.5% of business actors saw deteriorating conditions compared to the previous quarter, 34.3% reported stagnation, and 25.2% noted improvement. Aviliani said this signals the need for macro stability to be paired with consistent policies, better communication, and reforms that directly benefit the real sector to boost market confidence. “This must be safeguarded as it affects the exchange rate and investment-driven economic growth,” she added. Meanwhile, the government and monetary authorities continue to maintain financial market stability amid global pressures. BI previously stated it will continue stabilising the rupiah through foreign exchange market interventions, strengthening monetary instruments, and ensuring sufficient liquidity to maintain national financial system stability. Finance Minister Purbaya Yudhi Sadewa earlier expressed optimism the rupiah could strengthen to around Rp15,000 per US dollar, supported by stronger domestic economic fundamentals, controlled inflation, and efforts to maintain financial market stability.