Economist: Weaker Rupiah Burdens Exports Due to Rising Costs
JAKARTA, KOMPAS.com - Executive Director of the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira, has stated that the notion that a weaker rupiah automatically benefits the export sector is a misconception.
According to him, current conditions show that the rupiah’s depreciation is driving up production costs and burdening businesses.
“So that’s a misconception about the weaker rupiah benefiting exports,” Bhima told KOMPAS.com on Wednesday (27 May 2026).
“Because the current rupiah depreciation is accompanied by increases in raw material costs, production expenses, and logistics. Everything is being adjusted,” he said.
Bhima cited the agricultural sector, which has been affected by rising prices of non-subsidised fertilisers, plastics, farming equipment, pesticides, and agricultural medicines.
He noted that input cost surges in several sectors have reached up to 30% due to currency depreciation.
He stated that this situation means Indonesia is not reaping windfall gains from export commodities despite the weaker rupiah.
Bhima gave the example of palm oil fresh fruit bunch (FFB) prices at the farmer level, which have continued to decline despite palm oil being one of Indonesia’s main export commodities.
“This proves that farmers are burdened by significantly higher costs that cannot be offset by increased export demand,” he said.
He noted that Indonesia’s export growth in Q1 2026 reached only 0.7% year-on-year (YoY), while imports rose by more than 7%.
“This shows that the current currency depreciation is harming the economy, even hurting exporters,” Bhima said.
He argued that assessing the impact of rupiah depreciation cannot focus solely on exchange rates without considering the production cost structures borne by industries.
“It’s not simply that a weaker rupiah automatically boosts competitiveness,” he added.
Bhima also noted that Indonesia’s export product competitiveness still lags behind several Southeast Asian nations such as Vietnam, Thailand, and Malaysia.
“Some of Indonesia’s export products are less competitive compared to neighbours like Vietnam, Thailand, and Malaysia,” Bhima said.