Pressure on Rupiah and IHSG Should Be Momentum to Strengthen Market Confidence

The head of the Center for Sharia Economic Development at the Institute for Development of Economics and Finance (CSED Indef), Nur Hidayah, believes the pressure on the rupiah exchange rate and the Indonesia Composite Index (IHSG) must serve as a momentum for Indonesia to strengthen its national economic foundations. This weakening is seen as a signal for the government to improve market confidence through policy consistency. In recent weeks, the rupiah exchange rate briefly touched a level of around Rp18,190 per United States dollar. At the same time, the IHSG experienced a sharp correction to the 5,400-5,800 range amid a torrent of net selling by foreign investors. ‘The market is sending signals that cannot be ignored. The rupiah breached around Rp18 thousand per dollar, foreign investors are also carrying out very large net selling, and the IHSG has corrected significantly,’ Nur said during an Indef online discussion on Sunday. Nur explained that although global factors such as Donald Trump’s policies and the Fed’s interest rates have an influence, the market is also highlighting domestic factors. She stressed that investors are beginning to doubt the 8% economic growth target because old growth engines, such as household consumption and the manufacturing sector, are starting to slow down. Additionally, the shrinkage of the middle class by up to 10 million people over the past five years, according to BPS data, is a serious concern. ‘Investors are not afraid of risk; they are afraid of uncertainty. Institutional uncertainty is usually punished more severely than ordinary economic risk,’ she affirmed. Amidst this situation, Nur encouraged the optimisation of the Islamic economy as a buffer for national resilience. With Islamic financial assets reaching nearly Rp3,000 trillion, this sector is considered to have significant potential as a shock absorption mechanism when the conventional economy is under pressure. The government is expected to immediately provide clarity on the direction of development and maintain the fiscal space of the state budget (APBN) to remain credible in the eyes of global investors in order to subdue further market turmoil.