Rupiah Breaches 18,000, Public Purchasing Power on the Brink

Jakarta — The rupiah exchange rate has returned to the public spotlight after remaining under pressure throughout the second half of July 2026. In trading on Monday, 13 July 2026, the rupiah opened weaker at Rp18,090 per US dollar, down 25 points from the previous close of Rp18,065. This depreciation continues the trend from the previous week (6–11 July 2026), during which the spot rate corrected by 0.57 per cent and briefly touched a new psychological level of Rp18,128 per US dollar. Over the past year, the Garuda currency has weakened by more than 11 per cent against the US dollar.

Behind the daily fluctuating exchange rates, a tangible impact is beginning to be felt by the public: goods prices are rising, production costs are swelling, and purchasing power is being eroded. The rupiah’s depreciation is not merely a figure on a trading screen. Economists note that every 1 per cent depreciation of the rupiah has the potential to add 0.2 to 0.3 per cent of imported inflation pressure in the short term, as the cost of raw materials and finished goods from abroad automatically becomes more expensive when converted to rupiah.

Several sectors are already feeling this impact. Telisa Aulia Falianty, Professor at the Faculty of Economics and Business, University of Indonesia, cautioned that expenditure groups with high import content—ranging from pharmaceuticals, electronics, automotive, petrochemicals, wheat, heavy equipment, to telecommunications—are the most vulnerable to price increases due to the weakening exchange rate. The latest projections are even starker: economists estimate that the price of import-based goods could rise by 4 to 8 per cent by the end of 2026, with electronic products potentially experiencing double-digit increases due to high dependence on imported components. Interestingly, a number of producers are expected to pursue a ‘shrinkflation’ strategy—reducing the size or content of products without openly raising prices—so that consumers are not overly shocked by the price hikes.

Nailul Huda, an economist from the Center of Economics and Law Studies (CELIOS), stressed that the effects of the rupiah’s weakening will be felt from micro-businesses such as fried food sellers to large-scale entrepreneurs, as the rise in raw material costs permeates the entire production chain. He also highlighted that capital outflows are adding to the pressure on the rupiah, triggered by investor concerns over the government’s budget deficit widening to nearly 3 per cent of GDP. Similarly, Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE) Indonesia, noted that a number of strategic commodities—wheat, soybeans, garlic, milk, as well as pharmaceutical and industrial raw materials—remain heavily dependent on imports, meaning their input costs automatically swell each time the rupiah depreciates. The middle class is said to be facing the most palpable pressure as their spending room narrows.

Several external factors have compounded the pressure on the rupiah in recent weeks, including the escalation of geopolitical tensions in the Middle East and the Strait of Hormuz, which has driven up global oil prices, as well as market expectations regarding the US central bank’s interest rate policy. On the domestic side, the current account deficit and investor concerns about economic fundamentals have further encouraged foreign capital outflows from Indonesia’s financial markets. Nevertheless, this pressure has been partially contained by stabilising oil prices, a moderate increase in foreign exchange reserves, and government measures to strengthen domestic food supply.

The impact of the rupiah’s weakening does not stop with large business players. Rural communities that depend on basic necessities such as LPG, agricultural fertilisers, and motor vehicles are also feeling the price pressure due to the imported components in these goods. Economists consider the claim that rural communities are relatively safe from the impact of a rising dollar to be inaccurate, given that dependence on imported raw materials and finished goods is now evenly spread across various economic strata, both in cities and villages. The rupiah’s depreciation is not a new phenomenon, and history records that the currency has experienced similar pressures in the past. However, the consistent weakening trend throughout 2026 warrants collective attention—not to cause panic, but so that the public and businesses can prepare for potential price increases in the coming months. Mitigation measures such as logistics cost efficiency, strengthening the domestic food sector, and maintaining the purchasing power of the lower-middle class are key to preventing the impact of the rupiah’s depreciation from spreading further.