Rupiah Exchange Rate Could Reach 16,800 per US Dollar in 2027, BI Reveals Reasons

Bank Indonesia (BI) Governor Perry Warjiyo has revealed five factors driving the projected strengthening of the rupiah exchange rate in 2027, moving within a range of 16,800 to 17,500 per US dollar. This range is outlined in the Macroeconomic Framework and Fiscal Policy Principles (KEM-PPKF) for the 2027 fiscal year. ‘There are five main factors underlying why the rupiah in 2027 will range from 16,800 to 17,500, strengthening towards that level,’ Perry stated during a working meeting with the House of Representatives Budget Committee in Jakarta on Tuesday (9/6). The first factor is that global economic conditions will improve and will not be as adverse as currently, with growth projected to rise to 3.1%. ‘We hope the current geopolitical conditions will improve and will encourage inflows into emerging market countries, including Indonesia,’ Perry said. The second factor is Indonesia’s solid economic fundamentals, which will support rupiah appreciation. ‘High economic growth, low inflation, a manageable current account deficit, attractive yields, and more than sufficient foreign exchange reserves. So our fundamentals will support exchange rate strengthening,’ Perry explained. Third, the policy of strengthening governance of natural resource commodity exports, particularly through the existence of PT Danantara Sumber Daya Indonesia (DSI), is believed to boost exports and export proceeds, as well as increase state revenue. Perry noted this will support not only financing for economic growth but also increased foreign exchange, reserves, and rupiah appreciation. Fourth, BI’s strong commitment to continuously maintain the rupiah exchange rate through intervention and various other policies. Fifth, close coordination between fiscal and monetary policy focused on maintaining exchange rate stability by increasing attractiveness or yields for foreign portfolio investment inflows, particularly in SRBI and SBN, as well as maintaining sufficient liquidity in money and banking markets. ‘So with those five factors, God willing, the rupiah will strengthen next year in the range of 16,800 to 17,500 per US dollar,’ Perry stated. In his presentation, Perry also conveyed that the central bank shares a similar view that Indonesia’s economic growth next year will be better than this year. ‘Our range is 5.1% to 5.9% for 2027 economic growth projection, but we are confident it will lean towards the upper bound,’ Perry said. Meanwhile, inflation in 2027 is also believed to remain within the target of 2.5% plus or minus 1%, or a range of 1.5-3.5%, supported by strong synergy between central and regional governments together with BI through the Central/Regional Inflation Control Teams.