Rupiah Gains Ground as Markets Welcome Prabowo's Economic Growth Target

The rupiah closed firmer on Wednesday, strengthening by 52 points after earlier slipping by 25 points to Rp17,653 per US dollar, following President Prabowo Subianto’s delivery of the Macro Economic Framework and the Main Policy of Fiscal Policy (KEM-PPKF) for the RAPBN 2027 in a plenary session of the DPR RI. Markets welcomed the government’s growth target for 2027, set within a relatively high range. An analyst, Ibrahim Assuaibi, said optimism rose after the government signalled growth of about 5.8-6.5% in 2027. ‘In this afternoon’s trade, the rupiah closed 52 points firmer, having previously weakened 25 points to Rp17,653 per dollar,’ he said in a statement. He cautioned that the rupiah could remain volatile on Thursday, possibly closing around Rp17,650-17,700 per dollar. In his speech, Prabowo noted that Indonesia’s average growth over the past seven years has been around 5%, but acknowledged challenges, including a shrinking middle class and rising poverty. The government also targets inflation of 1.5-3.5% by 2027. On macro assumptions, the government set the rupiah band at Rp16,800-17,500 per dollar, with the 10-year government securities yield at 6.5-7.3%. Oil price assumptions for Indonesia were set at US$70-90 per barrel, with oil production lifted to 602-615 thousand barrels per day and natural gas lifting at 934-977 thousand barrels of oil equivalent per day. Fiscal targets place 2027 revenue at 11.82-12.40% of GDP, expenditure at 13.62-14.80% of GDP, and the budget deficit at 1.8-2.4% of GDP. Externally, the improvement in risk sentiment was supported by Bank Indonesia’s decision to raise the policy rate by 50 basis points to 5.25%, with the Deposit Facility at 4.25% and the Lending Facility at 6.25%, ending an eight-month holding pattern. BI said the move aimed to reinforce rupiah stability amid a deteriorating global backdrop, and to keep inflation within the 2.5%±1% target for 2026-2027. Markets remain attentive to the Middle East conflict, particularly US–Iran tensions. While US President Donald Trump signalled war–ending prospects, markets remain wary of negotiations and potential energy supply impacts. The Fed’s trajectory remains uncertain; the CME FedWatch Tool indicated about a 50% chance of a 25 basis point rate rise by year-end, up from around 35% a week earlier. NasDem Party chairman Surya Paloh commented on Prabowo’s target band for the rupiah; Deputy Speaker Saan Mustopa confirmed Prabowo’s attendance at the DPR plenary session the following day, where he was scheduled to speak. In Pekalongan, Central Java, UMKM operators voiced disappointment that the president’s remarks did not directly address villagelevel impact of the rupiah’s weakness. Separately, Prabowo’s recent UN speech was highly praised and seen as positioning him as a leading international figure.