Rupiah Hits Its Lowest Level, Government Explains Difference in Economic Strength Between 2026 and 1998

Jakarta — The rupiah exchange rate breached Rp 17,706 per US dollar, posting a record low. This figure has raised concerns among some who recall the 1998 monetary crisis, when the rupiah collapsed and the Indonesian economy slid into meltdown. However, the government emphasises that the current situation is very different.

In 1998, the rupiah plummeted, triggering a massive economic storm with inflation surging, banks failing, and economic growth plunging into recession. By contrast, in 2026, the rupiah weakness is occurring amid a still-strong economic foundation.

According to him, the current economic context and national stability are far different from the crisis two decades ago.

“If the rupiah weakens, it seems we will move like 1998 again. Different, 1998 was a policy mistake and social-political instability occurred after a year of recession,” said Purbaya on Tuesday, 19 May 2026.

He added that the most noticeable difference lies in inflation. Purbaya noted that at the peak of the 1998 crisis, Indonesia experienced hyperinflation exceeding 77 percent. Prices of essential goods surged and purchasing power fell.

Now, although the rupiah has weakened, inflation in Indonesia in April 2026 is recorded at 2.41 percent, still within the government’s target range of around plus/minus 3 percent.

In terms of economic growth, the gap is even more stark. In 1998, Indonesia’s economy contracted by 13 percent. Business activity collapsed and unemployment rose sharply. Meanwhile, in Q1 2026, Indonesia’s economy grew by 5.61 percent, indicating that consumption and investment remained positive.

The health of the banking sector also constitutes a major differentiator. During the 1998 crisis, many banks lost capital, and the capital adequacy ratio or Capital Adequacy Ratio (CAR) was in negative territory. Non-performing loans (NPL) reached around 30 percent. By February 2026, banks’ CAR stood at 25.83 percent, a level considered strong.