Windfall Effect Unfelt as Rupiah Weakening Drives Up Production Costs

While the theory suggests that a weaker rupiah can enhance export competitiveness by making Indonesian products cheaper globally, the Indonesian Chamber of Commerce and Industry (Kadin) states that the current situation is not automatically creating a windfall for exporters. A windfall in exports refers to the extraordinary and unexpected profits enjoyed by exporters or the state due to surges in global commodity prices or other external factors.

“Many national industries still depend on imports for raw materials, machinery, and energy, so the weakening of the rupiah actually raises production costs. Consequently, exporters’ margins are being eroded,” said Erwin Aksa, Vice Chairman of Kinds Indonesia, on Wednesday. Furthermore, amidst the global economic slowdown, international market demand has not been strong enough to significantly absorb increased exports. Therefore, the positive effect of the exchange rate is not as significant as in previous cycles, particularly for the manufacturing sector, where production structures remain heavily dependent on imports.

Erwin emphasised that what is currently needed is not just exchange rate stability, but also the strengthening of the domestic upstream industry, logistics efficiency, trade deregulation, and export market diversification to ensure a healthier and more sustainable Indonesian trade balance. He also expressed serious concern regarding the April 2026 trade surplus performance, which fell to just US$0.09 billion, the lowest level in 72 months.

Erwin noted that this indicates growing pressure on national export performance due to slowing global demand and rising domestic imports. Several factors are influencing this performance: first, the prices of several Indonesia’s leading commodities have corrected compared to previous boom periods, while manufacturing export volumes have not fully recovered. Second, imports of raw materials and capital goods are increasing to meet the needs of domestic industries and strategic projects, thereby pressing the trade surplus. Third, global logistics costs and geopolitical uncertainty continue to affect international trade efficiency.

Previously, the Indonesian Central Statistics Agency (BPS) recorded that the trade balance surplus in April 2026 was the lowest in 72 months. The goods trade surplus during this period was only US$89.1 million, significantly lower than previous months. This April surplus represents the smallest surplus since May 2020, marking the end of 72 consecutive months of surplus. The figure dropped sharply from March 2026, which reached US$3.32 billion, and was also lower than April 2025, which stood at US$160 million.

The rupiah exchange rate against the US dollar opened weaker by 39 points or 0.22 percent to the level of Rp17,878 in Wednesday morning trading. Money market analyst Ibrahim Assuaibi predicts that the rupiah exchange rate could touch Rp18,000 per US dollar by next week, as the currency remains under pressure due to increased demand for safe-haven assets and a widening Indonesian current account deficit.