I

ndonesia'€™s rupiah has had a bad start to the year, with investors kicking off 2015 in favor of the US dollar on bright economic prospects for the world'€™s largest economy, while other countries in the world struggle to grow.

The rupiah began the year at around Rp 12,500 against the US dollar and has been depreciating ever since, hitting Rp 12,658 on Tuesday, according to Bank Indonesia'€™s Jakarta Interbank Spot Dollar Rate (JISDOR).

Other emerging market currencies have also felt the pinch on speculation that Greece may exit the eurozone, a gauge of 20 developing-nation currencies sliding 0.9 percent to a 12-year low, according to Bloomberg data.

The news came as EU economies struggled to grow, with the European Central Bank (ECB) set to launch a stimulus package including quantitative easing. Recent Purchasing Managers'€™ Index data on Tuesday showed that the growth of eurozone services manufacturing slowed in the final quarter of 2014.

'€œThe overall outlook of the global economy is currently rather bleak,'€ Bank Central Asia (BCA) economist David Sumual told The Jakarta Post.

In the domestic field, continued weak exports data had also hit the rupiah, he added, as the trade balance posted a deficit of $425.7 million in November. Exports fell 14.57 percent from a year earlier to $13.62 billion, while imports were down by 7.31 percent at $14.04 billion.

However, David insisted that the long-term outlook of Indonesia'€™s economy would be positive on expectations of the new administration'€™s program for structural and fiscal reforms.

'€œWe expect that government spending can be accelerated in the first half to boost economic growth,'€ he said.

Investors have pinned high hopes on President Joko '€œJokowi'€ Widodo'€™s new administration to push through reforms to bolster economic growth in Southeast Asia'€™s largest economy after he managed to significantly reduce historically burdensome and poorly targeted fuel subsidies.

The new government has also aimed to simplify investment permits into one agency, the investment coordinating board (BKPM), to ease procedures and attract more direct investment.

BI spokesperson Peter Jacobs said negative global sentiments would continue to influence the rupiah, as investors preferred US dollars as the safe-haven currency at uncertain global economic times such as these.

An improving US economy '€” against the backdrop of weak European and Chinese economies '€” might make a case for its central bank, the Federal Reserve, to increase its benchmark rate in a move that could attract funds, encouraging them to leave emerging assets such as Indonesia.

Peter also acknowledged that the fundamental economy of Indonesia was not strong enough to counter external sentiments, as the country still had issues with current account deficits, the broadest measure of a country'€™s external trade.

'€œHowever, BI remains in the market to smoothen the volatility of the rupiah, which will continue to fluctuate in the near future on global sentiments. We also expect that the future domestic improvements in infrastructure development, direct investment and exports will help lift the currency,'€ he said.

Bank Danamon analyst Anton Hendranata, meanwhile, said it would take structural reforms to lift the rupiah significantly this year, such as reducing reliance on imports and shifting export focus from commodities to manufactured products.