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Indonesian economy faces tough challenges: Danamon
The economy faces tough global challenges with the rupiah exchange rate weakening, says an economic team from publicly listed private lender Bank Danamon.
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A customer displays banknotes at a money changer at the ITC Kuningan shopping center on Feb. 28. (Antara/Puspa Perwitasari)
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he Indonesian economy faces tough global challenges with the rupiah exchange rate weakening, says an economic team from publicly listed private lender Bank Danamon.
The team noted three threats against the economy – the outflow of United States dollars from Indonesian market, trade war and the increase of global energy prices.
It projects the ongoing outflow of capital from the Indonesian market owing to the sales of shares and bonds by foreign investors sparked by US economic improvement.
As a result, the Jakarta Composite Index (JCI) declined 2 percent earlier this week and the rupiah exchange rate weakened to above 13,800 against the dollar.
“High composition of foreign investment in both shares and bonds make Indonesia fragile to any global fluctuation,” said Danamon economist Dian Ayu Yustina at a statement on Friday as reported by kontan.co.id.
Another tough challenge for the economy was a trade war initiated by President Donald Trump’s decision to impose a tariff of 25 percent on steel imports and 10 percent tariff on aluminum imports.
The third threat was the increasing price of global energy, of which coal prices had reached more than US$100 per ton, while global crude oil had reached $70 per barrel.
The rupiah will continue to face pressure, said Dian, adding that Bank Indonesia might be open to the possibility of increasing its reference rate. (bbn)
Clarification from PT Bank Danamon Indonesia:
Dear business editors,
We are writing in reference to your article dated March 9, 2018, on the The Jakarta Post website, titled "Indonesian Economy Faces Tough Challenges: Danamon," and we wish to clarify a few aspects.
The report published by our economists does not mention or suggest that the Indonesian rupiah will continue to be under pressure. Our report mentioned that there had been some profit taking in bonds and stocks, and that had led to the United States dollar-rupiah rate to increase to 13,750-13,780, which was the actual rupiah level at the time our report was issued.
Our aforestated report was a general update on the market situation and was not intended to be a cautionary statement, as the article seems to portray.
In our economic indicators forecast, which was part of our report, we stated that we expected the policy/reference rate to be unchanged for the rest of the year, and we only mentioned that the monetary stance would have a “tight bias”, which indicated the possibility of no further rate cuts.
Hence, we are concerned that the headline of the article does not represent the essence of our report and the possibility that this could elicit unwanted market reaction. Our economists are always open for consultation and confirmation in the event that The Jakarta Post reporters plan to reference our economic report in their articles.
We appreciate The Jakarta Post’s commitment to high-quality journalism, and also thank you for the tremendous support accorded to Bank Danamon over the years. We hope that you construe our clarification as constructive, and we look forward to strengthening the synergy between our two prominent institutions.
Sincerely,
Atria Rai
Head of corporate communications
PT Bank Danamon Indonesia Tbk
