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Rupiah to remain under pressure in 2019, analysts say
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An employee counts rupiah bills at a money changer in Jakarta. (Antara/Sigid Kurniawan)
T
he rupiah’s volatility will continue next year because the country is unlikely to narrow its current account deficit, which is expected to reach 3 percent of the gross domestic product (GDP) by the end of this year as the result of an unstable exchange rate throughout 2018, analysts say.
"Next year, we cannot expect to significantly improve our current account balance because our trade will remain in deficit," Center of Reform on Economics (Core) economist Muhammad Faisal said recently.
The United States monetary tightening policy will still negatively affect the rupiah exchange rate, although the Federal Reserve will not be so aggressive in increasing its benchmark rate next year, Muhammad said.
He called on Bank Indonesia (BI) to continue to monitor the impact of the United States’ domestic monetary policy.
Bank Permata economist Josua Pardede added that the rupiah would also still face the impact of the US and China trade war, which was likely to continue next year.
"After the 90-day period [of the trade war] ends, it is likely that each country will still maintain its trade ego," he said.
He added that the trade war did not only have a negative impact on the rupiah, it would also affect Indonesia’s exports and subsequently, the current account deficit.
Josua
is also predicting an economic growth slowdown next year because of high demands.
Bank Mandiri money market analyst Reny Eka Putri believes that the legislative and presidential election in April would keep investors in a wait-and-see stance.
She estimated that the average rupiah exchange rate would be at Rp 14,908 per US dollar next year and Rp 15,185 by the end of 2019.
"Our projections are still slightly above the government's estimation in the 2019 state budget because the external risks — trade war and the global economic slowdown — will be more profitable for the US dollar," Reny explained as quoted by kontan.co.id.
Similarly, Faisal said the rupiah’s exchange rate was projected to reach Rp 15,000 next year, while Josua estimated an exchange rate of between Rp 14,500 and Rp 15,500 per US dollar. (aak/bbn)
