TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search results
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search resultsIndonesia is in the shadow of a perfect economic storm
The rupiah’s march toward 18,000 per dollar is not merely a currency story; it is a warning signal of something deeper, the erosion of confidence in Indonesia’s economic direction.
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
A farmer climbs a coconut tree on Nov.10, 2025, in Tawa village, Bacan Island, South Halmahera regency, North Maluku. Agriculture Minister Andi Amran Sulaiman has said that the downstreaming of coconut production is a key strategy to increase national export value by up to Rp 2.4 trillion (US$143.7 million) and to strengthen the welfare of coconut farmers across regions. (Antara/Andri Saputra)
T
he rupiah weakened to below 17,600 per United States dollar on Monday, driven by geopolitical tensions, a strong greenback, rising oil prices and accelerating capital outflows. Yet the rupiah’s march toward 18,000 per dollar is not merely a currency story; it is a warning signal of something deeper, the erosion of confidence in Indonesia’s economic direction.
History offers a brutal reminder: currencies rarely collapse first, confidence does. Indonesia is now facing a dangerous convergence of three simultaneous pressures: a weakening rupiah, widening fiscal fragility and rising social vulnerability through unemployment and poverty.
These are not isolated problems. They reflect a deeper structural weakness, an economy increasingly dependent on consumption, imports, commodity cycles and politically driven spending rather than productive transformation.
Indonesia’s economy grew 5.61 percent year-on-year in the first quarter of 2026, its fastest pace in more than three years. But beneath the headline, the structure of growth looks fragile. Household consumption remained the main driver, while government spending surged by 21.81 percent, far outpacing exports, which grew only 0.9 percent. The message is clear: Indonesia’s economy is increasingly being sustained by spending rather than productive strength or export competitiveness.
Since Prabowo Subianto took office in October 2024, the rupiah has depreciated by more than 14 percent. This pace is far steeper than during the early administrations of Joko “Jokowi” Widodo or Susilo Bambang Yudhoyono, when investor confidence remained relatively stronger.
Markets are now asking a dangerous question: Why is the rupiah weakening this fast despite aggressive intervention by Bank Indonesia (BI)?
BI has intervened heavily through bond purchases, liquidity injections and currency stabilization. Those measures are necessary. But the uncomfortable truth is no central bank can indefinitely defend a currency when the productive economy underneath it remains structurally fragile.
