UNAIR NEWS 鈥 The continued decline of the Indonesian rupiah has raised serious concerns about the country鈥檚 economic outlook. Beyond increasing import costs, the weakening exchange rate signals underlying domestic vulnerabilities and undermines investor confidence. According to Professor Dr. Imron Mawardi, S.P., M.Si., an economist from Faculty of Economics and Business, both global and domestic forces are at play.
鈥淕lobal instability鈥攅xacerbated by protectionist trade policies like those introduced during the Trump administration鈥攈as fueled uncertainty across international markets,鈥 he explained. 鈥淭hese policies have disrupted the global economy and financial systems, leading to currency devaluations worldwide, including the rupiah.鈥
Internal factors
Domestic challenges have also intensified the pressure on the rupiah. Political uncertainty, falling commodity prices, and inconsistent policymaking have shaken investor confidence. As capital exits the market, the national currency comes under additional strain.
This depreciation has had a pronounced impact on businesses reliant on imported materials. As import costs rise, domestic production becomes more expensive, triggering inflationary pressure across sectors.
鈥淲hen the rupiah weakens, the cost of importing industrial inputs increases,鈥 Prof. Mawardi said. 鈥淭his drives up production expenses and contributes to cost-push inflation鈥攑rice hikes caused by rising operational costs.鈥
Indonesia鈥檚 economic potential
Still, Prof. Mawardi expressed cautious optimism about Indonesia鈥檚 long-term investment prospects, despite growing competition from countries like Vietnam. He cited the nation鈥檚 large consumer base and strong market appeal. However, to maintain its edge, Indonesia must create a more stable and attractive business environment. This includes offering targeted incentives to foreign investors and adopting more consistent economic policies.
He also underscored the critical role of the government and Bank Indonesia (BI) in ensuring currency stability. 鈥淭he government needs to strengthen exports and attract foreign investment through structured efforts,鈥 he noted. 鈥淎t the same time, BI should actively intervene to manage short-term exchange rate volatility.鈥
Public鈥檚 role
Prof. Mawardi emphasized that the public, too, plays a part in stabilizing the rupiah. 鈥淧eople should avoid panic-buying foreign currencies like the U.S. dollar,鈥 he advised. 鈥淪upporting locally made products can also help reduce reliance on imports and stimulate the national economy.鈥
In a climate of economic uncertainty, safeguarding stability requires collaboration among the government, business community, and the public. Boosting exports, maintaining consistent policy direction, and encouraging support for domestic goods are key to addressing the ongoing depreciation of the rupiah.
Author: Rosali Elvira Nurdiansyarani
Editor: Khefti Al Mawalia
