There is Good News from Bank Indonesia, Rupiah Will Strengthen in 2023

JAKARTA – Governor of Bank Indonesia (BI), Perry Warjiyo, is optimistic that the rupiah exchange rate will return to strengthening in 2023. According to Perry, this belief is based on several things.

First, Indonesia's economic fundamentals are quite good. Second, high economic growth. Third, inflation began to decline towards a low level. Fourth, yields on SBN released by the government are quite competitive.

"The stability of the rupiah exchange rate will continue to be maintained. This is a high commitment from Bank Indonesia. It is estimated that the rupiah will strengthen in 2023, supported by the easing of global turmoil", he said on Wednesday, November 30.

Perry added, this optimism was also supported by the current account remaining in balance, a surplus capital account from foreign investment, and hopes of a return to portfolio investment.

“This will increase foreign exchange reserves. Then, financial system stability is also maintained as indicated by an adequate capital adequacy ratio and liquidity conditions at a more than adequate level", he said.

For information, in the press conference of the Board of Governors' Meeting this month, Perry revealed that the US dollar exchange rate index against major currencies (DXY) was recorded at 106.28 on 16 November 2022 or has strengthened by 11.09 percent (YTD) during 2022.

Meanwhile, the rupiah exchange rate up to November 16 2022 depreciated 8.65 percent (YTD) compared to the final level in 2021.

The depreciation of the rupiah exchange rate was considered relatively better compared to the depreciation of the currencies of several other countries in the region, such as South Korea's 10.30 percent (YTD) and the Philippines' 11.10 percent (YTD).

"The very strong US dollar was driven by the Fed's aggressive monetary policy tightening and the withdrawal of capital from various countries to the US, amid a weakening economy and high inflation in Europe", Perry said.