Rupiah Is Predicted To Weaken Due To Donald Trump's Protexionist Policy

JAKARTA - The rupiah exchange rate in trading Wednesday, March 12 is expected to move lower against the United States (US) dollar.

To note, citing Bloomberg, on Tuesday, March 11, the rupiah spot exchange rate closed down 0.26 percent to the level of Rp. 16,409 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.64 percent to a price level of Rp. 16,326 per US dollar.

Currency Observer Ibrahim Assuaibi said US President Donald Trump's protectionist policy had rocked markets around the world, with Trump imposing and then delaying tariffs on the country's biggest oil suppliers, Canada and Mexico, while also raising duties on Chinese goods.

"China and Canada have responded at their own rates. Over the weekend, Trump said the transition period for the economy is likely to occur but declined to predict whether the US could face a recession amid stock market concerns about its tariff actions," he said in a statement, quoted Wednesday, March 12.

In addition, Ibrahim said a Reuters poll showed that economic risks were increasing for Mexico, Canada and the US as businesses and policymakers grappled with uncertainty stemming from Trump's chaotic implementation of tariffs.

According to him, inflation concerns in the US, which are already increasing, have deteriorated, making it more likely that the Federal Reserve will delay policy adjustments in the near future.

Ibrahim said at the same time, the possibility of a recession growing in all three countries, despite increasing trade tensions, Trump had avoided making predictions about whether the US could face a recession by 2025.

Meanwhile, from within the country, Goldman Sachs Group Inc. projects that the APBN deficit will widen and approach its limits, which is 2.9 percent by 2025.

In addition, Goldman Sachs lowered the rating of 10-year tenor and 20-year bond to neutral, and lowered Indonesia's share rating from overweight to market weight.

The widening of the 2025 State Budget deficit is considered as the impact of jumbo spending on programs such as free nutritious meals (MBG), budget reallocations, the establishment of BPI Danantara, to the expansion of housing policies for low-income people (MBR) through the issuance of Housing SBN.

Indonesia's fiscal risk is the main reason for the giant bank to lower its projection of the Indonesian capital market. There are concerns over global trade tensions and the weakening of the domestic economy after President Prabowo Subianto announced a series of fiscal policies.

As a result, Goldman Sachs projects that the 2025 state budget deficit (APBN) will reach 2.9 percent wider than the government's target, which is a deficit of 2.53 percent.

Meanwhile, the 2.9 percent projection of Goldman Sachs is close to the maximum limit of the state budget deficit set by the government, which is 3 percent, the projection is in line with the fiscal risk that Goldman Sachs is worried about.

In the last ten years, the state budget deficit has exceeded 3 percent only during the Covid-19 pandemic, namely 2020 and 2021. The government has set exceptions due to the high need for state spending for handling the pandemic, when state revenues are drastically reduced due to the disrupted economy.

Ibrahim estimates that the rupiah will fluctuate but closed lower in trading on Wednesday, March 12, 2025, in the price range of IDR 16,390 - IDR 16,460 per US dollar.