Foreign Capital Flow Potentially Deras To RI, Foreign Exchange Reserves Can Reach 150 Billion US Dollars In 2024

Rupiah and US Dollars (Photo: dock. Antara)

JAKARTA - Bank Permata economist Josua Pardede estimates foreign exchange reserves in 2024 will increase to 150 billion US dollars compared to USD 146.4 billion by the end of 2023.

Josua said there is potential for sustainable capital flow, so that it can increase foreign exchange reserves until the end of 2024.

"Global prospects that show relative improvement, there is potential for sustainable capital flows, which can further increase foreign exchange reserves until the end of 2024," he said in his statement, Wednesday, August 7.

Josua said one of the drivers, namely that it is estimated that the Fed will cut policy interest rates more than once by the end of 2024, following a dovish signal from the last FOMC meeting last July, we anticipate an increase in investor risk-on sentiment.

According to Josua, this can increase capital flow into the portfolio market. In addition, Indonesia's relatively strong GDP growth in the second quarter of 2024, although the global economy has slowed down, strengthening positive prospects for the Indonesian economy and attracting direct foreign investment (FDI).

Even so, Josua said, there is a risk of decrease, especially regarding the potential for widening the twin deficit.

"The decline in the trade surplus driven by normalization of commodity prices and weakening global demand, combined with strong domestic demand, poses a risk of widening the current account deficit (CAD)," he added.

In addition, Josua conveyed that the prospect of widening the fiscal deficit could reduce the attractiveness of the domestic bond market, even in the midst of the more dovish conditions of the Fed.

Meanwhile, Josua said other risks include a possible worse global economic slowdown that could potentially lead to a recession that could mask risk-on sentiment, increasing geopolitical tensions in some areas that led to a surge in demand for safe haven assets, and uncertainty in political conditions in Western countries.

Therefore, Josua estimates that foreign exchange reserves in 2024 will increase to 150 billion US dollars compared to 146.4 billion US dollars by the end of 2023.

"We estimate that the Rupiah exchange rate will be appreciated from the current level to around Rp. 15,800 - Rp. 16,000 per US dollar by the end of 2024 compared to Rp. 15,397 per US dollar at the end of 2023," he concluded.