Rupiah Predicted To Strengthen Amid Global Volatility

Illustration. (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate in trading Wednesday, March 19 is expected to move higher against the United States (US) dollar.

To note, citing Bloomberg, on Tuesday, March 18, the rupiah spot exchange closed down 0.13 percent to the level of Rp. 16,428 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.32 percent to a price level of Rp. 16,432 per US dollar.

Currency observer Ibrahim Assuaibi said there were several global sentiments affecting the movement of rupiah such as Israel launching attacks on Hamas targets in Gaza, ceasefire talks failed.

"The attack reportedly killed more than 200 people, including senior Hamas officials, and sparked anger from the group, which accused Israel of violating the January ceasefire. Israel and Hamas had agreed to a temporary ceasefire in mid-January," he said in a statement, quoted Wednesday, March 19.

Ibrahim explained talks about a more concrete peace agreement had deteriorated amid disagreements over the terms of the ceasefire, while US delegations also could not mediate to peace.

"Israel claims the attack was in retaliation for the repeated refusal of Hamas to release Israeli hostages. The Selsa day attack marks an update in tensions in the Middle East," he said.

On the other hand, Ibrahim said amid constant uncertainty over Trump's tariff plans, mainly due to his main targets in Europe, China, Canada, and Mexico, announcing a series of retaliatory measures.

"Trump reiterated its threat that reciprocal and sectoral rates will be implemented as early as April 2. Concerns over the economic disruption of these rates sparked fears of the US recession," he stressed.

Ibrahim said the Fed meeting is now the focus for other economic signs, and the central bank is widely expected to maintain interest rates.

"However, the central bank is expected to reduce its aggressive views in the face of increasing economic uncertainty. Apart from the Fed, meetings between the Bank of Japan and the Bank of England will also take place this week," he said.

Meanwhile, from within the country, Ibrahim submitted a report on the Performance and Facts State Revenue and Expenditure Budget or the KiTa February 2025 State Budget showing indications of a fiscal weakening that needs to be anticipated immediately.

According to him, with a fiscal deficit of IDR 31.2 trillion or 0.13 percent of GDP in the first two months of this year, coupled with a 30.19 percent decrease in tax revenue (yoy), it is a sign of danger for the sustainability of government economic policies.

"If there is no firm corrective step, it is not impossible that the deficit could widen to exceed the safe limit at the end of the year," he said.

Reporting from data from the Ministry of Finance in the February 2025 edition of the KiTa State Budget report, the realization of state revenues until the end of February 2025 reached IDR 316.9 trillion or 10.5 percent of this year's APBN target.

In addition, tax revenues recorded a figure of IDR 240.4 trillion or 9.7 percent of this year's target, consisting of tax revenues of IDR 187.8 trillion or 8.6 percent of the target and customs and excise revenues of IDR 52.6 trillion or 17.5 percent of the target.

Meanwhile, Non-Tax State Revenue (PNBP) has collected as much as IDR 76.4 trillion or 14.9 percent of the APBN target.

Ibrahim said that the drop in tax revenue was not only caused by sluggish economic factors, but also administrative problems and the implementation of the graffiti system that failed to operate optimally.

"This drastic reduction in taxes is mostly related to obstacles in the implementation of the beliax which hinders tax collection from key sectors," he said.

Ibrahim said that apart from taxes, people's purchasing power is the main factor that should be observed. In addition, food and energy inflation that still lasts above 4 percent has the potential to suppress household consumption which is the largest contributor to GDP.

"If people's purchasing power continues to weaken, the retail sector, MSMEs, and the manufacturing industry will be significantly affected. This could be the beginning of a deeper economic slowdown," he said.

Ibrahim estimates that the rupiah will fluctuate but close higher on trading Wednesday, March 19, 2025, in the price range of IDR 16,390 - IDR 16,430 per US dollar.