JAKARTA - Head of Bank Permata economist Josua Pardede explained that the uncertainty surrounding US President Donald Trump's tariff policy had an impact that hampered the projection of capital flows into Indonesia by 2025.
He said that although the current tension of global trade wars had subsided, the potential uncertainty in the global financial market was still there, especially as a result of President Trump's protectionist approach.
"The approach to protectionists could exacerbate inflationary pressures in the US, creating a policy dilemma for the Fed, especially in balancing inflationary control with the need to support US economic growth," he told VOI, Tuesday, June 10.
On the other hand, he said China's prolonged economic stagnation also contributed to increasing investor preferences towards safe-haven assets, causing interest in risky assets, including in developing countries, to tend to decline.
Josua said that to face this challenge, such as Indonesia's new policy regarding Foreign Exchange Revenue from Natural Resources Exports (DHE SDA) is expected to be able to help reduce the impact of slowing incoming capital flows, supported by a continuing trade surplus.
"Therefore, we revised the estimated current balance deficit (CAD) in 2025 from 1.18 percent of GDP to 0.87 percent of GDP," he said.
In addition, Bank Indonesia (BI) is expected to intervene in foreign exchange markets by utilizing foreign exchange reserves to stabilize the Rupiah exchange rate amid increasing global uncertainty.
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According to him, this intervention could lead to a gradual decline in the foreign exchange reserves level. However, Indonesia's fairly solid macroeconomic fundamentals as well as a wider BI interest rate easing room in 2025 are believed to be still able to attract selective capital flows, especially to government bond instruments (SBN).
He estimates that Indonesia's foreign exchange reserves will be in the range of 153 billion US dollars to 157 billion US dollars by the end of 2025 compared to 2024 of 155.72 billion US dollars.
In addition, Josua said that the movement of the Rupiah is expected to be traded in the range of Rp. 16,100 per US dollar Rp. 16,400 per US dollar at the end of the 2024 period of Rp. 16,102 per US dollar.
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