Foreign Capital Flows Begin to Flee Indonesia Due to Middle East Conflict

BI Governor Perry Warjiyo (Photo: Antara)

JAKARTA - Bank Indonesia (BI) Governor Perry Warjiyo revealed that there was a significant outflow of foreign capital from the Indonesian financial market in March 2026.

According to him, this condition is triggered by increasing global uncertainty due to conflicts between the United States (US), Israel, and Iran.

Perry explained that the foreign capital outflow in March 2026 was recorded at US$1.1 billion or reversed from the position in January 2026 which still recorded an inflow of US$1.6 billion.

"In March 2026, portfolio investments recorded a net outflow of US$1.1 billion triggered by increasing uncertainty in global financial markets due to the war in the Middle East," he said in a press conference, Tuesday, March 17.

He said that the pressure came from the increased risks in the global financial market due to the conflict in the Middle East, which encouraged investors to withdraw their funds from the domestic market.

In addition, Perry estimates that the weakening of global economic prospects and the rise in world oil prices as an impact of the US-Iran conflict have the potential to widen Indonesia's current account deficit to near the upper limit of the range projected by Bank Indonesia.

According to him, this condition needs to be watched out for because it can push the current account deficit to the upper range, namely around 0.9 percent to 1 percent of Gross Domestic Product (GDP).

To face this situation, Perry emphasized the importance of strengthening policy synergies to maintain the performance of the balance of payments and strengthen external resilience, while maintaining the confidence of global investors.

"The impact of the deterioration of the global economy and financial markets due to the Middle East war needs to be anticipated and responded to appropriately to maintain the momentum of national economic growth," he said.