Investors and business actors are on edge. The rupiah, which was at Rp15,390 per US$ at the beginning of 2024, has plummeted to Rp16,427 per US$ (as of June 27, 2024). The depreciation of the rupiah is indeed influenced by global situations, especially after the Federal Reserve refrained from cutting its benchmark interest rate three times this year. However, there are domestic fundamental factors that make the rupiah a fragile currency, namely the twin deficits.
Sumber : Istimewa
Investors and business actors are on edge. The rupiah, which was at Rp15,390 per US$ at the beginning of 2024, has plummeted to Rp16,427 per US$ (as of June 27, 2024). The depreciation of the rupiah is indeed influenced by global situations, especially after the Federal Reserve refrained from cutting its benchmark interest rate three times this year. However, there are domestic fundamental factors that make the rupiah a fragile currency, namely the twin deficits.
The twin deficits Indonesia is experiencing are: The first one is Current Account Deficit: This persists, reaching US$2.2 billion in the first quarter of 2024, double the fourth quarter of 2023. After experiencing deficits of 2.7% of GDP in 2019, 0.4% in 2020, and 0.3% in 2021, Indonesia’s current account recorded a surplus of 1.0% in 2022, then a deficit again of 0.4% in 2023. The IMF projects Indonesia’s current account deficit to increase to 2.2% of GDP by 2026. The wider the current account deficit, the stronger the signal of the government’s declining ability to pay foreign debt.
