Indonesian Rupiah: Why has stronger growth failed to boost sentiment? – MUFG

A sustained recovery in the Indonesian Rupiah is still seen as difficult, with persistent concerns over investor confidence and weak portfolio flows weighing on the outlook. This is despite Indonesia’s Q3 GDP growth exceeding expectations at 5.47% year-on-year, supported by stronger exports and firm domestic demand, according to MUFG. Resilient private consumption and investment have eased the urgency for Bank Indonesia to provide support to economic activity.

Why does the FX outlook remain cautious despite the growth surprise?

"Indonesia’s Q3 GDP growth surprised to the upside, accelerating to 5.47%yoy from 5.29% in Q2, beating the 5.2% consensus."

"Domestic demand is holding up better than expected, with private consumption largely the same at 5.04%yoy and investment expanded 6.06%yoy."

"While stronger growth reduces the urgency for BI to support economic activity, it does little to address lingering investor confidence concerns."

"We remain cautious on IDR, with domestic risks and weak portfolio flows likely to constrain any sustained recovery."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)