Mahkatop
Mahkatop — Bank Indonesia (BI) recorded an increase in Indonesia’s foreign reserves to US$140.2 billion in June 2024 from US$139.0 billion the previous month. This increase was mainly due to tax and service revenues and the government’s foreign loan withdrawals, despite the need to stabilize the rupiah amid ongoing global financial market uncertainty.
Permata Bank’s Chief Economist, Josua Pardede, explained that the foreign reserves in June 2024 were influenced by an outflow of foreign capital amounting to US$1.96 billion from the Bank Indonesia Rupiah Securities (SRBI) market and US$0.09 billion from the stock market. Conversely, the Government Securities (SBN) market recorded a foreign capital inflow of US$0.12 billion. Additionally, the government’s issuance of global sukuk attracted a foreign capital inflow of US$2.35 billion.
Josua also stated that the trade balance in June 2024 is expected to return to a surplus. However, BI intervened in the foreign exchange market to stabilize the rupiah exchange rate due to increased uncertainty in the global financial markets.
Despite the increase in foreign reserves, Josua warned that the potential for further interest rate hikes by the Federal Reserve (The Fed) and emerging global risks related to political situations in the United States (US) and the European Union still need to be watched closely. These global risks will remain a primary concern in the second half of 2024, particularly the risk-off sentiment driven by the Fed’s ‘higher for longer’ policy and political risks in the US and the European Union, especially in France.
These factors could limit foreign capital inflows to Indonesia, especially with the anticipated first Federal Funds Rate (FFR) cut expected to occur in the fourth quarter of 2024. Additionally, the reduced trade surplus due to commodity price normalization and weakening global demand, along with strong domestic demand in Indonesia, could lead to a risk of widening the current account deficit (CAD).
Josua predicted that foreign reserves will decrease from US$146.4 billion at the end of 2023 to around US$140 billion to US$142 billion by the end of 2024. The rupiah exchange rate is also expected to be in the range of Rp15,800 to Rp16,200 per US dollar at the end of 2024, depreciating from Rp15,397 per US dollar at the end of 2023. (*)
