FE Today Logo
Search date: 06-09-2018 Return to current date: Click here

Widodo prioritises exports

September 06, 2018 00:00:00


JAKARTA, Sept 05 (Reuters): Indonesian President Joko Widodo said on Wednesday that multiple external factors were behind the rupiah's fall to 20-year lows and the priority was to increase investment and exports to contain the country's current account deficit.

The rupiah, stocks and bonds have sold off as investors flee emerging markets, with the vulnerability of Southeast Asia's biggest economy increased by worries about its current account deficit and need to import oil.

Wiododo pointed to external factors such as rising US interest rates, a US-China trade war, as well as crises in Turkey and Argentina for the pressure on Indonesian markets.

"There are only two key (things) - investments must continue to increase and exports must also increase so (we) can resolve the current account deficit," the president told reporters during a visit to Jakarta's port, in comments posted on the cabinet secretary's web page.

Indonesia's current account deficit was 1.7 per cent of gross domestic product last year, but is expected to widen to around 2.5 per cent in 2018 as economic activity improves, Bank Indonesia (BI) has said.

The president made the comments as the rupiah was trading at 14,926 against the dollar at 0412 GMT, around the lowest level since the Asian financial crisis in 1998 after losing around 9.0 per cent so far this year.

Indonesia's central bank "decisively intervened" in the foreign exchange and bond markets on Wednesday morning to "smooth volatility" of the rupiah, Nanang Hendarsah, head of monetary management at Bank Indonesia told reporters.

Indonesia's benchmark 10-year bond yield was at 8.423 per cent, up from previous day's closing of 8.340 per cent.

The Jakarta stock index fell 3.1 per cent - its fifth straight session of losses - and was poised for only its second decline of more than 3.0 per cent since November 2016.

On Tuesday, Indonesia's government said that authorities will take firm action against currency speculators, and announced plans to delay import-heavy energy projects.

Finance Minister Sri Mulyani Indrawati did not specify what sanctions speculators could face, but warned that large currency transactions would be checked by the central bank and the Financial Services Authority (FSA) to ensure they were based on trade or commerce.

In an attempt to anticipate future dollar requirements, Widodo asked ministers to assess how much foreign currency would be needed to pay for imports related to large infrastructure projects.

The government also announced plans to delay an estimated $24 billion to $25 billion in import-heavy power station projects, and rules to force exporters to keep earnings at home, among efforts to prop up the ailing rupiah.

To reduce the oil import bill, Indonesia has sought to boost of the use of biodiesel.


Share if you like