Rupiah Depreciation Threatens Manufacturing Industry
Tuesday, 18 June 2024
The Indonesian Employers' Association (Apindo) highlights the trend of the weakening rupiah against the US dollar, which is increasingly pressuring the national manufacturing industry. According to Bloomberg, the rupiah exchange rate was at IDR 16,412 per dollar on Friday (June 14), down 0.87% from the previous day.
Apindo Chairman Shinta W. Kamdani stated that the rupiah's depreciation to the IDR 16,400 per dollar level is highly unfavorable for business operators. The rupiah at IDR 16,000 per dollar already significantly increases production and operational costs in Indonesia, making them more expensive.
The current rupiah level is also neither affordable nor competitive for the growth of the domestic manufacturing industry, including the export-oriented industrial sector.
"The increase in the cost of doing business is not limited to the rising burden of importing raw or auxiliary materials but also other business expenses such as logistics or transportation costs, financial burdens, and so on. This will impact the risk of decreased business performance, reduced potential for job creation, increased risk of non-performing loans (NPL), reduced production capacity, and more," she said on Tuesday (June 18).
The rupiah's depreciation also potentially negatively impacts investment realization in the manufacturing industry. Moreover, there is a risk of increased volatility or financial market speculation, which tends to pressure national macroeconomic stability.
The domestic market is also feared to become increasingly sluggish, and consumers of manufactured products tend to hold back if the rupiah's depreciation continues and is left unchecked. Apindo strongly hopes that the government continues to make various policy interventions needed to create stability and strengthen the rupiah exchange rate.
"Indeed, these efforts are not easy because the exchange rate depreciation is due to external conditions beyond our control. However, currently, the rupiah depreciation is the third deepest in Southeast Asia year-to-date (ytd)," she explained.
Therefore, the rupiah depreciation must be closely monitored and promptly addressed to prevent Indonesia's exports and investment realization from declining. According to Apindo, these two factors significantly contribute to macroeconomic stability, industrialization, job creation, and overall higher national economic growth.
