Indonesian Rupiah: Higher oil prices add to IDR pressure - MUFG
MUFG’s Lloyd Chan remains cautious on the Indonesian Rupiah as domestic inflation accelerates and Gross Domestic Product (GDP) growth stays above 5%. The trade balance has improved slightly but remains weaker than 2025 averages due to higher Oil and gas imports.
MUFG's Lloyd Chan maintains a cautious outlook on the Indonesian Rupiah (IDR) as domestic inflation surges and GDP growth remains above 5%. The country's trade balance has slightly improved but still lags behind 2025 averages due to increased oil and gas imports. While Bank Indonesia's policy support and intervention framework provide short-term assistance, sustained Brent prices above $90 could strain Indonesia's fiscal and external positions, negatively impacting the IDR.
August CPI inflation accelerated to 3.19% year-over-year, indicating that inflation risks are still leaning towards the upside. July's trade balance returned to a modest surplus of $0.12 billion after two months of deficits, primarily because the oil and gas trade deficit narrowed from $3.5 billion to $2.9 billion. However, the trade balance remains considerably below 2025 averages, underscoring the continuing impact of higher oil and gas imports.
Bank Indonesia's policy support and intervention framework is expected to offer near-term support for the rupiah, but sustained Brent prices above $90 per barrel would intensify pressure on Indonesia's fiscal and external balances.
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