In the latest monthly report presented by Vitra Faisal, Senior Economist at Samuel Securitas, several key points about Indonesia’s economic condition over the past month were discussed in detail.
Foreign Exchange Reserves and Interest Rates
Indonesia’s foreign exchange reserves remain strong, reaching 100 billion USD. These substantial reserves allowed Bank Indonesia to refrain from raising interest rates last month and maintain the rupiah at a range of 16,200 to 16,300. However, Faisal warned of potential pressure on foreign exchange reserves in the coming months, particularly due to declining commodity prices such as coal and nickel.
Trade Surplus and Current Account Deficit
Indonesia’s trade surplus remains high at 2.39 billion USD. However, the average surplus is decreasing, raising concerns about the potential widening of the current account deficit to minus 0.7% of GDP. Faisal explained that declining commodity prices could reduce the trade surplus and put pressure on the country’s foreign exchange reserves.
Purchasing Managers’ Index (PMI) and Production
The Purchasing Managers’ Index (PMI) in the manufacturing sector showed a decline, although it remained at the expansion level of 50.3. However, this downward trend is a serious concern as it could affect production and the competitiveness of Indonesia’s industries.
Inflation and Consumption
The inflation rate was recorded at 2.51%, significantly below the consensus of 2.9%. Faisal noted that while this figure indicates controlled inflation, it also suggests a possible weakening of demand. This weakening consumption could affect economic growth prospects, which are projected to reach only 4.94% in the second quarter.
Global Sentiment and Its Impact
Global sentiment was disrupted by the shooting incident involving Donald Trump, which increased the likelihood of Trump being re-elected as President of the United States. This could affect inflation in the US and the Federal Reserve’s interest rate policy. US inflation data and Personal Consumption Expenditure (PCE) showed a decline, with the probability of a rate cut in September reaching 100%.
Stock Market and Bonds
Indonesia’s stock market (IHSG) is expected to remain positive, with the index moving in the range of 7,346 to 7,375. Faisal highlighted that the Federal Reserve’s policy announcement and Jerome Powell’s speech could provide positive sentiment. In the bond market, bond yields are expected to range between 6.9% and 7.05%, with potential capital gains on tenors below 7 years.
