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The benefits of the weakening of the rupiah are over

Reporter: Margareta Engge Kharismawati | Editor: Uji Agung Santosa

JAKARTA. Who said that the weakening of the rupiah exchange rate always benefits exporters and increases foreign exchange? If you look at trends and existing data, since 2012, Indonesia has lost momentum in gaining gains from the depreciation of the rupiah. This is because when the rupiah weakens, Indonesia’s exports are in a downward trend.

As a result, in such a situation, it seems that a strong rupiah brings more benefits than a weak rupiah. Honey, that hope goes away. This is because, based on Bank Indonesia’s middle rate, Wednesday (22/7), the rupiah weakened again by 0.29% against the US dollar to 13,368. Since the beginning of the year, the rupiah has weakened by more than 5%.

After all, according to BI’s records, the current value of the rupiah is still below its economic value (under value) so it is claimed that it is still profitable for exporters. BI Governor Agus Martowardojo said the current position Real Exchange Rate (RER) Indonesia is below the level of 100. This means that because the rupiah is below its economic value, Indonesian exporters can enjoy gains from exports.

Once again, the momentum and the arguments are obsolete. This is because export demand and commodity prices in international markets are sluggish. As a result, “Indonesia does not benefit from the weakening of the rupiah because at the same time its exports have fallen,” said Berly Martawardaya, an economist at the University of Indonesia, yesterday.

Bank Permata economist Josua Pardede believes that the current depreciation of the rupiah is not helping much to boost the pace of exports, especially exports of manufactured products. This is because a number of producers and manufacturers who are oriented towards the export market, mostly use imported raw materials. The weakening of the rupiah actually hurt them because they had to pay expensive raw materials.

Therefore, Josua estimates, Indonesia’s exports are likely to be under pressure. Apart from falling demand from the international market and falling world commodity prices, the weakening of the rupiah also indirectly affected it. Manufacturers and exporters who use imported raw materials, put the brakes on production for efficiency. “This is the reason why the weakening rupiah has not become an incentive for exporters,” said Josua.

Josua estimates that in the future the rupiah will still have the opportunity to weaken. This is because the market is still watching the plan to increase the interest rate of the US central bank (The Fed). This potential weakening must really be watched out for.

Acting Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance, Suahasil Nazara, assessed that the economic slowdown in Indonesia’s trading partners was more dominant as the cause of slowing Indonesian exports. “Demand for exports has fallen, it is difficult for our exports to rise,” he said.

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