Dr. Pipat Luengnaruemitchai, Assistant Managing Director, Chief Economist at Kiatnakin Phatra Financial Group, posted on Facebook describing the economic situation in Indonesia as a signal for a “Perfect Storm” in the past 2-3 months. The current stage of its economy indicates intense volatility in both the money and capital markets as well as domestic economic policies.
The economist stated that the Indonesian rupiah has sharply depreciated, hitting an all-time low. Meanwhile, the Indonesian stock market index (JCI) has continuously declined due to foreign investor sell-offs and, in some periods, has seen double-digit monthly drops. The Bank Indonesia’s policy interest rate was raised to 5.25% to address pressures from capital outflows and currency stability. At the same time, global credit rating agencies have reportedly downgraded Indonesia’s credit outlook to “Negative”.
Dr. Pipat has also outlined structural factors that impose significant downward pressure, such as energy subsidy burdens and populist policies, as well as policy constraints under the “Impossible Trinity” (Policy Trilemma) framework. This situation requires the central bank to choose between currency stability, capital mobility, and conducting an independent monetary policy to stimulate the economy. Additionally, the establishment of a new state agency “Danantara” has also raised policy uncertainty and dampened investor confidence.
Meanwhile, the economist noted that although Indonesia still benefits from certain commodity prices, policy uncertainties and a fragile current account mean the country must rely increasingly on foreign capital.
Dr. Pipat also drew a lesson for Thailand, stating that while Thailand’s current economic fundamentals remain more stable, it is still necessary to closely monitor risks regarding fiscal discipline, policy credibility, and overall economic stability. Investor confidence can change rapidly if economic policies are not implemented cautiously going forward.
