Economic Data is Disappointing, Rupiah is Depreciating

KATADATA ? The economic data during the second quarter 2015 still hasn?t been successful in convincing the market subjects regarding the prospect of Indonesia?s economy in the near future. They are probably right since the exchange rate value of rupiah against U.S. dollar has weakened again.

On today?s trade, rupiah depreciates again to be at around IDR 13,530 per U.S. dollar, which is the lowest position since the 1998 crisis. Since the start of the year, the rupiah value is recorded to reach 9% against the U.S. currency. The pessimism of market subjects towards the economic prospect can also be seen from the difference of rupiah currency in the spot and the period market, or from the one-year forwarded version that has gotten wider.

During today?s trade, the rupiah value in the one-year forwarded market is at IDR 14,880 per U.S. dollar, which means there is a difference of 1,360 points compared to the currency in the spot market. Although it is not as big as the one in August 2013, which was at around 1,700 points, the difference tends to widen ever since March 2015.

Financial market analyst from the Bank Himpunan Saudara, Rully Nova, said that the market subjects see the economic data of Indonesia during the first semester of 2015 to be not adequate, since it hasn?t shown any better performance. The government?s consumption, which was hoped to be the trigger of economic growth, is also still low. Thus, Rully admitted that the current situation is like a transition period, which is the period where the government tries to decrease its dependency on commodities.

?The rupiah matter depends on the situation inside and outside of the country. From the domestic side it depends on how fast the transition period is,? said Rully to Katadata, Thursday (6/8).

While from the external factor, Rully sees that there?s a chance for rupiah to get stronger, especially when there?s a certainty over the raise in the Fed rate. ?Unless it missed again,? said Rully. ?But the market would also see how are the government?s expenditure realized.?

The Head of Research Department of PT Monex Investindo Futures, Ariston Tjendra, said that the number of economic growth of the first semester was only 4.7%, and it shows that the government would have a hard time in pursuing the targeted economic growth, which is at 5.2% this year. ?The number has confirmed the slow economic growth in Indonesia compared to the previous year,? said Ariston.

The BI Governor, Agus Martowardojo, previously said that the rupiah?s exchange rate value would still be better compared to other currencies in ASEAN. Ever since the early of this month, he recorded that the depreciation of rupiah is below 1%. While for Singaporean dollar and Malaysian ringgit, they depreciate more than 1%. This shows the fundamentality of Indonesian economy to be better than them.

He mentioned that ever since the start of the year, rupiah has weakened by 8%, while other currencies are between 10 to 15%. According to Agus, this is because of the better performance in the domestic side, which is a declining inflation as well as in the current account deficit, which is predicted to be fewer than 2.3% during the second quarter of the year.

He also said that the depreciation happens more because of the uncertainty of the increasing Fed Rate. The U.S. economy has gotten better, and it gave indication for the Fed Rate to increase in the second semester. Furthermore, rupiah has also been affected by the slow growth of China?s economy. If it grew more than 10% from 1990 to 2010, in this year it is predicted that the growth would only reach 6.8%.

From the domestic side, Agus also admitted that there?s still a wide concern in the market that the economy of Indonesia would continue to be lethargic. Also, the government?s spending also hasn?t shown any signs of increasing, even though government?s investment is the only hope amid the fall of commodities prices.