The rapid capital inflow into Indonesia made the Rupiah stronger below 14,000 against the US Dollar - Photo: Privacy

JAKARTA (TheInsiderStories) – Good morning! Indonesia financial market is now under pressure. After strengthening in the last few weeks, Rupiah touched 14,000 against US Dollar again. The Jakarta Composite Index was not so good either by falling by 0.4 percent to 6,495 with Rp132.9 billion foreign net sells.

Some sentiments impacted the depreciation. First, Indonesia’ 2018 current account deficit widened to US$31 billion or 2.98 percent of Gross Domestic Product (GDP). Moreover, there is still an uncertainty of United States (US) and China trade talks and hit Asian market.

As we know, US President Donald Trump said that he would not meet China President Xi Jinping until the end of 90-day trade truce in March. The trade war has created a global economy turmoil.

But according to United Nation Conference on Trade and Development, Europe, Mexico, Japan, and Canada companies may gain dozens billion dollars additional benefit from the trade wars, as a substitution from the US and China markets. Based on the studies, Europe would get the biggest profit with $70 billion new exports. Then, Mexico, Japan, and Canada would gain more than $20 billion.

UN predicted that around $250 billion of the US and China goods may switch to other regions. It is more than 80 percent of around $300 billion goods impacted by the trade tariffs war that occurred since July.

Ahead of US and North Korea talks, Vietnam Foreign Minister Pham Binh Minh will visit Pyongyang while Hanoi will host the Trump and North Korea Supreme Leader Kim Jong Un by the end of this month. In the meeting, Trump and Kim are expected to discuss about revoking North Korea sanctions in exchange of its denuclearization.

In Indonesia, House of Representatives postponed the ratification of Indonesia-Pakistan Preferential Trade Agreement. The House considered the action may harm Indonesian export, as it is potentially creating surplus trade loss. In 2017, Indonesia trade surplus with Pakistan was $2.15 billion.

By establishing the agreement, Indonesia can maintain its palm oil products. Especially, Malaysia—Indonesia’ palm oil competitor—already has a Comprehensive Economic Partnership Agreement with Pakistan. Recently, Indonesia and Malaysia’ palm oil preference tariff is 6.42 percent. But the agreement ratification postponement may change the deal.

While, Energy and Mineral Resources Ministry affirmed that Indonesia’ 35,000 megawatts electricity project will not reach its target this year. In the budget, the electricity project can be achieved if the economy grows by 7 percent annually.

But in the realization, economic growth didn’t even touch 7 percent. In 2018, Indonesia economy only grew by 5.17 percent. With such condition, government tries to be realistic by lowering the target. Indonesia’ electricity project realization will only be around 57 percent of the previous target, at 19,000 to 20,000 megawatts.

May you have a profitable day!

Written by Linda Silaen and TIS Intelligence Team, Please Read Our Insight to Get More information about Indonesia