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IDR seen neutral in 2020 – UOB

According to the Global Economics & Markets Research team at UOB Group, the Indonesian currency could see some bouts of weakness this year although it should remain stable overall.

Key Quotes

“The Indonesian rupiah, IDR, proved to be less volatile in 2019 than the year before despite going through an election year. Factors such as softer oil prices, a dovish Fed, inflows to the bond market and government import tightening measures helped offset concerns over the current account deficit. Higher FX reserves and President Widodo’s election win also worked positively for the currency.”

“Bond market inflows may taper off as we only project one more BI 25bps rate cut and a fiscal deficit target of 2.15% of GDP in 2020 (Government target at 1.76% of GDP). IDR’s relatively resilient performance in 2019 has been predominantly underpinned by massive inflows into the local bond market so the tapering of bond inflows next year may see IDR trading weaker albeit in a stable fashion on the back of an improving structural current account deficit.”

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