Jakarta – The Indonesian economy faces tough global challenges with the rupiah exchange rate weakening, says an economic team from publicly listed private lender Bank Danamon.

The team noted three threats against the economy – the outflow of United States dollars from Indonesian market, trade war and the increase of global energy prices.

It projects the ongoing outflow of capital from the Indonesian market owing to the sales of shares and bonds by foreign investors sparked by US economic improvement.

As a result, the Jakarta Composite Index (JCI) declined 2 percent earlier this week and the rupiah exchange rate weakened to above 13,800 against the dollar.

"High composition of foreign investment in both shares and bonds make Indonesia fragile to any global fluctuation," said Danamon economist Dian Ayu Yustina at a statement on Friday as reported by kontan.co.id.

Another tough challenge for the economy was a trade war initiated by President Donald Trump's decision to impose a tariff of 25 percent on steel imports and 10 percent tariff on aluminum imports.

The third threat was the increasing price of global energy, of which coal prices had reached more than US$100 per ton, while global crude oil had reached $70 per barrel.

The rupiah will continue to face pressure, said Dian, adding that Bank Indonesia might be open to the possibility of increasing its reference rate. (bbn)

Source: http://www.thejakartapost.com/news/2018/03/09/indonesian-economy-faces-tough-challenges-danamon.html