Bambang Ismoyo, Jakarta – Indonesia's business sector is facing mounting pressure from the weakening rupiah, with industry leaders warning of rising production costs, heavier dollar-denominated obligations, and growing uncertainty for investment decisions.
According to the Indonesian Employers Association (Apindo), the depreciation of the rupiah against the dollar has begun to significantly affect industries that remain heavily dependent on imported raw materials.
Apindo chairwoman Shinta Kamdani said companies are strengthening risk management strategies to cope with the currency volatility and broader global economic uncertainty.
"Businesses are reinforcing more comprehensive risk management strategies. The use of hedging instruments against exchange-rate fluctuations is being increased, along with efforts to rebalance debt structures," Shinta said on Friday.
The rupiah weakened to Rp 17,596 per dollar in the spot market on Friday, according to Bloomberg data, marking a decline of 67 points, or 0.39%.
Shinta said the weakening currency has had a direct impact on production costs, particularly in manufacturing industries where imported raw materials account for a substantial share of operating expenses.
"About 70% of manufacturing raw materials still come from imports, while raw materials contribute around 55% of total production costs. As a result, rupiah depreciation is immediately reflected in higher costs," she said.
Industries considered most vulnerable include petrochemicals, plastics, food and beverages, pharmaceuticals, and energy-intensive manufacturing sectors, all of which rely heavily on imported inputs.
One of the clearest examples can be seen in the plastics industry, where rising global naphtha prices have pushed resin prices up sharply in recent months. The increase has had a ripple effect across downstream industries, particularly packaging manufacturers and other sectors reliant on plastic-based materials.
Apindo warned that the situation is contributing to cost-push inflation, where higher production expenses gradually feed through to consumer prices across supply chains.
Beyond financial risk management, companies are also pursuing operational efficiency measures by tightening capital expenditure and optimizing working capital to preserve financial stability.
Businesses are additionally seeking to diversify suppliers and promote import substitution in an effort to reduce dependence on overseas raw materials. However, Shinta acknowledged that domestic substitution capacity remains limited across many industrial sectors.
Despite the challenges, she said businesses still have room to adapt, although strong external pressures and limited policy flexibility have constrained the pace of adjustment.
Apindo emphasized that closer coordination between the government, monetary authorities, and the private sector would be crucial to maintaining economic stability.
"In a situation where external pressures remain strong and policy easing space is relatively limited, synergy between monetary, fiscal, and real-sector policies becomes extremely important," Shinta said.
Source: https://jakartaglobe.id/business/rupiah-slide-pushes-indonesian-firms-into-costcutting-mod