JAKARTA, March 17 — Bank Indonesia has cautioned that Indonesia must maintain the momentum of its economic growth amid the ongoing war in West Asia, as global economic and financial conditions continue to deteriorate.
ANTARA news agency reported Governor Perry Warjiyo as saying that the impact of the worsening global economy and financial markets due to the war in West Asia needs to be anticipated and addressed appropriately to maintain the momentum of national economic growth.
The nation's growth is expected to remain within the 4.9 to 5.7 per cent range, supported by strong domestic demand, with Bank Indonesia continuing to strengthen its policy mix in coordination with the government to maintain stability while supporting growth.
“Bank Indonesia will continue to strengthen the policy mix through monetary, macroprudential, and payment system policies that are closely synergised with government policies to maintain stability while continuing to support economic growth,” he said today.
Regarding domestic conditions, Perry said economic growth in the first quarter of 2026 is expected to remain fairly high, supported by strong domestic demand.
Household consumption has increased, driven by festive spending, improved incomes from holiday allowances, and government social spending and incentives.
He added that investment is expected to remain solid, driven by government-led projects, including Koperasi Desa Merah Putih and Danantara, as well as programmes that support growth and employment while maintaining fiscal resilience.
On the external front, particularly on the exchange rate, the rupiah weakened 1.29 per cent to Rp16,985 per United States (US) dollar as of March 16, in line with broader depreciation among emerging market currencies amid global uncertainty.
“Bank Indonesia will continue to strengthen various policies to maintain the stability of the rupiah exchange rate from the impact of worsening global conditions due to the Middle East war,” said Perry.
The central bank has intensified intervention in offshore non-deliverable forward, domestic non-deliverable forward, and spot markets, while optimising monetary instruments to attract foreign capital inflows.
“Various efforts to strengthen the performance of the balance of payments are expected to support the rupiah exchange rate stability.
“Bank Indonesia believes the rupiah exchange rate will remain stable, supported by the bank’s commitment, attractive yields, and Indonesia’s still favourable economic growth prospects,” he said.
In light of these developments, the increase in global oil prices has negatively affected cross-border trade supply chains, which in turn has lowered global economic growth prospects and heightened inflationary pressures worldwide.
Perry noted that global financial markets have also deteriorated, reflected in the strengthening of the US dollar, rising US Treasury yields, and capital outflows from emerging markets.
As a result, global growth in 2026 is projected to slow to 3.1 per cent from 3.2 per cent previously, while inflation is expected to rise to 4.1 per cent from 3.8 per cent, limiting room for monetary easing, including a greater likelihood of delays to cuts in the US Federal Funds Rate.
