Highlights

• Bank Indonesia Turns More Aggressively Pro-Stability Amid Rupiah Pressure: Bank Indonesia raised the benchmark BI Rate by 50 bps to 5.25%, exceeding market expectations and signaling a stronger commitment toward maintaining rupiah stability amid intensifying global uncertainty, rising US Treasury yields, and persistent geopolitical risks. The move reflects growing concerns regarding imported inflation and capital flow volatility as the rupiah weakened toward Rp17,700/USD.

 

• Current Account Deficit Widens but External Position Remains Manageable: Indonesia’s current account deficit widened significantly to USD 4.01 billion in Q1 2026, equivalent to 1.1% of GDP, exceeding SSI’s forecast of USD 3.18 billion and marking the largest quarterly deficit since Q4 2019. The deterioration was primarily driven by a narrowing trade surplus amid weaker global demand and supply chain disruptions. Nevertheless, the deficit remains within Bank Indonesia’s projected range of 0.5%–1.3% of GDP, indicating that external vulnerability remains relatively manageable.

 

• Export Governance Reform Intensifies to Strengthen FX Resilience: The government accelerated efforts to tighten export governance through centralized export mechanisms and stricter DHE SDA regulations. Starting June 2026, 100% of natural resource export proceeds will be required to enter Indonesia’s domestic financial system, while authorities also intensified efforts to reduce underinvoicing and offshore FX leakages.

 

• Financial Markets Face Heightened Volatility and Foreign Outflows: Indonesian equities and bonds remained under pressure amid broad-based global risk-off sentiment, rising US Treasury yields, elevated oil prices, and persistent foreign capital outflows. Investor positioning increasingly shifted toward defensive and commodity-linked sectors amid expectations of prolonged external uncertainty.
• Geopolitical Tensions Continue Shaping Global Macro Risks: Escalating tensions in the Middle East continued pushing oil prices above USD 100/bbl, strengthening global inflation concerns and tightening financial conditions across emerging markets. These developments increasingly transmitted into Indonesia through rupiah volatility, higher imported inflation risks, and rising pressure on domestic financial assets.