Highlights

• FX Reserves rose to USD 150.1bn, the highest since August and fully aligned with SSI’s forecast.

 

• ⁠Manufacturing PMI strengthened to 53.3, driven by domestic demand despite foreign order contraction and weather-related supply-chain pressures.

 

• ⁠Inflation eased to 2.72%, below SSI and consensus expectations.

 

• Sumatra Disaster emerges as a major macroeconomic shock, with estimated economic losses of IDR 28.8–1 trillion and peak Sumatra’s GDP drag of −2.5% to −0.8% (Fithra Faisal Hastiadi’s Assesment Report).

 

• Bond market increasingly driven by fiscal dominance, with long-end yields rising despite BI’s easing cycle.

 

Overview

Indonesia closed the week with a mixed but resilient macro landscape: external stability strengthened as FX reserves rose to USD 150.1bn—fully in line with SSI’s forecast—while manufacturing momentum improved, with PMI climbing to 53.3 despite weather-related supply disruptions. Inflation eased to 2.72%, giving BI additional policy space, and the trade surplus remained solid. However, the Sumatra disaster introduced a significant macroeconomic shock, with estimated losses of IDR 28.8–37.1 trillion, a projected GDP drag of −2.5% to −0.8%, rising unemployment, and inflationary pressures from disrupted logistics. This shock interacts with pre-existing fiscal risks, reinforcing a trend of fiscal dominance in the bond market, where long-end yields continue to rise despite BI’s easing cycle. Equity markets stayed constructive, supported by domestic flows and sector rotation into industrials and tech, while digital-economy developments—from AI tourism tools to Starlink’s emergency deployment—added positive structural signals. Overall, Indonesia’s outlook remains stable but cautious, with near-term performance hinging critically on the speed and scale of fiscal deployment for Sumatra’s recovery.