A Prolonged Slowdown

With the rupiah free falling past Rp14,000 per US dollar and with China, the world's second largest economy and Indonesia's number one export destination, grappling to revive both its slowing economy and its collapsing stock market, companies are downgrading their numbers for 2015 and taking a more sober look at prospects for next year.

The hope that Bank Indonesia might lower its benchmark interest rate, which is currently at 7.5 percent, is becoming more remote with foreign investors moving away from emerging markets to seek safer havens. With the drop in emerging market currencies and a weaker growth outlook in these markets, investments here are becoming less attractive as slowdown risks rise. Meanwhile, US economic growth this year is being revised upward to 3.7 percent year on year, further increasing the attraction of the US dollar.

September 8, 2015