INDEF: Government Must Maintain Credibility for Rupiah and IHSG to Strengthen

The Indonesian government must prioritize maintaining the credibility of its economic policies to ensure the continued strengthening of the rupiah and the Composite Stock Price Index (IHSG), according to M Rizal Taufikurahman, Head of Macroeconomics and Finance at the Institute for Development of Economics and Finance (INDEF).

"To maintain the trend of strengthening IHSG and the rupiah, the government needs to continuously uphold economic policy credibility through fiscal discipline, regulatory certainty, and more effective and productive management of the state budget," Taufikurahman stated on Tuesday. He added that efforts to bolster policy credibility should be accompanied by accelerated structural reforms, increased investment, strengthening the industrial sector, and improving public purchasing power. These measures are crucial for enhancing national economic productivity and competitiveness.

Taufikurahman explained that sustainable financial market strengthening can only be achieved with robust economic fundamentals and growing investor confidence in Indonesia's economic prospects. INDEF forecasts that the IHSG has the potential to return to the 8,000 level within the next 12 to 18 months. Realistically, the rupiah is predicted to recover to around Rp 16,500 per US dollar within one to two years.

These projections are contingent upon a more conducive global economic environment, a decline in global interest rates, and consistent implementation of domestic economic reforms. Taufikurahman emphasized that the recovery of the IHSG and the rupiah is not solely dependent on market sentiment but significantly relies on the government's ability to maintain macroeconomic stability, attract investment, boost productivity, and build policy credibility. This, he noted, will form the foundation for sustainable, quality economic growth.