Jakarta. The Indonesian rupiah is expected to remain stable despite challenges posed by US President Donald Trump's renewed protectionist trade policies, with analysts citing Indonesia's strong foreign exchange reserves and its recent membership in the BRICS bloc as key support factors.

Edwin Sebayang, Director of Purwanto Asset Management, dismissed concerns that the rupiah would hit Rp 17,000 per US dollar, citing strong foreign exchange reserves and expectations of domestic interest rate cuts.

"The rupiah will not reach Rp 17,000," Sebayang said during Beritasatu TV's Investor Market Opening segment in Jakarta on Wednesday.

As of morning trading, the rupiah stood at Rp 16,321, supported by global sentiment and Indonesia’s record-high reserves.

Indonesia's foreign exchange reserves reached $155.7 billion at the end of December 2024, up from $150.2 billion at the end of November 2024. Meanwhile, Bank Indonesia unexpectedly cut its interest rate by 25 basis points to 5.75 percent in its January meeting.

Global markets were buoyed by Trump’s decision to avoid imposing additional tariffs on China and Europe while signaling potential levies on Mexico and Canada. US equity markets rallied, with the S&P 500 gaining 0.88 percent and the Nasdaq up 0.58 percent. Asian markets followed suit, with the MSCI Asia Pacific Index rising 0.19 percent and Japan’s Nikkei adding 0.32 percent.

BRICS Membership and Domestic Consumption
Indonesia, now a member of the BRICS bloc, could benefit from global trade fragmentation caused by Trump’s policies. Oktavianus Audi Kasmarandana, an analyst at Kiwoom Sekuritas, said Indonesia’s diversified trade partnerships and solid domestic consumption would shield it from external shocks.

"Indonesia has opportunities to strengthen its trade diplomacy and reduce reliance on the US and China," Oktavianus said. He projected stable GDP growth above 5 percent and an optimistic Jakarta Composite Index (JCI) target of 7,800 for 2025, assuming a stable rupiah exchange rate below Rp 16,200.

Analysts also highlighted the impact of Bank Indonesia’s potential interest rate cuts. A reduction in rates could stimulate economic growth, support the stock market, and attract investment into the banking, energy, technology, and consumer goods sectors.

Despite optimism, risks remain. Trump’s tariff threats could trigger a new wave of trade wars, further straining global supply chains. The International Monetary Fund (IMF) forecasts global economic growth could fall to 2.7 percent-3.1 percent in 2025-2026 due to geopolitical tensions and inflationary pressures.

Nafan Aji Gusta, a senior analyst at Mirae Asset Sekuritas, warned that escalating trade conflicts could significantly disrupt global commerce. "Trade War 2.0 would exacerbate market fragmentation, particularly affecting emerging economies like Indonesia," he concluded.

Trump previously threatened to impose 100 percent tariffs on goods from BRICS countries if the group created a currency to challenge the US dollar. He reiterated this threat shortly after taking office.

However, it remains unclear whether Trump will follow through with the tariffs. Russian Ambassador to Indonesia Sergei Tolchenov said BRICS would ignore these threats as it continues to promote the use of national currencies within the group. Similarly, Indonesia is not concerned, with National Economic Council Chairman Luhut Binsar Pandjaitan stating that the country is "too big to lean on any country" and should not fear upsetting Washington.