Fiscal discipline key to sustaining rupiah, JCI rally: INDEF

Jakarta (ANTARA) - Indonesia must maintain strict fiscal discipline and regulatory certainty to lock in a recent rally in its currency and stock markets, a leading economic think tank said on Tuesday.

The Jakarta Composite Index (JCI) has the potential to hit the 8,000 milestone within the next 18 months, while the rupiah is projected to recover toward the 16,500 per U.S. dollar mark over the next two years.

Analysts at the Institute for Development of Economics and Finance (INDEF) warn that sustaining this momentum requires Jakarta to look beyond short-term market sentiment and focus on deep-rooted economic fundamentals.

"The government needs to maintain economic policy credibility through fiscal discipline, regulatory certainty, and more effective and productive state budget management,” M. Rizal Taufikurahman, head of INDEF’s Center of Macroeconomics and Finance, told state news agency ANTARA.

He noted that while a projected easing of global interest rates will provide a tailwind, Indonesia’s long-term prospects hinge on domestic execution.

He urged policymakers to accelerate structural reforms, boost industrial output, and stimulate consumer spending to drive national productivity.

Sustainable financial market growth can only be achieved if it is backed by strengthening economic fundamentals and rising investor confidence in Indonesia’s economic prospects,” Taufikurahman said.

According to the economist, the recovery of both the rupiah and the JCI is heavily determined by the government's ability to maintain macroeconomic stability and build policy credibility rather than relying solely on shifts in global sentiment.

The calls for stability follow a highly bullish week for Indonesian assets.

The JCI, Indonesia’s benchmark index, surged from an opening of 5,344.69 on June 9 to close at 6,118.73 on Monday, June 15.

Simultaneously, the rupiah staged a notable recovery against the greenback, strengthening from 18,134 per dollar on June 9 to finish the period at 17,778 per dollar.

Foreign investors are closely watching Jakarta's fiscal management for signs of long-term stability.

INDEF highlighted that turning the current market rally into high-quality economic growth will ultimately depend on the government’s ability to successfully convert market optimism into consistent foreign direct investment and enhanced competitiveness.

Translator: Uyu Septiyati, Raka Adji

Editor: Aditya Eko Sigit Wicaksono

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