The Indonesian rupiah in 2026 is projected by the Institute for Development of Economics & Finance (Indef) to reach Rp17,000 per US$, marking a weaker position compared to this year’s range of Rp16,000–Rp16,700 per US$.

In its report, Realigning the Direction of an Equitable Economy (2025), Indef states that this projection reflects structural challenges in Indonesia’s economy and the high demand for US dollars for trade activities.

“The projection of the rupiah at Rp17,000 per US$ not only indicates short-term pressure but also highlights deeper structural problems in Indonesia’s economy, including reliance on imported raw materials, limited export diversification, large dollar-denominated financing needs, and the still-ineffective efforts to strengthen domestic industry.”

Indef warns that without coordinated industrial, fiscal, and monetary policies, the pressure on the rupiah in 2026 could become a significant barrier to Indonesia’s macroeconomic stability and long-term economic transformation.

What is causing the rupiah to weaken in 2026?

There are two sources of pressure: external and internal factors.

“Externally, the weakening of the rupiah is mainly driven by uncertainties in global economic conditions. Geopolitical tensions—such as conflicts in the Middle East, China’s economic slowdown, and trade fragmentation—increase investor risk aversion and put pressure on emerging market currencies, including the rupiah,” Indef explained.

Domestically, pressures arise from the non-commodity trade deficit (particularly capital goods), dependence on imported manufacturing inputs, strategic food imports, and the government’s need for dollar-denominated debt financing.

“The high demand for energy imports, caused by inefficient energy subsidy structures, also creates structural demand for US dollars, which further weakens the rupiah against the US dollar.”

What happens if the dollar reaches Rp17,000?

On the positive side, Indef notes that a dollar exchange rate of Rp17,000 per US$ may improve export price competitiveness, especially for manufacturing sectors and export-oriented MSMEs.

However, Indef stresses that these benefits are limited, as Indonesia’s export structure is still heavily dominated by commodities whose prices are determined by global—not domestic—markets.

Meanwhile, the negative impacts are far broader and affect households, industries, and the government.

First, imported inflation will rise due to higher costs of imported raw materials and capital goods, leading to increased consumer prices.

Indef also expects significant pressure on the manufacturing sector, particularly for industries reliant on imported inputs, as higher production costs will squeeze profit margins and potentially hinder industrialization progress.

A further negative consequence is the increased burden of government and corporate debt repayments denominated in US dollars, which will narrow fiscal space and raise credit risk.

“Moreover, if the Government and the Central Bank fail to maintain exchange rate stability, over the long term this could trigger monetary tightening through higher BI interest rates, which would ultimately suppress investment and slow economic growth.”