Bank Indonesia kept its policy rate unchanged at 5.75% for a fourth consecutive meeting, as the rupiah weakened slightly after MSCI launched a downgrade consultation that has increased concerns over capital outflows. With the market split on the decision, expectations of a possible hike to support the currency were left unmet, while external risks remained in focus.
Current Account Dynamics and FX Reserves
BI expects Indonesia’s current account deficit, at 1% of GDP in Q2, to widen to between 1.6% and 2.4% of GDP in 2026, implying larger external funding needs as MSCI’s review proceeds. The central bank is leaning on its foreign exchange reserves as a buffer: reserves stood at $125bn in September, or 8.4% of GDP, and BI is seen as having scope to smooth moves given spot turnover of around $7bn a day.
MSCI Review and Market Classification Risks
MSCI’s consultation considers reclassifying Indonesia from Emerging Market to Standalone Market status, with a final decision due by end-June 2027.
