Indonesia, one of five “fragile” emerging markets, looks stronger now

By The Economist online

IN RECENT weeks signs have appeared in the poky arrivals hall at Soekarno-Hatta airport in Jakarta, Indonesia’s capital, exhorting visitors to shun the dollar in the name of national sovereignty. “Use rupiah for all transactions in Indonesia!” travellers are told, as they wait, interminably, at the luggage carousels. That reflects old suspicions of foreign interference in the economy, South-East Asia’s largest, coupled with newer concerns about the currency’s vulnerability to capital flight.

In 2013, when the Federal Reserve’s “tapering” of its asset purchases led to a 21% slide in the rupiah against the dollar, Indonesia was seen as one of the “fragile five” emerging markets. Of late, anxieties have resurfaced. On December 14th the Fed raised interest rates for the first time in a year. More rises are expected this year. Higher yields in advanced economies draw capital from emerging markets, putting pressure on their currencies. The rupiah fell by 3.7% against the dollar in November, the steepest monthly decline for more than a year, as part of a wider sell-off of emerging-market currencies.

This partly explains why…

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Category: Business and finance, Approved, Finance and economics, FINANCE

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