UI Economist: Industrialization Key to Alleviating Rupiah Pressure

An economist from the University of Indonesia (UI), Fithra Faisal Hastiadi, has stated that strengthening industrialization is one of the strategies to reduce pressure on the Indonesian Rupiah (IDR) exchange rate. According to Fithra, the pressure on the rupiah is not sufficiently addressed solely through Bank Indonesia's (BI) intervention, as the weakening exchange rate is also linked to structural problems, one of which is deindustrialization. "So the problem (weakening) of the rupiah is more structural. That's why it keeps going down and keeps going down. So which sector is most affected, it's the manufacturing sector again," Fithra said at the ANTARA Business Forum (ABF) 2026 in Jakarta on Wednesday, September 23. He explained that the manufacturing sector's contribution to the Gross Domestic Product (GDP) is currently around 18 percent. This condition, according to him, reflects the problem of deindustrialization, which limits the industry's ability to produce goods for the international market. These limitations then impact trade performance and current account transactions, ultimately putting pressure on the rupiah. "Our tradable sectors are limited. We can't sell more goods out. All we can sell are commodities. Well, this is a problem," he stated. Furthermore, the industry's dependence on raw materials and components from abroad means that the weakening rupiah can potentially increase production costs. "When he needs input from outside, the price gets more expensive. So, it's like a vicious circle. So it's like a satanic loop," he added. Therefore, Fithra assesses that Indonesia needs to strengthen industrialization and gradually reduce dependence on imports by producing goods that have been supplied from abroad. "Things that we usually get from outside in terms of input, we can produce here. Well, that will be the roadmap," he said. Strengthening the industry is also needed to encourage more sustainable economic growth while expanding formal employment, according to Fithra. Meanwhile, at the close of trading on Wednesday, the rupiah exchange rate against the US dollar strengthened by 66 points or 0.37 percent to Rp17,818 per US dollar, compared to the previous close of Rp17,884 per US dollar.