Why Indonesia’s economy is expected to weather Covid-19 battering

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An undervalued currency and prudent macroeconomic policies, plus lessons from India, should help the country survive

A security guard gestures outside the closed Plaza Indonesia shopping mall as Indonesia imposes emergency measures tightening restrictions in Java and Bali amid a surge in coronavirus disease on July 4 2021. REUTERS/WILLY KURNIAWAN

The spread of the virus took a heavy toll on Indian assets, especially once the tally of new cases jumped to nearly 400,000 a day in April. The rupee was Asia’s worst-performing currency that month, sliding 1.3%, with declines worsened by concern the central bank’s bond-buying plans would add to a liquidity glut. The benchmark Sensex slid as much as 4.7% in April by the time it reached its intraday low on April 22.

While the market effect has so far been more muted than in India, Indonesia’s 10-year bond yield climbed 17 basis points in June, while the Jakarta Composite Index has fallen almost 3% from June’s high.

 

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